Wealthy people usually aren’t born that way. Most people spend their lives amassing their fortunes by working hard, spending little, saving a lot, and investing wisely. It may sound like a simple strategy, but the fact that the vast majority of Americans fall short of millionaire status proves that it’s easier said than done.
Then again, 11.8 million households in the U.S. boast a net worth of at least $1 million, excluding the value of primary residences, according to market research and consulting firm Spectrem Group, and their ranks are growing. So it’s totally possible.
Read on to learn what you might be doing to keep yourself out of the millionaire’s club. More importantly, find out how you can change your ways and build your own seven-figure nest egg.
You Chose the Wrong Profession
Of course, you can become very successful in any job as long as you work hard and start saving early. But a higher income can certainly make it easier to save more and faster.
According to the Bureau of Labor Statistics, many wealthy people today work in technology, engineering, and medicine—fields that are well represented in our list of the best jobs for the future.
With enough time and the right saving approach, you can build a fortune even with a small salary. According to a U.S. Trust “Insights on Wealth and Worth” survey of high-net-worth investors, 55% credit their choice of careers with helping them reach their goals.
What can you do about it?
If you’re still in school, majoring in a promising field can put you on the path to a lucrative career and help make you a millionaire. But remember: You’ll have an easier time working hard for the rest of your life if you have a legitimate interest in your chosen profession.
If you’re past your college days, you can still learn some skills to advance your career (more on that later). Also consider supplementing your income.
You Stopped Investing in Yourself
Your education doesn’t end once you’re done with school. In a world that’s always changing, you need to continuously hone your abilities.
Taking the time to keep your skill set and knowledge base up to date makes you more valuable to your colleagues, clients, current employer, and future employers.
As Benjamin Franklin wisely said, “An investment in knowledge always pays the best interest.”
You’re Too Scared of Stocks
Cash stuffed under your mattress or even deposited in a savings account won’t keep up with inflation, much less blossom into $1 million. In order to maximize your gains, you need to invest your money wisely.
In many cases, that means putting your money in stocks. Consider the math: A typical yield you can expect from a money market account these days might be 1%. If you put away $10,000 in one account and added nothing else, in 10 years you’d have around $11,046 total with interest.
But if you invested that $10,000 in stocks and earned a typical 8% annual return, you’d have about $21,589, or nearly double the return.
You’re Afraid of Taking Risks
It’s easy to become content with staying in your lane financially—even if your financial lane is paved with low-risk but low-yielding savings accounts and CDs that will never make you rich. A healthy respect for risk is good when it comes to preserving your wealth, but a total aversion to risk can hinder your ability to ever build wealth.
But to label the wealthy as indiscriminate risk-takers who gamble their savings on pork belly and bitcoin would be inaccurate. In reality, according to a U.S. Trust survey, 4% of high-net-worth investors describe their risk profile as very conservative, 14% as conservative, and a telling 43% as moderate. On the other end of the spectrum, 33% describe their risk profile as aggressive, and just 7% as very aggressive.
You don’t save enough.
If you don’t save money, you’re never going to be rich. It’s hard to get around that obvious (but often ignored) principle. Even if you earn seven figures, if you spend it all, you still net zero.
You live beyond your means.
Spending more than you earn can put you in a dangerous hole of debt. On the bright side, you won’t be in there alone. According to the National Foundation for Credit Counseling, nearly two in five Americans carry credit card debt from month to month. And among those balance-carrying households, the average credit-card debt is $9,333, according to research firm ValuePenguin.
You Overlook the Value of Nickels and Dimes
No, we’re not suggesting that you search for loose change under your sofa cushions. Rather, cutting seemingly insignificant expenses—late-payment penalties on your bills and out-of-network ATM fees on your cash withdrawals—can add up to substantial savings.
One in four Americans fails to pay all of their bills on time, according to the National Foundation for Credit Counseling.
You are drowning in debt.
Debt can be a danger to your financial well-being. If you’re taking out loans and racking up balances on high-interest credit cards, you won’t have a chance to save much money.
The average U.S. household has more than $136,000 in debt, including credit cards, mortgages, car loans, and student loans, according to a 2018 NerdWallet study.
But not all debt is bad. Borrowing to go to school, get professional training, or start your own business can help boost your career and income potential in the long run. The trick, of course, is borrowing wisely, at low rates, and for purposes that promise a good return on the investment.
You Neglect Your Health
You need to work to make money, and you need to be healthy in order to work. A U.S. Trust survey found that 98% of millionaires think their health is their most important personal asset.
You don’t have a budget.
Without a budget, it’s easy to live beyond your means because you’re not keeping track of how much you’re spending.
Working toward financial goals, such as saving for a vacation, buying a house, or funding your retirement, can also prove difficult if you don’t put together a well-thought-out financial plan.
You Pay Too Much in Taxes
Did you get a tax refund this year? Receiving that lump-sum payment from Uncle Sam may seem like a good thing. But it actually means that you’ve loaned the government money without earning any interest.
You Lack Purpose in Your Life
Not surprisingly, cash topics are for the rich. Indeed, 97% of the rich people surveyed via means of the U.S. Trust listed their personal economic safety as the pinnacle motivation for constructing their wealth in the first place. That’s carefully observed by way of the potential to find the money for a preferred lifestyle (91%) and the economic safety of family (84%).
But keeping up with the Joneses isn’t the best purpose for collecting a fortune. Indeed, 72% of the wealthy are motivated by a desire to help others through philanthropy, 58% by the ability to create financial opportunities for others, and 44% by the desire to use their wealth to better the world.
What you may do approximately
Entire religions and philosophies are devoted to helping humans figure out what they may be supposed to do in this life. We might not try and compete with them. But what we can say is that you don’t want to be Bill Gates to make a distinction with your cash.
Start modestly by donating to a small organization with an assignment that aligns with your life’s purpose, which could be rescuing animals, helping the arts, supporting children, or feeding the hungry.
A $1,000 donation to a well-run nearby meals financial institution can accomplish plenty similarly to a $1,000 donation to a huge countrywide charity. As your manners increase, so can your philanthropy. And in case you discover you do not have coins to spare, donate a little instead.