We would all love to have extra money, and it would be even better to have enough money to never worry about finances again. According to 2013 UBS Investor Watch findings, being wealthy means living with no financial constraints, but investors feel that at least $5 million is necessary to be wealthy. We can all agree that being rich means living without worrying about your finances, but is $5 million really the magic number? It probably depends on the person. What we do know is that most people would be happy to never count their change again or worry that they won’t be able to pay a bill. If you have been trying to save for a long time or if you’ve simply given up on being rich someday, there may be specific reasons you are not succeeding. Read on to find out if you are holding yourself back.
1. You don’t plan for the future
You might wish you were rich, but if you don’t plan for the future, you will never be rich. Without a set plan, you won’t save money, and you will always have excuses (like telling yourself you can save when you’re older or that you can save more when you make more). A financial planner can help you set goals and stick to them. However, if you really want to start saving money now, you can also set your own goals and make your own savings plans. Start by looking carefully at your current budget. Determine with inflation how much you are going to make over your lifetime and include potential financial difficulties, as well (loss of a job, loss of a loved one, stock issues, etc.). Determine how much you need to save each month, and each year, in order to reach your financial goals.
Once you have set goals, one of the hardest issues you will face is actually sticking to them. Having a financial planner can help keep you accountable, but you can also talk to a trustworthy friend or your significant other. As you budget, you will also find that giving up certain items that you don’t need might help you become rich faster. Just for fun, check out Cool Math’s Give-It-Up-to-Get-Rich Calculator.
2. You spend more than you make
This one is obvious. If you have a combined annual family income of $90,000 but you are not saving any of it (or worse, you’re spending more than you make), you will never be rich. People tend to think that if they had more money, they could stay on budget. While this might be the case once in a while, the majority of the time, budgeting is the issue. If you can’t stay on budget now, you probably won’t stay on budget if you make $10,000 more in a few years, or even $50,000 more.
If you often find yourself purchasing items that are more extravagant than your lifestyle dictates, or if you constantly use your credit card and you can’t pay it off, then you are probably spending too much money. Once you stop spending more than you make (or close to it), you can start saving. Also, if you learn to live within your means, you will learn to be happy doing so.
3. You’re not investing properly
Hopefully you are saving and investing some of the money you make each month. If you’re not investing any of it, then you should start by looking into investing. If you are already investing, your money is ideally split between several different stocks. Although you can get rich from investing all of your money in one great stock choice, you can also lose a lot of money if that stocks plummets and all of your money is tied into it.
Your best bet is usually to diversify your investments (this can include bonds, cash, stocks, and even CDs if you want to have one safe choice — but you won’t make much money from it). If you are just starting off and you only have a little bit of money to invest, then you may not be able to diversify just yet. In that case, saving anything is better than nothing. But in the long run, diversifying your investments is your best bet.
4. You have a complex
Some people believe that they will never be rich, and if you believe that, your self-fulfilling prophecy will probably come true. You have to believe that you want to be rich, and that you can be, in order to succeed. Some people feel that because their parents were poor or they have no college education, they can never be rich. However, some of the most successful people dropped out of college, including Bill Gates, Steve Jobs, and Frank Lloyd Wright. The world would be a different place without them.
Negative thinking will prevent the smartest person from becoming rich (unless of course, they win the lottery). If you are stuck thinking that you are not smart enough, not good enough, or just not worthy, then you will probably never be rich. Also, although you don’t want to go out and start spending like you’re rich, acting like you’re rich will help you get there (for example, working more hours, saving more, planning for the future like you will have more than enough money — but not actually spending that money yet).
5. You believe that being rich is bad
Going along with the previous point, if you believe that rich people are fundamentally bad people, you will never be rich. Perhaps you have no interest in being rich: Almost all of us would like to have enough money to never worry again, even if we claim otherwise. The rich get blamed for a lot of bad in this world, and much of it is unfair. Most rich people are not out to keep all the money in the world.
Americans in the top 20 percent of earnings contribute an average of only 1.3 percent of their income to charities, and this gets discussed frequently. However, many wealthy Americans give millions of dollars each year, and celebrity endorsements of charities can help bring in more donations, as can large donations from other wealthy Americans. Still, the wealthy often get blamed for the fact that there are so many poor people. In the end, all that gets you is more negative thinking.
In addition to blaming the rich, many people have a negative image of the wealthy in general. The rich pay a lot in income tax, often have to worry about being robbed or financially mislead, face expensive lawsuits, and often are seen as pretentious, demanding, and rude. The reputation that rich people often face is usually unfounded, but even when it is completely just, that doesn’t mean you have to be the same when you make your money.
There are several other reasons you may never get rich. You need to have an emergency fund: If you lose your job and you have to use credit cards, or worse, high-interest loans, to pay your regular monthly bills, you may dig yourself into a huge financial hole. There is no set annual income that you need in order to be rich. We’ve all heard the stories about people who are poor by most Americans’ standards but retire as millionaires by saving carefully. You also might be preventing yourself from becoming rich by telling yourself you are too young to save now, or that you enjoy living each day like it’s your last. The truth is, today is probably not your last day, so start saving now.