Study Reveals Habits That Make It Hard for People to Get Rich
Jakarta, CNBC Indonesia - The desire to become rich and achieve financial stability remains a dream for many people. However, reality shows that the majority of Indonesian society is still in the middle class group, not the wealthy elite.
This middle class group is assessed to have certain financial behaviour patterns that make it difficult for them to improve their economic status. One of the main factors is the way they manage expenses, which often have to be divided between primary needs and lifestyle.
On one hand, they are still able to enjoy things like eating out or going on holidays. On the other hand, they also try to set aside part of their income to save or invest, although the amount is not always optimal.
CEO of Pineapple Money, Zach Larsen, assesses that this condition puts the middle class in a dilemmatic position, between fulfilling a decent standard of living and maintaining long-term financial stability.
“Many of them focus on a decent home, a reliable vehicle, and children’s education. Retirement savings and insurance also become priorities,” said Zach, quoted from Yahoo Finance.
Meanwhile, a Business Insider report shows that the majority of middle-class respondents plan to save their money if they receive additional income.
In contrast, low-income groups tend to choose to pay off debt, while the wealthy prefer to invest it.
Here are seven typical middle-class purchases that the rich rarely make, as quoted from Yahoo Finance:
- Instalments
Many middle-class individuals are burdened with debt such as home loan instalments, car credit, and student loans. Unlike the rich who use debt to buy productive assets like property, the middle class often buys consumable goods on credit.
“Expensive vehicles, luxury items, or non-essential needs are often bought on debt,” said financial expert Jacques du Toit.
- The Latest Gadgets
The middle class often buys non-luxury branded products, for example gadgets, clothing, or mid-range household appliances. “Sometimes they get trapped in the desire to always follow trends, even if it means going into debt,” said Whaley.
- Education Costs
Large investments in education are a top priority for the middle class, both for private schools and universities. According to Rob Whaley from Horizon Finance Group, education is seen as a path to social and economic upward mobility.
However, Toit warns that education can also be a trap if the path does not match interests or job prospects. “For example, taking a fine arts major may follow passion, but it does not necessarily guarantee stable income,” he said.
- Suburban Property
Home ownership is another significant expense. CEO of Sell Quick California, Marc Afzal, states that the middle class generally buys houses in the suburbs for space and comfort, unlike the rich who own multiple premium properties and the lower class who more often rent.
- Expensive Cars with Long-Term Instalments
According to money coach Mary Vallieu, many middle-class families buy cars priced between Rp800 million and Rp1 billion with seven- or eight-year instalments. Meanwhile, the wealthy buy cars outright, and the poor generally use second-hand cars or family hand-me-downs.
- Holiday Packages
Instead of exclusive holidays like the rich, the middle class chooses holiday packages that are considered cost-effective but still provide experiences. Concerts, entertainment events, and travel also become routine expenses for them.
- Expensive Kitchen Appliances
The middle class tends to buy better versions of basic needs - like expensive mobile phones and premium kitchen tools. “They don’t always choose the best items, but they still want more features,” said Jake Claver from Digital Ascension Group.
Although the middle class can enjoy a more comfortable lifestyle, experts suggest that their spending should still be directed towards creating long-term financial security.
“One of the keys to building wealth is to adjust spending to values and long-term benefits,” said Toit. He emphasised the importance of investing, building businesses, and automating financial management.
“The goal is not just to have income, but to build a sustainable lifestyle that allows growth without excessive financial pressure,” he added.