7 REASONS YOU’RE NOT RICH
As financial advisors, we’ve spent many years helping other people overcome financial stumbling blocks so they can become rich. When it comes to helping people become wealthy, we’ve seen a lot of people over the years make mistakes that have eroded their wealth. (Okay, we’ve made most of those mistakes, too!)
Being “rich” can mean different things to different people, but we believe it means having enough money working for money so that you don’t have to work anymore. We all hope that will happen for us when we reach retirement. For some people, it happens in their 30s. Some people are born into it. And for some people, it never happens.
The good news is that it is never too late to become rich if you are ready to own up to the reasons you’re not and do something about it.
Want to know why you aren’t rich yet? Keep reading.
#1: YOU SPEND MONEY LIKE YOU’RE ALREADY RICH. Sure, it feels good to buy expensive things, whether it’s a new car, Lululemon, a big house in the country, or a trip to Mexico. And it’s hard to say “no” to those things when you see your friends buying them. If they can afford it, you must be able to afford it too, right? Wrong!! Make your buying decisions based on your income and goals, not because you saw pictures of your friends in Hawaii on Facebook. Even if you don’t buy pricey items, if you regularly buy stuff you really don’t need, it still adds up fast ($250 trip to Walmart for shampoo? Really?).
Most of us are guilty of (at least occasionally) living beyond our means and carrying a balance on our credit cards. The problem is that as long as we continue to spend more than we have (and you are if you’re carrying a balance on your credit card), we can’t start building wealth. Overspending and high-interest credit card debt are your worst enemies when it comes to building your wealth. Spend like you’re poor and you are much more likely to become rich.
#2: YOU DON’T HAVE A PLAN. Without clearly defining your life goals and dreams, becoming rich will just seem like an unattainable fantasy. And that can turn into a go-to excuse for why you don’t need to save. As we say in the financial industry: those who fail to plan, plan to fail. Creating a financial plan may seem overwhelming or intimidating, but it doesn’t have to be. In fact, we have some great tools on our website to help you get started! The process simply starts with prioritizing your goals and writing them down. Put that list where you can see it on a regular basis. Review your goals with your financial habits annually – and you’ll be well on your way to growing wealthy!
#3: YOU DON’T HAVE AN EMERGENCY FUND. You’ve probably heard it a hundred times: you need to have at least six months of income saved in an emergency fund. And yes, it’s much easier said than done. However, we’ve seen too many people (including ourselves) get hit with a major unplanned expense, whether it’s a car or home repair, a medical bill, an unexpected job loss, an accident or illness that’s led to a drastic reduction in income. When these things happen, and they do — more often than you might think – not creating a financial safety cushion can make one of those situations much worse. If you’re forced to rely on credit cards, you’ll end up sinking deeper into debt instead of becoming rich.
#4: YOU LET YOUR EMOTIONS GUIDE YOUR INVESTMENT DECISIONS. You might be lucky enough to become rich by investing your money in a hot stock tip that you heard from a friend – like pot stocks or block chain technology. You might be lucky enough to win the lottery, too! But that’s betting, not a great strategy for getting rich. Choose the stocks you invest in by doing research. Read the financial statements of the stock and learn about how the stock market works, or talk to someone who knows how to do that.
Or maybe you’re the kind of person who doesn’t want to take any risks with your money, so you put it all in GICs or term deposits. The problem with safe investments is that they don’t have to offer a good return, because they know that you’re more interested in safety than return. Safe investments usually don’t even keep up with inflation. So if you’re playing it safe, you’re probably also eroding your wealth. You’re not going to get rich (or even be financially secure) that way.
#5: YOU DON’T PAY YOURSELF FIRST. Here’s the secret to saving: make it automatic. Saving is seamless when it’s automatic. Treat putting money into savings like paying your bills – it’s got to be done every month whether you like it or not. Set up a monthly, semi-monthly or bi-weekly contribution into your emergency savings and retirement savings – even $25/month can go a long way. <See what saving $2000/year can do for you.>
#6: YOU’RE RELYING ON AN INHERITANCE OR SOMEONE ELSE. You might think you don’t need to worry about saving because someone else will save you. Maybe you are depending on a new job, a pay raise, , a wealthy spouse, inheritance, or even the lottery. Any of these are an excuse to put off taking steps to become rich on your own . The problem is that very little in life is certain. No one knows what will actually happen in the future. It is up to you to save now, and save yourself, just in case something, or someone, else won’t. By the way, did you know that your parents aren’t legally obligated to leave any money to you if you’re over 18 years old and independent when they die? It is their money, not yours.
#7: SOMETHING ELSE IS MORE IMPORTANT. With every week, month or year passes by without saving, your opportunity to become rich decreases. Time and compounding growth are your two best supports when it comes to growing money. Wasting them will cost you BIG TIME. Even if you make little money or have a lot of expenses, or you’re in debt, you can still always save something. The earlier you get into a habit of saving, no matter how much, the easier it will be to continue and increase those savings. But you do need to start. Now.