Tuesday, July 23

7 Things Getting in Your Way of Being Rich

These Things Are Standing in Your Way to Becoming Rich!

Well, building wealth might seem super easy, but it’s not. In fact, succeeding in gaining an impressive net worth might require a great deal of planning, patience, and sacrifice.

The good news is that you could easily create a brighter financial future, no matter where you stand right now. Probably the biggest barrier for people is that they have to fix their mindset.

And in order to do this, you might have to focus on your finances instead of making that list of expensive things you’re going to get! I’ve worked as a financial advisor for more than 15 years, and the vast majority of my millionaire clients have rather ordinary salaries.

However, they stay frugal, save, and invest. Let’s see what’s currently getting in your way of becoming rich, shall we?

save money on coffee in your way
Photo by insta_photos from Shutterstock

Poor budgeting habits

Plenty of people have no idea how much they actually spend on a weekly basis. It’s also shocking to realize how easy it is to increase your budget right in line with your income increases.

You might even think you have a couple of dollars to spare, but in fact, spending could rapidly catch up with you. Just for the sake of this discussion, we could insert a metaphor: a budget is like a closet; no matter how big you make it, you might surprise yourself with how rapidly you can fill it.

I think it’s also extremely difficult to exercise discipline, especially since social media and all the other platforms make you suffer from the fear of missing out almost instantly.

However, you should take a hard look at your spending habits, because tracking your spending with an account aggregator like Mint.com might prove to be extremely helpful.

Just see where your money goes every month and try to come up with ways to cut back on some expenses. But it’s important to mention that you shouldn’t cut back on everything!

That’s no way of living! You should still find room for a minimum of one expense that might be unnecessary but will bring you a ton of joy. Going too barebones on your budget might set you up for failure, especially when it rapidly becomes too difficult to stick to.

No emergency fund or retirement savings

If you don’t have any emergency funds, you might be forced to use high-interest-rate credit cards in the case of an emergency, which could also lead to a cycle of debt.

Besides that, not having an adequate amount of retirement savings might prove to be a huge obstacle to building wealth. Plenty of people, especially high-earners, are still living paycheck to paycheck.

Many tell themselves that there’s still a lot of time to save later in life, but the sooner you actually start, the quicker you will be able to build wealth through the power of compounding returns.

If you want to increase your emergency fund or retirement savings, you should start small. Just set aside a small portion of your income every month by automatically transferring money into another account, whether it’s a savings account or a 401k.

As you work on slimming down your budget, you could increase the percentage of your monthly savings over time until you’re saving a minimum of 10% of your income.

bill in your way
Photo by Cast Of Thousands from shutterstock.com

High debt

High debt is probably one of the most devastating things for your wealth, especially the kind of debt that we label as “bad”, such as credit cards that might charge extremely high-interest rates and ultimately cause your balances to balloon.

Probably the best way to attack debt is the “snowball method”. This way, you will manage to apply any extra money you can spare to the lowest debt balance.

Now, once the debt is paid off, you can put all the money you were initially allocating every month to pay off the next smallest debt balance. Trust me, you will rapidly gain momentum and feel great because you will be able to knock down your loans one by one.

Low credit score

One of the main secrets to long-term financial success is a very strong credit history, which is usually reflected by high credit scores. A very long and positive credit history will automatically unlock great financial opportunities and also open many doors to achieving financial success throughout a person’s lifetime.

Well, your credit score dictates different activities, like buying a car or home, but also approval for loans with lower interest rates. Moreover, it also affects your chances of qualifying for an affordable insurance rate and credit cards with the best terms. As you might know, a strong credit report will offer easier access to these opportunities.

Luckily, there are many things you can do to help improve your credit score. For those of you who are currently working to improve your scores, there are a couple of basic steps you need to take first: creating a budget, paying your bills on time, and paying off any remaining debt.

Lack of investment knowledge

Investing without an appropriate amount of knowledge might result in poor decisions and even financial losses. Brainy Savings would definitely recommend that you invest some time in learning about the different investment options currently available to you, but truth be told, it’s quite hard for an investor to know everything.

That’s why you should start working with a financial advisor to receive proper guidance tailored to your unique needs and financial situation.

Savings that are not automated

The biggest hindrance when it comes to building your wealth is, simply put, human behavior. One way in which you could successfully overcome the challenges of human behavior is to automate your finances as much as you can, so you won’t have to rely on willpower alone.

This way, you will be able to make a tougher decision. For instance, you’ll be able to save money you would otherwise spend and then reap the rewards on an ongoing basis.

Spending your savings

Saving money is a wonderful thing, but you’re defeating the whole purpose if you constantly dip into your accounts for other unintended purposes.

Savings should be used for one thing only, whether we’re talking about vacations, emergencies, or even a major life event, such as buying a house.

Keep your funds safe from everyday spending, no matter how tempted you might be by an item, a sale, or even an experience. Moreover, if you are actively trying to change the financial habits you have had for years, it’s worth noting that it might take some time to fully make the shift.

Building wealth doesn’t necessarily happen overnight, so if you encounter a couple of roadblocks along the way, try to refocus, recenter yourself, and focus on getting back on track.

Even if we covered all the main points we had planned, there’s still so much to talk about on this subject.

That’s why we thought you might like to try one of our book recommendations, “True Wealth Formula: How to Master Money, Live Free, and Build a Legacy” by Hans Johnson. We highly recommend you read it, and of course, tell us what you think of it in the comments section.

If you enjoyed reading this piece, we also recommend reading: 10 Worst Ways Frugal People Are Wasting Money On

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