Everyone wants to be wealthy. But it’s not easy. We indulge in behaviors that are self-destructive and prevent us from accumulating wealth. Identifying these behaviors and correcting them can help you get back on track financially.
Reasons why people are not wealthy
1. Lack of discipline
To be wealthy, you need the discipline to save and invest. If you contribute every month to your 401(k) or your discretionary brokerage account and invest in stocks, mutual funds or ETFs, over time you will build wealth.
2. Inability to delay gratification
Buying a luxury car that you can barely afford provides instant gratification. But real wealth is built by putting off such pleasures and saving for the future so that you can easily afford to buy such things. A dollar saved today can be worth several dollars in the future.
3. Lack of education
It takes money to make more money. People with advanced degrees make more money. This in turn allows them to save and invest more and reach financial freedom early.
4. You play the status game
You buy luxury cars and the latest gadgets to keep up with your friends, colleagues, and neighbors. It feels good to stay in the circle with your peers. If you play the status game, you will never win the wealth game.
5. You don’t understand compound interest
Compound interest is the secret to getting wealthy. Time in the market matters. The longer you invest, the more wealth you can build. People who don’t understand compound interest wait until later in life to invest, which reduces their chances of reaching financial freedom.
6. Lack of basic knowledge about investing
You need basic knowledge about stocks, bonds, ETFs, and mutual funds. You don’t have to be Warren Buffett to be a good investor but you need to know enough to play the investing game. You can learn by reading books but will learn faster by doing. Start a brokerage account, invest small amounts to learn faster.
7. Analysis paralysis
Even the best traders only make money on 50% of the trades. There is no point in overthinking your trades. For most folks, ETFs and mutual funds are the way to go. This means fewer decisions to make and you will at least make market returns.
When it comes to saving and investing, people put things off. Whether it’s starting a new brokerage account or contributing to an existing account, take action.
9. Fear of losing money
The stock market is volatile. Your portfolio goes up and down with the market. Making money involves sitting tight when the market moves against you. To be a good investor, you need to overcome the fear of losing money.
10. Lack of a growth mindset
Some people believe that the world is stacked against them and that they can’t make money. You need to have a growth mindset to build wealth. Millionaires think positively and follow through on their ideas.
11. Unrealistic expectations
Investors are impatient and want to compound their money quickly. But building wealth is slow and takes time. Stock market on average only returns 10% (with a lot of ups and downs)
12. Pay too much in taxes
Find ways to minimize your taxes. Investing in your 401(k) or investing in real estate are legitimate ways to reduce your taxes. Invest the tax savings to grow your wealth.
13. Not having mentors
Hanging out with people with similar goals greatly increases your chances of becoming wealthy. Having a mentor who has done it before helps your wealth-building journey immensely. When investing, you will inevitably run into a rough period at some point. Having a mentor will keep you on track and increase your odds of success.