What if I told you that there were 7 telltale signs that you will never be rich…would you want to know them? In this article, I will share with you 7 signs you will never be rich!
Sign #1: You focus too much on saving
Now, don’t get me wrong, saving money is super important because if you never save money then you will never amass significant wealth but where poor people falter is focusing the bulk of their attention on saving. You see, most people don’t know how to increase their income meaning that if they want to save more they need to focus on cutting costs instead. The problem with this strategy is that you can only cut costs so much. You will always have expenses like housing, groceries, and transportation which puts a limit on your saving potential.
However, the rich know that becoming wealthy requires you to split your focus between both saving and earning. Believe it or not, the average millionaire has 7 different streams of income meaning that they are just as, if not more focused on making cash than saving it. These streams include earned income, profit income, interest income, dividend income, rental income, royalty income and capital gains. What you have to realize is that your savings will always be capped by the amount you earn and when expenses are deducted this often leaves little to be saved. However, earning more increases this ceiling and when combined with solid savings practices makes the potential to build wealth seemingly endless. So if you want to build real wealth, put just as much time into making money as you do saving it.
Sign #2: You overspend
As we just mentioned in sign #1, saving money is a key component of becoming rich and if you spend more than you make, you will never be rich! Unfortunately, most people think that making more money will solve their savings problem but what’s most often seen is that as income rises, so does spending. For instance, your standard sedan may suffice when you’re earning $50,000 a year but when you suddenly find yourself earning double, you may gravitate towards getting a luxury vehicle instead ultimately hindering your ability to save.
This rise in spending can be attributed to what’s known as Parkinson’s law. Parkinson’s Law states that “work expands so as to fill the time available for its completion” and in the financial context it means you will spend up to the amount you have available. And available doesn’t just mean the money in your bank which is why people will go broke and then some by maxing out their lines of credit and credit cards. The reason this phenomenon takes place is due to a lack of financial control. Unfortunately, school teaches things like how to find the slope of a line or how to write in cursive, but it never teaches you how to create and maintain a budget, aka real-life skills. Therefore, unless you have family or friends who bestow sound financial principles upon you then you are almost destined to run into money management issues later in life. It’s for this reason that there are people who earn lower incomes and can still save a ton of money and on the flipside, there are people who make millions and have nothing in the bank.
Sign #3: You’ve accepted the paycheck lifestyle
In life, can you either make money by trading your time or your value and for the average person, trading time for money is the preferred choice. You see, trading time for money in the form of a salary or an hourly wage is much easier than exchanging value for money and for many, this is the only way they know how to make an income. Again, school never teaches you how to start a business but instead teaches you general skills that you can further develop by going to college or university. The skills you learn in school mould you into a perfect employee which is why millions of people clock in and out of their 9-5 jobs each and every day. And don’t get me wrong, working for a paycheck is okay, I understand that we all have bills to pay and people to take care of but if you accept this lifestyle then you will never be rich. Wealthy people understand that your employer will always choose to make themselves rich over you and I know this to be true because it happened to me.
A couple years ago I was working 50+ hours a week in management consulting and from what I could tell I was doing a great job. However, when salary increase time rolled around, I received an infuriatingly small raise which I voiced to my manager. He calmly said to me that if you don’t accept it then someone else will do your job for less and to just be happy with the raise I got. It was at this point that I knew the paycheck lifestyle would never make me rich. And like I said, wealthy people know that the only way to become extremely rich is to start a business. By running a business, you get to leverage other people’s talents and time and can scale much more than you ever could as a single employee. And the best part is that you’re the one who sets the price and not your employer meaning you can make the money you want as long as your business is thriving.
Sign #4: You don’t invest your money
Chances are, if you don’t invest your money, then you will never be rich. One of the most effective ways to earn more money over time is investing it, and the earlier you start, the better. Just take Warren Buffet as an example. Buffett bought his first stock at age 11 and by strategically investing over the course of many decades, has become one of the wealthiest people on the planet. But it’s not just billionaires who practice ongoing investing. On average, millionaires invest 20% of their household income each year making investing a significant part of their wealth accumulation strategy. And if you think that millionaires invest in exciting products, you may be surprised.
Most millionaires invest in the same things as the average investor like a ROTH IRA and a 401K but also extend these investments to include things like real estate properties and personal development. I personally didn’t start investing at a young age because I thought investing was complicated but over time I’ve come to realize that it’s easier than you might expect. Simply setting up an investing account and making monthly contributions to an index fund or your retirement account is a great start to becoming richer than you ever thought possible.
Sign #5: You don’t challenge yourself
If you never step outside your comfort zone then you will never become rich. Unfortunately, most people settle into their paycheck lifestyle, going to their mundane job each and every day and then waste away their nights watching Netflix. They strive to make every aspect of their life comfortable but the rich seek the opposite. What the rich know is that wealth creation starts where your comfort zone ends. This is why entrepreneurs, especially the ones who succeed, thrive in uncertainty with many of them not knowing where their next paycheck will come from.
Take Jeff Bezos for example. Today’s world’s richest man held many high-profile positions in major tech and investment companies in his 20s but always felt like he was meant for something more. While holding a senior vice-president role and making hundreds of thousands of dollars, Jeff decided to challenge himself and started a new book selling business which we all know today as Amazon. In my own life, I make a point to challenge myself once a week. This can be in the form of reading multiple books, increasing my lifts in the gym or asking a girl out on a date. So take a look at your life and if it seems like you are optimizing your life for comfort then you can kiss becoming rich goodbye!
Sign #6: You don’t have financial goals
In the same way that you can’t hit a target that doesn’t exist, not having financial goals means that you will likely never become rich. When trying to build real wealth, the process will be easier if you have a clear, specific goal in place before forming a financial plan. For instance, if you want to earn a million dollars, your first step would be to write this goal down and then detail the steps you need to take in order to get there. The steps could include earning your next promotion, picking up freelance work or creating an investment plan that will compound to $1 million dollars over time. Unfortunately for poor people, this first step can’t even be done because when it comes to wealth they don’t even know what they want.
Sure, they will tell you that they want more money or to be wealthy but they don’t even know what that truly means. But if you ask a rich person this same question, they will tell you exactly what their goals are, how long it will take to achieve them and the precise steps they will take to do so. Now, while I’m not rich yet, I have found that setting financial goals to be very effective. For instance while in high school, my goal was to earn $80,000 a year within 5 years of starting my career. In order to do this, I wrote down this larger goal and then detailed in the following steps: Complete accounting degree, get CPA designation and obtain $80,000 a year job and at age 27 this goal was finally achieved. So if you want to increase your chances of realizing financial success then setting achievable goals is a must!
Sign #7: You don’t pay yourself first
We’ve already established that saving money is one half of the equation to becoming rich but unfortunately most people hinder their ability to save by failing to pay themselves first. You see, when they get paid, they dish out money to their landlord, credit card company, the government and many others which often results in them having little to nothing left for themselves at months end.
But as popularized by the book “The Richest Man in Babylon”, paying yourself first is one of the keys to becoming wealthy. The book recommends paying yourself 10% of your income every month, ensuring that your savings will grow over time. One way to ensure you save this 10% every month is to set up automated deductions from your pay. Most employers will allow you to automatically deduct a portion of your paycheck which can be re-routed into a separate savings account and I think that this method is effective for two primary reasons. First, it allows you to avoid having to think about saving money which means you can spend more time working on your business or improving your skills that will increase your income. Secondly, it doesn’t allow you to have direct access to the funds you are stashing away which makes you significantly less likely to spend it. Now, if you begin to implement this method and feel like you can save more than 10%, then go right ahead. The more you are able to deduct and ultimately save, the faster you will reach your financial goals and as you probably guessed, the rich practice this habit religiously because if you aren’t paying yourself first then you are putting the financial goals of others before your own!