Investing & Retirement
9 Reasons You Will Never Be Wealthy
Being wealthy means different things to different people, but I think most would agree that it means having the financial freedom to live your life in the way you want. It’s a simple truth that most of us are not where we want to be financially, and the reasons are often very similar. Want to know why you aren’t rich, and probably never will be? Read on.
Reason #1: You spend too much
While it can feel great to buy expensive things like a big house or a luxury vacation, or just overspend on your trips to the department store, the happiness you get from this spending only lasts until you get the bill. If you’re like many people, you’re living beyond your means already and using credit cards to buy things you can’t really afford. As long as you spend more than you have, you cannot begin to build wealth.
The answer? Start spending like you’re poor and you’ll already be putting yourself on the path to wealth.
Reason #2: You have too much debt
The average American household has $7,050 in credit card debt. If you make the minimum payment every month on that amount, it will take close to 30 years to pay off and cost you a total of $10,660 with interest before you’re debt free — assuming you don’t keep charging.
There are a few types of debt that can lead to wealth and financial success, such as a mortgage, a credit line used to start a business or student loans, but credit card debt will only drag you down and keep you there.
Reason #3: You have no plan for the future
Without goals, becoming wealthy will always seem like some distant and unattainable dream. As they say, those who fail to plan, plan to fail. A financial plan doesn’t have to be difficult, but it should include short-, mid- and long-term goals that will push you toward your ultimate goal: financial independence. Start by prioritizing your goals and getting them down on paper and putting this list where you’ll see it every day to stay on track and give yourself motivation.
Reason #4: You’ve delayed too long
Every year that goes by without saving money decreases your chance of every becoming wealthy. That’s because compound interest and time are the best ways to grow savings, and wasting them will hurt you. Even if you’re struggling to pay off your existing debt, start putting aside money every month, even if it’s just $10 or $20 to get started. The sooner you start the habit, the easier it becomes.
Even if you’re getting a late start, you still have a shot if you start today. The best way to do it? Automate everything so you don’t need to create a new habit. Set up automatic monthly transfers to your savings account or retirement account right now.
Reason #5: You make excuses
It’s too expensive just to get by. I’ll never pay off my debt. I don’t make enough money. Does this sound familiar? It’s easy to get lazy and let bad habits take hold. Just look at the millions of people who have had to push off retirement — or go back to work — as proof of this. As long as you keep making excuses, you’ll stay exactly where you are now and never become wealthy. It’s up to you to take responsibility and make changes in your life.
Reason #6: You’re passing up free money
Does your employer match employee contributions to a 401(k)? If so, you’re just passing up free money but not participating. The same goes for taking the easy route and claiming the standard deduction on your tax return when you qualify for more by itemizing. These are just two common examples of money millions of people pass up every year.
Reason #7: You focus on today
It’s hard to think about retirement when it’s decades away and you have wants and needs today. While you have bills to pay and a family to feed, the problem is focusing too much on today leads not only to debt but neglecting your future retirement.
The longer you wait, the harder it will become to amass the nest egg you need. If you wait until you’re 35 to start saving, you’ll have to save $670 every month to get $1 million by 65. If you start saving at 25, you’ll only need to put aside $286 a month to have a million when you turn 65.
Get rid of your “buy now, worry later” mentality and start saving now to be rich later.
Reason #8: You buy everything new
New things are rarely a smart investment. Just look at buying a new car versus a used car for the perfect example. New vehicles lose, on average, 30% of their value within 2 years, including an immediate drop in value as soon as the car leaves the lot. After 5 years, the average vehicle is worth just 44% of its original value.
This same idea applies to most things. Buying pre-owned items can save you a substantial amount of money. Ditch the idea that you need to buy new and start buying clothing, textbooks, tools, video games and many other things pre-owned.
Reason #9: You’re waiting for something to come along
Do you live without any sense of urgency? Maybe you think you can put off paying off your debt, or saving money because something will come along. It’s amazing how many people give up their chance at financial freedom because of a belief that a new job, an inheritance or even the lottery will take away their problems. A better strategy is remembering that very little in life is certain, so it’s smart to focus on what you can do today.
You don’t need to win the lottery or be the next Bill Gates to become wealthy. After all, even Warren Buffett started out with nothing and slowly built his empire over a lifetime through smart decisions and foregoing the things that most of us wouldn’t consider giving up. If you truly want to become wealthy, it’s time to take responsibility and step up; only your actions today will make it happen.