HomeFINANCE6 Reasons that keep you POOR and How to avoid the Middle...

6 Reasons that keep you POOR and How to avoid the Middle Class trap?

At time dream of life full of luxuries, comfort and pleasure just ignore the fact that getting rich is a matter of mindset more than anything else. You wish to see those large numbers when logging into your bank account but without making any sacrifices, lifestyle changes and financial literacy. 

Thus, in this article will take a look at the top six habits which are responsible of keeping you stuck in the middle class trap and keep you do the never ending financial stress across your 30s, 40s and even after retirement.

You’ll learn some great hacks to escape the matrix, which when implemented, yield great results with improved financial health.

Reason 1 : Starting to Invest at a young age

This may sound fascinating but investing in bonds, funds and stocks in your early 20s is not the best thing you can do with such small amount of money. Credits to modern-day finance influencers who have advised people to be invested for longer duration rather than focusing on the investment amount.

Investing on self before stocks and Mutual Funds

At an early age, such as early twenties, investing in yourself through buying resources such as courses on skills such as graphic designing, programming or photography and self help resources including books. 

Basically, you should aim to improve your monthly active income rather than focusing on building long-term plan by investing small amounts in SIP every month. Otherwise, you can use this small capital to buy experiences such as trips with college or school friends or exploring new activities around you.

Switching jobs and increasing monthly income

As an individual in the early career stage, you should focus on switching your job as it is relatively easy to increase your income exponentially at the start of the career. As an example, it is easier to reach to 40K per month from 10K per month then reaching to 50 Lacs per annum from 35 Lacs per annum.

Reason 2: Being Penny-wise and Pound-foolish

Not knowing about the pattern of spending your monthly income is a big red flag in your financial growth. Noting down all the expenses is essential as we know what gets measured gets controlled.

Defining your Monthly Budget

Open an excel sheet or a notebook and list down all of your monthly recurring expenses including online food ordering such as Swiggy/Zomato, monthly subscriptions such as YouTube, Spotify or Prime and Netflix, lastly, put in all your daily expenses including travel and other lifestyle expenses. This will ensure proper monitoring of the spending of your salary and will control any over expenditure.

Buildng a second income source

Creating fantasies about passive income or side business is our old fashioned way of dreaming. However, by providing services through your existing skillset, you can make this dream a reality that too alongside your main occupation.

Reason 3: Utilising Savings Poorly and Buying Liabilities

After accumulation of some capital, and hardly making things work along with intense discipline, you may decide to utilise your money on buying liabilities such as a vehicle or a real estate property through different loans available via banks.

Buying real estate on Home Loans

Let’s say you’ve saved one crore ruppees after being disciplined for a long time of five to seven years. You may be forced to think about investing in a house for living requirements through the emotions the society has embedded within us.

This will invite un-necessary expenses to your monthly income including the maintaining of the property along with house tax and other expenses.

If you wish to buy a real estate property for personal use, make sure to follow the 3/20/30/40 Rule. The rule describes fixed conditions for home loans as follows:

  • 3: The total cost of the property should not be more than three times of your monthly income.
  • 20: The tenure of the home loan should not be more than twenty years.
  • 30: Your home loan EMI should not be more than thirty percent of your monthly income.
  • 40: You should make a minimum down payment of fourty percent of the total property cost. For example, fourty lakhs should be paid as down payment amount, when buying a property worth one crore.

Buying over-priced cars

You may argue that a real estate property will make you returns as the price of the property appreciates. However, this isn’t the case with cars. Four wheelers are a great and comfortable way of travelling but it may not be financially wise to buy one.

Cars are a liability and often cause increased monthly expenses as they require regular maintenance as well as the fuel expenses (fuel prices are already sky rocketed!). However, I am not discouraging you to buy one.

Preferring second hand cars over brand new ones makes sense financially as well as emotionally. You can get a great deal for an almost new car that too with escaping a huge amount of tax amount.

You can use the 20/10/4 rule for Car Loans when considering to buy one.

  • 20: You should pay atleast twenty percent of the total cost of the car as down payment.
  • 10: The monthly EMI and fuel expenses of the car should be under ten percent of your monthly income.
  • 4: The total loan tenure of the car should be less than four years.

Following these small yet effective rules can ensure a secure financial future.

Reason 4: Being Over-conservative and limiting risk

A little bit of risk today may yield exponential returns in the future thus, redefining risk principles is definitely helpful when looking for opportunities.

Defining your risk appetite

We often blame our situation after we end up blowing our counts even before the month ends and living paycheck to paycheck.

Not an investment advice but sometimes highly risky assets such as crypto currency and microcap industries yield far more returns than a safer asset would ever generate.

Looking out on making a fortune out of this isn’t a bad idea until it is been done with a minor fraction of your income, considering it as play money.

Going the extra mile

When it was the last time you’ve judged the owner of the company you work at for his luxurious vehicles and comfortable lifestyle? This person is the perfect example of taking exponentially high risk at a point in time where he decided to pursue his passion and give up on his stagnant life. 

This might act as an inspiration for you to put in extra effort to something you like such that in future you can monetise it as an income source.

Reason 5: Avoiding all types of Consumer Loans

Banks and fintech companies have made applying for loans as easy as a two minute process. However, it is easy to be addicted to them and go out of financial discipline. Let’s have a closer look at them.

Credit Cards and No Cost EMIs

Credit cards are an easy way to buy things we cannot afford through a one shot payment.

Credit card issuing companies promote overspending and, thus, offer the facility of only paying the “minimum amount due”.

The interest on the pending amount is up to 35-40%, and it takes no time to make things go wrong and put your financial future to darkness.

Reality of Consumer Loans

Consumer loans and No Cost EMIs promote buying by offering attractive offers including no interest on EMIs. This creates an audience pull, which forces you to buy products far above requirements. 

The seller pays the interest on your behalf to the bank, but inturn sells more number of units of the costly product, which a less number of people have bought at its original price.

Reason 6: You tend to be Financially Illiterate

Escaping learning about key elements of finance may sound cool but actually can potentially harm your savings in the long run.

Importance of being financially educated

You may a view of being a student from a non-commerce background and try to escape the importance of being financially literate however, sadly there is no excuse to an escape from necessary financial education. Understanding finance is not only essential in making money but also essential in growing and investing it safely.

Where to get necessary knowledge?

Financial literacy being the need of hour, you can access a number of personal finance resources on Youtube as well as explore Labour Law Advisor’s blogs to educate you about different topics including Labour laws, taxation, real estate investment, mutual funds and other finance related terminologies. The video below explains it all.


As a closing thought, it is well said that “Wealth is what you don’t see”. If you spend your income towards buying expensive luxury lifestyle items to “feel” rich, its certain that you’re losing out on the opportunity to make it big.

In this article, we’ve discussed about the six habits which keep you away from your financial goals which include investing on yourself before investing in stocks and mutual funds, defining your monthly budget which includes all daily life expenses such as online food orders and subscriptions along with building a second income source, thridly avoiding investments in real estate and vehicles and following proper protocols when buying them.

After this we’ve discussed the importance of taking a certain amount of risk to ride the sudden spikes in a commodity.

At the end, we talked about the importance of being financial literate as it is the only way to earn and protect the capital to ensure a smooth and bright financial future.

Related Blogs

Financial Advisor


Follow Us


Jagruk Investor

Jagruk Employees

Despite its rich colors and traditions, India faces a growing problem: scams. With advancements in technology and AI, scammers are becoming increasingly sophisticated, making...

Don't Miss

Recent Comments