There’s no doubt that having enough money is a prerequisite to a good life. When you have enough money, you can choose to spend time with your family and do the things that make you happy. However, there are many impediments to achieving this ideal lifestyle and here are seven that you must watch out for if you want to build real wealth.
Number 1: High-interest debt
One of the first things stopping you from becoming rich is that you carry high-interest debts. Although debt can be a useful tool, most of the time, people get into debt for unnecessary reasons. According to a recent study, about 80% of people are battling with debt. In other words, 4 out of every 5 people you see are in debt. The disadvantage of debt is that you must pay it back with an interest. And the interest rate of some debts could be as high as 20%, which means that for every $100 of debt you have, you would have to pay an extra $20 back in interest. Now, imagine if you have to pay back $1,000 with a 20% interest rate. That means that you’ll have to pay an extra $200!
Now, don’t get me wrong, every single day it gets harder to stay out of debt. From student loans to a mortgage, auto loans, and credit card debts, being in debt seems to be the new normal. However, the first step to stay out of debt and become rich is to decide that debt will not be part of your life. Some people are doing well without debt so decide to be like them by avoiding debt. Imagine what your life would look like if you didn’t have debt? Think of how you could use the extra money you would have every month if you were debt-free.
Now, the first step to get out of debt is to calculate how much you owe and pay it back. You may not be able to pay everything at once but making plans to pay back your debts is certainly a step in the right direction. Once your debts are paid, do your best to avoid further debts by cutting your spending and creating a budget. This will help you focus on your needs and significantly reduce ever getting into debt again!
Number 2: The fear of investing
Another thing stopping you from building true wealth is the fear of investing. So many people prefer to save their money in banks where they can see it because of the fear of losing money. However, it is easier to become rich by investing rather than saving money. Therefore, the first step to overcoming the fear of investing is learning about investing. One of the reasons why you may be scared of investing is that you think you’ll lose all your money and this is probably because you don’t know how investing works. Although investing does carry risk, the more investing knowledge you have, the more educated investing decisions you can make and the good part is that you don’t have to go back to school to learn how to invest. You can start by taking advantage of free online resources or enrolling in an investing course.
Next, you have to set goals to help you stay motivated during your investing journey. For instance, you can set a goal of investing a certain amount towards retirement or for your children’s education. Start small so that you don’t lose your motivation if you happen to realize losses. Even $100 can get your investing journey going. Also, it’s important to learn from your mistakes when they happen, because they will, but the key is to avoid them in the future!
Number 3: Thinking you already know everything about money
One of the easiest ways to deceive yourself is to claim you know everything about money. When it comes to money, there is no know-it-all. In fact, the richest person on earth does not know everything about money, and having a degree in finance does not guarantee you’ll become rich.
However, when you think you know everything about money, you may find it difficult to learn new things. The most productive minds are the ones open to learning new ideas. You should be willing to admit there are things you don’t know.
Here are a few ways to learn more about money and improve your finances. Firstly, invest in books and courses about money to increase your knowledge. One of the habits of some of the richest people is that they read every day. People like Warren Buffett, Mark Cuban, and Oprah Winfrey have all attributed their success to what they learned from reading books. You can also learn more about money by associating with successful people. We learn faster by observing what people do, therefore, you can easily pick up the habits that made them successful by associating with them. For example, you could learn how to save for retirement by associating with someone who has done that already. You can learn from their exact steps and mistakes to increase your chance of success.
Number 4: Having kids before you can afford to
Kids are adorable, however, having them when you’re not prepared can be terrible for your financial progression. Many people fail to realize that kids are dependent and you have to take care of all their needs and this could cost a lot of money.
For instance, you have to start spending money even before the kid arrives. You have to visit the hospital for regular checkups during the pregnancy and you may be required to take some medications. After the kid has arrived, you still need to spend money on clothing, feeding, and regular medical checkups. It is also possible to have a medical emergency that would cost you more than you have planned for.
If you ask me, having kids should be something that adds joy to your life and doesn’t add financial stress to it. Unfortunately, this is exactly what happens when you decide (or don’t) to have a child when you’re still swimming in debt or have no savings in your name.
Therefore, before you decide that it’s time to have kids, consider how much money you have set aside and if it’s enough to take care of a child. Remember that that child is your responsibility and many of your parental duties will require money.
Number 5: Pursuing more formal education than you need
Gone are the days when the only way to make money was by going to school, getting good grades and getting a job afterward which would be proceeded by buying a home and a car with a loan, contributing to your retirement accounts and then enjoying your golden years. Although there is nothing wrong with this life path, it may not be as practical as it once was. In fact, this type of lifestyle limits your financial potential if you ask me.
The main purpose of going to school is to get educated enough to secure an income but sometimes education can be taken too far. Getting three degrees doesn’t mean earning three times more however it does mean either spending three times the money on school or taking on three times the amount of student debt. This debt can severely impact your financial position and growth as you make interest payments and loan repayments for decades after graduating.
If you want to be rich, acquire the education you need to succeed but not more than that. Perform an assessment of the cost-benefit trade off of your time and money when it comes to education and if the return warrants the investment then, and only then, should you pursue more education.
Number 6: Not being able to sell yourself
Another thing stopping you from becoming wealthy is your inability to sell yourself. Selling yourself simply means the ability to make others see your worth. Everyone is concerned about what’s in it for them and if you’re not helping them solve a problem, they don’t need you. Every successful person has learned to develop the skill of selling themselves and that’s why they are rich. This skill goes beyond making money as it is important in every aspect of your life. For example, when you go for a job interview, they want to know what you can do for the company. If you are not able to convince the people interviewing you, they may likely not employ you.
Another area of your life where this skill is important is marketing your service to others. You can be highly skilled and still broke because you don’t know how to sell yourself. That is why some of the richest people in the world today are not the smartest people but they know how to convince others to do business with them.
So let’s see some of the ways that you can develop the skill of selling yourself. Firstly, you have to discover yourself and identify your unique selling point. If you were to appear for an interview today, think of a skill you have that would contribute greatly to the organization. For example, if you’ve worked for a similar role you’re been interviewed for, let them know how your experience would contribute greatly to the success of their organization. The same thing applies when you have a product or service that you want to market, focus on how it would help the customers if you want to convince them to buy from you.
Number 7: Thinking you have to be lucky to get rich
The last element that trips people up on their path to financial success is over-estimating how luck plays into things. The statistics of the number of people that have become rich have shown that the easiest way to predict your success is never to rely on luck. People who rely on luck are those who waste their time gambling or hoping to buy a winning lottery ticket someday. Most of the richest people in the world today came from humble backgrounds but they were willing to work hard and as a result, they became successful.
Elon Musk is the CEO of three companies and he works harder than all of his employees. In the early days of his companies, he was reportedly working about 100 hours a week whereas the average worker was putting in just a fraction of those hours. Another person who has shown that it pays to work hard and not rely on luck is the CEO of Apple, Tim Cook. He wakes up very early every day and he starts working immediately. He gets to work before most people and he’s always there after most of them are gone. I think the only definition of luck is when opportunity meets preparation. Honestly, you’ll be wasting your time if you think that the only way to become successful is through luck.
In summation, if you can sidestep these mistakes, you can heighten your chances of building real wealt