Financial Classes That Matter
Over our years of working in financial services, managing money and following economics, we’ve come to the conclusion that, just as there are four original members of Destiny’s Child, there are four fundamental financial classes. Some folks may be lightly weighted in a few classes and some transient between a couple, but by and large most are heavily weighted in one class.
Like the members of a boy band, each financial class has distinct characteristics that, either positively or negatively, prevent people from changing the class in which they’re most heavily weighted. That doesn’t mean people are immotile. By not being money conscious, people can easily move to a less desirable financial class. With enough education and effort, people can move to a more desirable financial class.
The four classes, as we see them, are as follows.
The Leveraging Class
Like Stanley Burrell, members of the Leveraging Class spend more money than they have and, therefore, spend on credit. They often get into a cycle of continuous borrowing and find it tough to get ahead, if they even want to, and occasionally find themselves in the Spending Class.
Members of the Leveraging Class may actually have a good credit rating, but they often spend 15 percent or more for everything they buy because they carry a credit card balance from month to month. They go where fashion sits and are often the proverbial Joneses.
Members of the Leveraging Class go to the mall and buy everything on credit.
The Spending Class
As if believing “Mo’ Money Mo’ Problems” is the gospel truth, members of the Spending Class spend every penny they get. They rarely have more than a few 100$ bills if they ever join the Saving Class, at all, and frequently join the Leveraging Class. Members of the Spending Class often spend 5 percent or more on everything they buy because they occasionally use credit cards.
Check out the video of how we recently achieved a financial dream: Dream a Little Dream with Me
Members of the Spending Class don’t have a long and consistent credit history and, therefore, often don’t have great credit scores. They don’t have a lot of stuff, as with the Joneses, which make one envious. They don’t have emergency savings nor use a lot of credit, so their things aren’t shiny and new.
Members of the Spending Class go to the mall and spend all their cash.
The Saving Class
Members of the Saving Class, possibly in an ambitious attempt to make a material girl’s rainy day, are judicious about every penny they spend, but often can’t afford to invest in the stock market due to their stage in life or income, or don’t trust the stock market after multiple market crashes and Wall Street scandals.
Because of our current, low interest rate environment, this class isn’t as large as it used to be or should be.
Members of the Saving Class go to the mall and window shop.
The Investing Class
Members of the Investing Class take inspiration from the CEO of Hip Hop and invest as much as they can in the stock market and other investments. They experiences the power of their money working hard for them and don’t see the value in joining the Saving Class due to America’s anti-savings policies.
Contrary to Merle Travis, they’ve learned to use credit to their advantage and often have stellar credit scores. While they have debt, their net worth is positive. Through their investments and debt management, they generate enough money to subsidize their lifestyles. They don’t have to work hard for the money, but it’s fun earning money for nothing.
The Investing Class makes The Joneses want to take out another mortgage on [their] home, but they likely don’t have enough credit to subsidize a lifestyle that requires seeing all the real opportunities to makes lots of money.
Members of the Investing Class own the mall through a REIT in their 401(k) that earns them 10 percent annually.
In which class are you and in which class do you want to be?