There has been a lot of debate about whether there is a middle class or not in Zimbabwe. As a person with a mind that leans heavily towards numbers and mathematics, I believe we have some sort of middle-income band that we can call a middle class. It may not look like the middle class in other parts of the world or like we would want it to look but it is still our middle class. And just like any other middle class, it comes with financial traps that will ruin what is supposed to be an improved life, at least financially.
Spending to the hilt
The middle-class life comes with some sort of stable or reliable income which gives a sense of security that more money will come. As such people are easily persuaded to spend all the money they make, after all, there will be more money. If you spend all you earn funding your current lifestyle it is highly unlikely that your life will ever change.
Funding a lifestyle with debt
When you’ve spent it all and you still haven’t covered everything you can of course turn to debt. Easy for the middle-class person to access debt, whether formally or informally, to get those things done. This opens you up to the possibility of falling into a debt trap. If this month the income, was not enough to cover everything and you borrow to pay back the following month you will be short that month too.
Ignoring the basics
The other trap that comes with middle-class income is thinking you are beyond the basics of personal finance. For example, there’s a belief that saving and budgeting are activities for those with low incomes who have to make ends meet. However, these concepts apply to everyone and there’s an argument that goes on to say to whom much is given much is expected. So the higher the income the more important these basic concepts are.
Speaking of basic concepts that are ignored budgeting has to be the top one. You can see how this happens, people will easily assume since there is enough more there is no need to economise and so budgeting is unnecessary. That’s the trap. Budgeting, at least when done right, isn’t just about making a plan, it’s about following and reviewing that plan. It’s about tracking and directing your habits and correcting your plans where needed.
Saving is not popular and that’s a shame. Particularly in middle-class situations where it is deemed unnecessary. The problem here is that saving is often associated with rainy days or times of trouble. Well, saving is all that and more. Savings whether as an emergency fund or general savings are one of those things that it’s better to have and not need than need and not have.
Investing doesn’t quite have as low an opinion rating as budgeting or saving but it is something that you will find middle-class people tend to ignore. Investing isn’t very attractive in its usual form. Many living the attractive fast life of the middle class don’t want to take small bits of money and put them away for 20 to 40 years. The trap here is that investing is invariably a time game. The longer you have been doing it the better your returns. Instead of investing, people fall for the next trap.
Get rich quick schemes
Since getting rich slow doesn’t appeal you may find middle-class people more open to getting rich quick schemes. We’ve had a lot of these fleecing people in Zimbabwe but you can rest assured the problem is not uniquely Zimbabwean. They are cleverly designed to lure people with the right emotional signals. They all end the same way, I’m very expensive tears.
Not saying no
The final trap is not learning to say no. No is powerful in your journey through personal finance because it saves you the most trouble you will encounter in life. However if you do not learn to say no there will always be something new to buy, a family member who “needs help”, a friend who has the latest get rich quick scheme and so on. Doing things because you have the money or can pay for them is a recipe for disaster.