4 money traps that keep you broke was inspired after listening to uncle G.  If you’re making so much money that you don’t know what else you could with it, this post doesn’t apply to you.

The fact is ~80 percent of Americans are living pay check to pay check. These traps which the middle class fall prey to are set and designed by institutions.  If you avoid these 4 money traps that keep you broke, you’ll definitely be on your way to financial independence.

Savings in the bank

1 of the 4 traps that keep you broke is having your savings account as the only source that pay you interest.  The average savings account interest rates that most big known bank pay is around 0.01 percent.  This means that someone that had $100,000 sitting in savings account will only get $1,000 return on his money at the end of the year.  That’s lazy money and resources wasted especially when you factor in inflation.

College

With the current student loan debts over 1.3 trillion dollars, how many people do you know that graduated college but still can’t get a decent paying job?  You don’t have to answer that.  Like Uncle Sam, student loans will be stuck on you like white on rice if you’re not able to pay.  It’s one of those debts you can’t default on.  With vast amounts of information out there with a click of a button, do you really need to give the institution anywhere from 20-40k a year to get information you can get for free?  College is indeed needed for occupations such as lawyers, doctors and other specialized callings.  Unless you’re aspiring to have a career in one of these professions, it may be wise to invest that money in yourself and paying to learn from mentors with proven results.

401 (k)

With trillions of dollars sitting in 401(k) s, do you really think Wall Street cares about your retirement?  Based on history, the stock market will yield some kind of return if you hold your money in there long enough.  Depending solely on your 401 (k) s as the main source for your retirement is impalpable.  Despite the recent move upwards which is great, do expect occasional corrections and not be surprised.  The market is irrational and the moves are based on sentiments.  Whether it’s going up or down, the price of stocks doesn’t truly represent the value of the companies.  To learn more about stocks, see Real Estate vs Stocks book.

Buying a house

As mentioned in previous post: Worst Investment People Make, buying a residential property which doesn’t earn any income is ridiculous.  Check out the article to learn more.

So what’s the solution if saving money is a bad idea?  The correct answer is to focus on making more money.  Let’s say you only make 50k a year, the truth is you’re still broke even if you save the whole 50k.  You can’t get very far for too long on just 50k.  This means improving yourself by acquiring knowledge and skills to create other income streams especially if the pay in your current job whack.  Not saying whether or not to quit your current job but to at least start something else on the side until the income from your side hustle matches or surpasses it.

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