if you ever try to get out of debt or stop feeling broke chances are you failed having spent seven years working in finance I've witness middle class habits that consistently keep people in the rat race today I'm sharing from my personal experience six of those habits and how you can avoid them middle class habit number one so I grew up lower middle class we were never broke but we were definitely extra careful about what we bought my mom would always make sure that we bought things on sale or at the very least had a coupon handy so you best believe when I received my very first big boy paycheck in Corporate America I was freaking out like I thought I had made it like Mama we solve poverty and I remember that the very first thing that I did was I went to the supermarket I walked along the aisle and I grabbed a $6 pint of bed and Jerry's chocolate therapy ice cream because I don't know about you but growing up Ben and& Jerry's was the bis ice cream brand and then I think I bought it a few more times that week and that's when I realized middle class habit number one which is lifestyle inflation most middle class people decide to spend more money as their income goes up maybe you decide to take out a loan to buy a new car move into a bigger apartment and start buying organic free range avocados the problem is when you start to spend all the extra money you make you'll never end up Building Wealth nasam talb once said the three most harmful addictions are heroin carbohydrates and a monthly salary because eventually you're going to become a prisoner to your own job your golden handcuffs get tighter and shinier because you need your a bi-weekly paycheck to pay off your debt and to sustain your new Lifestyle the only way to break free or to make sure that you never fall for the golden handcuffs is to know exactly how much money you should spend and save the general rule of thumb is the 50320 rule basically 50% of your take-home pay goes towards your needs like housing food and utilities 30% for your wants your vacations entertainments and Mr magic lamp and 20% to your savings so if you're making about $6,000 a month3 would go towards your needs 1,800 towards your ones and 1,200 towards savings for future Investments but you need to know that the 50320 rule isn't a one-size fitall solution it's just a good starting Baseline to help you understand your own personal financial situation and then you can readjust the ratio accordingly personal finance is personal for a reason middle class habit number two so back in 2015 I was doing an internship in Ohio for the summer and 2 weeks before I was supposed to drive back to New York I got into a really bad car accident with four cars my car was basically towed to the mechanic and they said that it was going to cost around $55,000 to fix and immediately I began to spiral because I had no idea how I was going to pay for $5,000 but I absolutely needed to because I had to drive up in 2 weeks and my sublight was about to end but I think like 10 minutes into my panicking I suddenly remembered that I saved up an emergency fund for stuff like this and that's when I realized middle class habit number two and it's not having an emergency refund it's basically a cash Reserve that's set aside for financial emergencies which does not include a wild Night Out Vacations or fried chicken Cravings the money should only be used when all hell breaks loose when your house gets flooded when you're stranded in the middle of nowhere and have no other options basically when your life is Fubar now this is really important because you do not understand how much your brain is constantly focusing on the worst case scenario in case you're run out of cash because you're in some sort of emergency and you can't pay for it so by having this buffer it really frees you up mentally so you have less stress you have more time to focus on other things the good news is determining how much you need in your emergency fund is simple open up a spreadsheet and take account of all your monthly expenses rent loans bills the golden rule for your emergency fund is to save 3 to 6 months of your essential expenses so if that's $3,000 for you then you want to save up to $188,000 but I understand that saving this much might seem impossible and honestly I had a lot of trouble saving this much too at first so for me I found that the most effective way to save money is with this thing called Financial automation studies showed that this helps you easily save 3.8 times more money because everything is on autopilot and you don't have to think about it anymore it's the same strategy that I've been using for years and has allowed me to finally control my money instead of it controlling me if automating your finances sound interesting to you I'm graning a free challenge on July 1st while I'll show you step by step how to automate your money anyone can join but space is limited so secure your spot today I'll leave the link in the description and again it's completely free and you can win some great prizes next only two things in life are guaranteed death and taxes while everyone has to pay taxes I realize that more often than not the middle class are paying taxes without actively thinking about how they can legally reduce their taxes there are a ton of legal tax loopholes that middleclass people can take advantage of which is what the wealthy do in fact did you know that Warren Buffett one of the richest men in the world with a net worth of $134 billion actually pays less taxes than his secretary although it's a lot easier to reduce your taxes if you're self-employed it doesn't mean there aren't things you can do as someone with a full-time job one of the easiest ways is by contributing to a 401k plan but you can only have access to one if your employer offers it but if you don't then don't worry because I'll share other ways to lower your taxes in a bit a 401k plan is basically an account that you can fill with pre-tax money which you can then use to invest in 2024 you can contribute up to $23,000 to a 401k which means that you can reduce your taxable income by however much you contribute the three other tax advantage accounts to check out are first in HSA it's a savings account that's used to pay for current and future medical expenses like doctor visits or medicine you can contribute up to and reduce your taxable income by $4,150 in 2024 there's also a traditional IRA which is similar to the 401K except you can open one up at any time time and you can contribute up to and reduce your taxable income by $7,000 if you're under 50 and $8,000 if you're over 50 then there's a 457b plan for government employees nonprofit organizations and some for profit companies you can contribute up to and reduce your taxable income by $23,000 middle class habit number four so 2017 was probably one of the happiest moments of my life because I graduated college not because I completed a big milestone as a first generation college student which deserves claps all around thank you thank you but because that meant to me that I didn't have to study read a book or take any more exams for the rest of my life because I was terrible at them but it wasn't until maybe 7 months into my first job that I realized that this would severely impact my earning potential and this is when I realized middle class habit number four which is not understanding career Capital C newort came up with this concept called Career Capital which is basically the accumulation of your skills talents and abilities throughout your life which directly impacts how much money you can earn over time the more you know the more you can do and the more you can make in economics this can be explained by the law of supply and demand basically when you have high career capital or skills that are in high demand but there aren't a lot of people who can do it then you automatically position yourself to solve problems that few others can as a result employers are willing to pay a premium for you if you want to become rich you need to develop skills and talents that others want and if you have have what skills can you learn that will give you a leg up from your colleagues like when I worked in Corporate America I dedicated 2 hours every week to teach myself python a programming language so I could finish my work a lot faster a task that normally took someone 3 hours to do I can now do in 10 minutes and the whole reason for this was so I could aggressively push for pay raises and promotions and I don't know if you can tell but I'm Asian and in Asian culture you're kind of taught to be quiet keep your head down and just do the work so initially it was really hard for me to ask vate for myself for raises and promotions but because I had the skills that clearly made my work stand out for my colleagues I became a lot more confident in asking for more money middle class habit number five so my parents are immigrants meaning that growing up they always told me that I needed to work hard if I ever wanted to make it and out of my two other siblings they especially emphasized this to me because I consistently had the worst grades in school and I took what they said to heart I studied and I hustled really hard to show them that I could do it but after I graduated college and I started working in finance that's when I realized middle class habit number five which was yes hard work is important if you grew up poor it'll get you from point A to point B but to get to Point Z you need to work smart nval riec con said one of the biggest separators between those who make it and those who just keep on trying is leverage it's basically a concept that means amplifying what you do imagine you're throwing pebbles into a calm body of water each Pebble you throw represents your input you your effort into whatever you're doing and when the rock hits the water the ripple effect is the output Leverage is what can transform your Pebbles into Boulders and basically 10x the size of your ripples the reason Leverage is important is because we're all limited by 24 hours in a day if you're pizza chef and you can only make one pineapple pizza an hour no matter how hard you try to hustle you'll only be able to make 24 pineapple pizzas in a 24-hour period it's a very linear process but for the wealthy their process is exponential they use leverage so they can make hundreds of pineapple pizzas in the same 24-hour period two types of smart work with Leverage is code leverage and media leverage which is creating software and creating content respectively both of these types of Leverage allow you to scale your output because all you need to do is write a piece of code once and the impact of it can compound over time with zero marginal cost to reproduce it again another example is before the internet if I wanted to teach people about personal finance I would need to find a classroom that maybe 30 40 people can fit inside of and I would need that classroom every single time a new group of people want to listen but now with content leverage all I need is a camera a computer recorded once and millions of people like you can watch and listen for as many times as you want but the easiest and quickest way that you can take advantage of Leverage is with investing on average the stock market returns about 10% a year meaning your money will essentially double every every 10 years without you needing to do anything if you invest $6,000 a year from 25 to 65 and an annual return of 10% you'd end up with a total value of over $2.7 million on the other hand if you just kept the money under your mattress you'll end up with the same amount you tucked away $240,000 investing versus keeping your money under the mattress is the difference between using leverage and not and if you're looking to start investing I'll link the investing app that I use below where you can get free stuff if you invest at least $100 the next middle- class habit is being okay with bad debt nowadays it seems like taking on bad debt is the cultural norm people are using bad debt to buy everyday things like clothes and groceries which reinforces the mentality that you can just use your credit card to buy whatever you like even if you can't afford it by the end of 2023 Americans had over a trillion dollar in credit card debt which is the worst that it's ever been but don't get me wrong I love using credit cards because of all the benefits it has but my rule of thumb is unless I can afford to buy that thing outright in cash I will not buy it with bad debt credit card companies want you to spend more because that's how they make money if you can't afford to pay the bill at the end of the month they'll just charge you interest the problem is the average credit card interest rate nowadays is 27.9% which can easily turn your $300 Clothing Haul into thousands of dollars if you're not able to pay it off in time but if you already have bad debt the quickest way to get rid of it is with the AV launch method here's how it works first decide how much money you can budget off to pay off your debt every month it could be $50 $100 or even $11,000 second open up Google Sheets and list out all your balances and the minimum payments you need to make for each one third order each debt from highest to lowest by interest rates so if you currently have a $1,000 credit card balance with a 20% interest rate a $2,800 credit card balance with a 10% interest rate and a $177,000 car loan with an 8% interest rate what you want to do is make all minimum payments on all your balances to avoid penalties and if you have any money left over from what you budgeted put it towards the balance with the highest interest rate in this example you would put your leftover money towards the credit card balance with that $1,000 number once that debt is paid off you move on to the next balance with the next highest interest rates in the case the $2,800 credit card balance then you just rinse and repeat which leads me is something that you've got to start accepting and it's that even if you're trying your hardest to be better with money sometimes you still might feel like you're not doing enough and that might be because you don't know the five financial goals you need to achieve before you're 30 click here to find out what they are and what you need to do before it's too late