5 Reasons You’re Falling Behind on Your Bills on a Middle-Class Salary
Living on a middle-class salary in the United States today can be surprisingly difficult. Even though you think you’re making good money, you may find yourself falling behind on things like your credit card bills, rent or mortgage payments, utilities, student loans, etc.
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Everyone is in a different situation, but some common reasons why middle-class people fall behind on their bills include not saving for unexpected expenses, acquiring credit card interest, eating out too frequently, being house poor or having a salary that isn’t keeping up with inflation.
Not Saving for Unexpected Expenses
It’s impossible to foresee every expense that will come your way. Unexpected expenses like emergency vet visits for your pet, car repairs or a broken household appliance will happen. These expenses can be costly and quickly cause you to fall behind on your other bills. The wise thing to do is to plan for them in your budget as much as possible.
Set up an emergency fund to plan for unexpected expenses. That way, when something you hadn’t planned happens, you have the money to cover the cost. Work toward having at least three to six months’ worth of living expenses in your emergency fund. Put this money into an online high-yield savings account. These tend to have a much higher interest rate than most brick-and-mortar banks, and it will allow the money to be easily accessible when needed.
“Middle-class individuals fall behind on bills because they don’t build an adequate emergency fund,” said Melanie Musson, finance expert with Clearsurance.com. “If they’re keeping just afloat each month, one unexpected bill could cause a cycle of falling behind. So, make sure an emergency fund is part of your financial plan. Start funding it right away and work towards adding to it every month.”
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Acquiring Credit Card Interest
Spending more than you can afford to pay off each month on your credit card can be an easy way to get yourself in trouble financially. According to LendingTree, the average credit card APR is 24.66%. This can make it very difficult to pay off your balance once you fall behind.
By setting up a budget, you can ensure that your spending stays in check and you can pay off your credit card balance in full each month. This will prevent your hard-earned money from going toward credit card interest.
“As incomes increase, so too can discretionary spending, often without conscious planning,” said Justin Godur, founder of Capital Max. “This ‘lifestyle creep’ can quickly lead to financial strain and credit card debt. To combat this, maintaining strict budgeting practices is essential. Even with salary increases, focusing on savings and investments rather than spending ensures that financial security remains the priority.”
Eating Out Too Frequently
Eating out or getting takeout from restaurants can be tempting. However, it can also be expensive. If you find that you’re eating out more than you should, it could be why you’re falling behind on your bills. Instead, try cooking at home. If you’re celebrating something special with friends, try inviting them to your house and have a potluck. This is a much cheaper alternative than dinner out at a restaurant.
You’re House Poor
A popular guideline is that you should never spend more than 30% of your income on housing costs. Anything more than that and you could end up house poor. This means you’re spending too much on housing, leaving little to pay your other bills.
If you find that you’re house poor, you could consider moving to a more affordable home (smaller, different location, etc.) or renting out a spare bedroom to help cover part of your mortgage payment.
Your Salary Isn’t Keeping Up With Inflation
If you haven’t had a raise in a while, it may be time to ask for one so your salary keeps up with inflation. However, it’s essential to be prepared before approaching your boss and having a conversation. Do your research to learn more about comparable salaries for your position. You should also make a list of the reasons why you deserve a raise. Include things like the revenue you were responsible for and your other successes. Always approach asking for a raise by highlighting your value to the company, not by focusing on how badly you need the extra money.
The Bottom Line
Many people struggle financially, even on a middle-class salary. By identifying the reason or reasons you are falling behind on your bills, you can begin to understand the problem and work toward fixing it.
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