As President Donald Trump’s second term is now in full swing, many upper-middle-class Americans are making financial moves that feel smart now but could backfire later. From reactive investment decisions to unsustainable spending habits, these short-term decisions are quietly setting the stage for long-term setbacks.
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Here are four mistakes the upper middle class is making with their money in the Trump economy.
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Politics Over Portfolio
Some upper-middle-class investors have adjusted their portfolios based on their feelings about Trump’s economic policies rather than sticking to sound financial strategies.
“Many investors who believed Trump would win the presidency bought (shares of) Trump Media & Technology Group (DJT), believing a Trump victory would translate into gains for DJT,” said Robert Johnson, an author and finance professor at Heider College of Business at Creighton University. “DJT has lost approximately 55% in value over the last year.”
“Wholesale changes in investment strategy as a response to Trump’s economic policies is likely to be the subject of regret by investors,” Johnson explained. “My advice is not to mix investment strategy decisions with politics.”
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Betting Big on Real Estate
Some upper-middle-class individuals have overextended themselves in real estate, encouraged by Trump-era tax breaks and the possibility of their return, like 100% bonus depreciation and lower capital gains taxes.
“Many upper-middle-class Americans are guilty of overleveraging themselves in real estate, assuming that home values will continue rising indefinitely,” said Erika Kullberg, a personal finance expert.
However, banking on favorable policies while carrying too much debt leaves them vulnerable if the market shifts or those policies stall.
“This is risky because high mortgage rates and economic uncertainty are likely to eventually lead to a decline in property values,” Kullberg said. “When that time comes, they’ll be left with homes they can’t sell easily without taking a loss.”
Unnecessary Debt
According to the Federal Reserve’s survey of consumer finances, 61% of upper-middle-income households held credit card debt, the highest percentage among all income groups. Only 26% of the highest-income households carried credit card debt.
“Upper-middle-class Americans are taking out loans on that they don’t need to,” said Melanie Musson, a finance expert with InsuranceProviders.com. “The threat of things getting more expensive because of tariffs is pushing some people to want to buy now before they cost more.
“If you’re not prepared to make a big purchase, panic buying could lead you to make unwise decisions. They may be doing fine right now, keeping up with monthly payments. But if they face a loss due to the economy, they’ll find their finances quickly spiraling out of control.”
Chasing Headlines, Losing Gains
Reacting to news headlines or market fluctuations might feel proactive, but it often leads to emotional, short-sighted decisions.
“The Trump Administration’s economic policies inject a great deal of uncertainty into the markets,” Johnson said. “The ‘on-again, off-again, on-again’ nature of the Administration’s tariff policies has infused a higher-than-normal level of uncertainty into the financial markets.”
Regardless of one’s income status, Johnson said sticking to a long-term strategy is what actually builds wealth.
“Investing without a plan is like driving without a roadmap or GPS,” Johnson said. “Investors should not concern themselves with broad market moves or the crisis du jour.”
Johnson recommended investors create an Investment Policy Statement (IPS) to clearly establish their return objectives and risk tolerance over their relevant time horizon, along with applicable constraints such as liquidity needs and tax circumstances.
“It is best to develop an IPS in a rather calm market,” Johnson said. “Developing an IPS in a volatile market or during major stories is problematic. The whole point of an IPS is to guide you through changing market conditions.”
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: 4 Mistakes the Upper Middle Class Are Making With Their Money in the Trump Economy
