8 Ways People Become Poor While Earning a High-End Salary

Angela Mae   Sun, November 12, 2023 at 3:00

The average annual salary in the United States is $56,220 across all occupations. So, when we think of a high-end salary, it’s significantly above that. In fact, many people consider a high-end salary to be anything in excess of six figures — that is, the $100,000 range or higher.

But even high-earners aren’t always in a good position financially. According to a LendingClub report, nearly half of people earning $100,000 a year still struggle to make ends meet. Rather than building wealth, a lot of these individuals are actually living paycheck to paycheck.

This might seem strange when you consider the numbers on their own, but the truth is that it’s very possible to become poor even when living on a higher salary. Poor money management, excessive spending, limited savings or investments, and a lack of financial preparedness can all keep even the highest earners strapped for cash.

If you’re wondering just how it is that people with a high-end salary become poor, here are some of the most common ways.

Overreliance on Credit Cards

Diana Howard, financial analyst at CouponBirds, suggested that an overreliance on credit cards is one of the main money habits that keeps high earners poor.

“Even [when] making a lot of money (like over $100,000), high earners may still end up losing it all and facing the same money management pitfalls as average earners. In some cases, it can even become easier,” she said.

“People with high incomes rely heavily on credit cards,” continued Howard. “A Quicken survey reveals that 46% of individuals with higher income depend more on their credit cards, compared to the middle-income groups (40%) and lower-income groups (39%). It’s pretty normal to have credit card debt, but once the balance is broken, rich people can sink deeper in the mud.”

Succumbing to Lifestyle Creep

Lifestyle creep is what happens when you start spending more money as your income increase. Sometimes, this increase in spending is disproportionate to earnings — and not in a good way.

 “Lifestyle creep is real. That’s when you start adding more expensive features to your lifestyle over time. Before you know it, you’re overspending,” said Todd Stearn, founder and CEO of The Money Manual. “For example, many of us started with one streaming service but then we added another and another and before long, it’s a serious monthly expense. The same can happen with fancy restaurant dinners, nights out, travel, and more. Then, once you get accustomed to this lifestyle it can feel challenging to go back to living simpler.”

Not Making Tax-Efficient Money Moves

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/8-ways-people-become-poor-170027930.html