There seems to be a perception that the reason people can't become millionaires is because they don't work hard enough. The truth is that working hard has little to do with becoming a millionaire. That doesn't mean you don't have to work hard. You do it. But you also need to avoid the many pitfalls and bad financial decisions that end up being the real reason most people can't build wealth. The truth is that you don't have to have a huge income to acquire assets over a million dollars, but you do have to make good financial decisions (and avoid bad ones).
It is important to note that one problem is probably not what keeps you from becoming a millionaire, but a combination of several actions and decisions you have made. And, yes, there are exceptions to the rules, but then there are people who win the lottery – and can you really bet your retirement on winning the lottery? Here are 10 possible reasons why you are not currently a millionaire:
You Spend More Than You Make
There are no secrets, and certainly nothing magical, when it comes to the basics of personal finance. To keep your finances in order, you need to spend less money than you earn. If you fail to do this one simple thing, no matter how much you make, you will always find that you don't have enough money to live on. It goes a step further than this. Spending less than you earn is not enough by itself to build wealth. You should also save and invest a portion of all the money you make. Most people recommend that this amount be 20% of your salary. If you don't set aside 20% of your income and put it into long-term savings and investments, chances are you won't become a millionaire.
He tries to meet the expectations of others
Nothing will stop you from reaching your financial goals faster than trying to fulfill other people's expectations instead of you. This is commonly known as trying to “keep up with the Joneses.” The simple truth is that if you try to live like a millionaire before you have the resources to become a real millionaire, it is unlikely that you will ever become a millionaire. Instead, you'll just build up more debt and waste money on things to impress people who probably wouldn't be impressed anyway. Trying to keep up with the Joneses when your income can't compete with the Joneses is a surefire way to ruin your wealth-building opportunity.
You don't pay yourself first
One of the most important steps you can take to make sure you're saving money is to pay yourself before you pay anyone else. If your goal is to save 20% of your income, you need to pay yourself that 20% of your paycheck before paying any other debts or expenses you may have. If you try to pay yourself after paying all your other expenses, you will inevitably fail at the end of the month occasionally (if not always), and fail to save the money you were hoping for. By paying yourself first, you're making a commitment that wealth creation is an important part of your overall plan, not something we hope will happen after everything else.
You have children
This probably won't be the most popular item on the list of why you're not a millionaire, but the hard, cold truth is that kids are expensive. It is very expensive. The costs associated with children can be reduced to a certain extent if you have built up some wealth and planned the cost of having children in your budget, but this is often not the case for most couples. Having children at a young age on a low income will greatly affect your ability to build wealth. Since compound interest is so important in wealth creation, and its premise is that the earlier you start saving and investing, the better, the reality is that it is almost impossible to put money aside when you are young and with children. If this is the case, any extra money you have is bound to end up going towards childcare instead of being invested in wealth creation.
Your House Is Too Big
Some people think that buying a big house is a good investment. While this may be the case, buying a house for more than you can afford is a good way to ensure that you are unable to create real wealth. The problem is that the bigger you buy, the bigger your mortgage costs. A big house will mean bigger tax payments, more expensive maintenance, more things bought to fill the house, higher insurance payments and other related expenses if you buy a house that suits your needs. The real way to build wealth is to buy a house that suits your needs and budget, and take all the money you earn by not buying a big house to invest and create wealth.
Returns Items Fast
Just because there is a new and shiny version of the gadget you bought a year or two ago doesn't mean you need to buy that new gadget. If you're the type of person who constantly trades in useful products to buy the latest and greatest gadgets, you may have a hard time building the kind of wealth you want. Those who create savings to invest do so by getting the most value from their purchases by using their purchases throughout the useful life of the items. The people who can afford the newest and shiny things by upgrading them every year are those who have already built their wealth, not those who are trying now.
You Let Others Manage Your Finances
There is nothing wrong with getting the opinions of others to help you develop a plan to build your wealth, but it is important to take an active role in this planning. Giving full control of your money to someone else is a sure way to ensure that you fail to build the wealth you hope to create. Creating wealth and maintaining it means that you need to understand the financial decisions being made, and periodically review them to make sure they meet your goals. Giving complete control of your finances to someone else creates a situation where you no longer have control over your financial future, and the only person you can truly trust to look out for your best financial interests is yourself.
You Fail to Take Care of Your Health
Nothing will deplete your wealth faster than illness. While you may not be able to control all aspects of your life, there are some steps you can take to make sure you are as healthy as you can be. Eating right, exercising, taking preventative measures, getting an annual check-up and treating health problems before they become serious all put you in a better position to live a healthy life. The better you take care of your health, the better chance you have of creating wealth, and keeping that wealth as you grow older.
You Get a Divorce
As much as getting married can be a great way to help build wealth, divorce often has the opposite effect. In fact, getting a divorce is one of the best ways to destroy the wealth you have built up to that point. That doesn't mean you should stay in a marriage just for financial reasons, but it's important to know that divorce often destroys a lot of wealth, and getting a divorce will derail your best-laid plans to become a millionaire.
You have one or more bad habits
A bad habit is anything that robs you of money without giving anything in return. The past is smoking, gambling and drinking alcohol, but a bad habit can easily be that expensive cup of coffee every day or three sodas you drink each day. You don't even have to buy things. Being lazy and sitting in front of the television for five hours a day instead of working to improve yourself is also a bad habit that harms wealth creation. Depending on the number of bad habits you have, and how much they cost you continuously, this alone may prevent you from becoming a millionaire.
Bonus reasons:
You don't teach yourself
Research on the wealthy generally shows that people with more money spend more time learning work-related skills. According to author Tom Corley, the wealthy spend at least 30 minutes a day on work-related reading. This allows them to develop their skills, making them more successful in turning time into money, improving market returns, or running their own businesses (here).
You don't exercise
The rich work very long hours. On average they work more than 50 hours a week. In order to maintain this pace, the rich usually exercise at least 30 minutes a day by exercising. This may include running, jumping rope, walking or cycling. Exercise allows your brain neurons to grow and produce glucose. Glucose is the fuel for the brain, where it grows and becomes more intelligent. And, as a result when people exercise more, they tend to do more (per Harvard University).
Wrapping This Up – Even If You're Not Rich Now, You Can
Getting rich is not easy – but it is possible. Even if you are not rich now, if you get good habits, save and invest consistently, live frugally and avoid hitting any landmines (like getting a divorce, or buying a very big house), you should know how to be rich. Fast forward, getting rich takes years of work but it is possible and very rewarding. .
For more Funny Advice Reads, consider this:
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(Photo courtesy of Enkhtuvshin)
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