Slow and Steady

20 reasons you are not rich

Posted on: May 5, 2009

Someone posted this on a forum I frequent, and I thought it was very interesting. I thought about each point in turn, and have written my thoughts on each.

Original article

The reason why you aren’t a millionaire (or on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money, but the truth is that for most people, whether or not you become a millionaire has very little to do with the amount of money you make. It’s the way that you treat money in your daily life.

Here are 10 possible reasons you aren’t a millionaire:

1. You Care What Your Neighbors Think: If you’re competing against them and their material possessions, you’re wasting your hard-earned money on toys to impress them instead of building your wealth.

Oh trust me, the older I get the less I care what people think. I’m forever being told I should have a new car, or should have a 2 bedroom flat. My reply is usually asking them if they’ll pay for it. That shuts them up!

2. You Aren’t Patient: Until the era of credit cards, it was difficult to spend more than you had. That is not the case today. If you have credit card debt because you couldn’t wait until you had enough money to purchase something in cash, you are making others wealthy while keeping yourself in debt.

We are definitely a ‘have it now’ society. When I was in debt, I didn’t have the facility to get what I wanted straight away, and now I’m debt free, I doubt that is going to change.

Having chronic pain also makes you patient. There are days you cannot move, and you can’t fight it. You just have to wait until your body is ready to move again.

3. You Have Bad Habits: Whether it’s smoking, drinking, gambling or some other bad habit, the habit is using up a lot of money that could go toward building wealth. Most people don’t realize that the cost of their bad habits extends far beyond the immediate cost. Take smoking, for example: It costs a lot more than the pack of cigarettes purchased. It also negatively affects your wealth in the form of higher insurance rates and decreased value of your home.

I agree to a degree. I honestly don’t think a bottle of wine every so often is bad.

4. You Have No Goals: It’s difficult to build wealth if you haven’t taken the time to know what you want. If you haven’t set wealth goals, you aren’t likely to attain them. You need to do more than state, “I want to be a millionaire.” You need to take the time to set saving and investing goals on a yearly basis and come up with a plan for how to achieve those goals.

I’ve realised the importance of goal setting last year. When you write down why you want to achieve your goals and how, it seems to work better.

5. You Haven’t Prepared: Bad things happen to the best of people from time to time, and if you haven’t prepared for such a thing to happen to you through insurance, any wealth that you might have built can be gone in an instant.

Yes this is what happened to me last year. It’s now too late to get health insurance as I have too many pre existing conditions, so I’m going to build up an emergency fund of a year rather than the suggested 3-6 months.

6. You Try to Make a Quick Buck: For the vast majority of us, wealth doesn’t come instantly. You may believe that people winning the lottery are a dime a dozen, but the truth is you’re far more likely to get struck by lightning than win the lottery. This desire to get rich quickly likely extends into the way you invest, with similar results.

Nope, I’m very sceptical of these schemes.

7. You Rely on Others to Take Care of Your Money: You believe that others have more knowledge about money matters, and you rely exclusively on their judgment when deciding where you should invest your money. Unfortunately, most people want to make money themselves, and this is their primary objective when they tell you how to invest your money. Listen to other people’s advice to get new ideas, but in the end you should know enough to make your own investing decisions.

I am in total agreement of this, and this is why I’m reading up on savings and investments so I can make informed decisions.

8. You Invest in Things You Don’t Understand: Your hear that Bob has made a lot of money doing it, and you want to get in on the gravy train. If Bob really did make money, he did so because he understood how the investment worked. Throwing in your money because someone else has made money without fully understanding how the investment works will keep you from being wealthy.

See the above point.

9. You’re Financially Afraid: You are so scared of risk that you keep all your money in a savings account that is actually losing money when inflation is put into the equation, yet you refuse to move it to a place where higher rates of return are possible because you’re afraid that you will lose money.

I will bear this in mind once I’m in a position to invest. I can see how this can happen, especially if you’ve build up a lot of money for the first time.

10. You Ignore Your Finances: You take the attitude that if you make enough, the finances will take care of themselves. If you currently have debt, it will somehow resolve itself in the future. Unfortunately, it takes planning to become wealthy. It doesn’t magically happen to the vast majority of people.

This is not me at all. Like a garden, I believe finances need pruning and a bit of care. I currently set aside a day a month to have a quick run through.

In reality, it is probably not just one of the above bad habits that has kept you from becoming a millionaire, but a combination of a few of them. Take a hard look at the list, and do some reflecting. If you want to be a millionaire, it’s well within your power, but you’ll have to face the issues that are currently keeping you from creating that wealth before you will have a chance to call yourself one.

Many people assume they aren’t rich because they don’t earn enough money. If I only earned a little more, I could save and invest better, they say.

The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it’s how you treat money in your daily life.

The list of reasons you may not be rich doesn’t end at 10. (Caring what your neighbors think, not being patient, having bad habits, not having goals, not being prepared, trying to make a quick buck, relying on others to handle your money, investing in things you don’t understand, being financially afraid and ignoring your finances.)

Here are 10 more possible reasons you aren’t rich:

You care what your car looks like: A car is a means of transportation to get from one place to another, but many people don’t view it that way. Instead, they consider it a reflection of themselves and spend money every two years or so to impress others instead of driving the car for its entire useful life and investing the money saved.

I’ve had my car from new, and it’s nearly 10 years old. I am unfortunately going to have to get rid of it soon as it’s a manual and I can’t drive it for long periods without being in pain. I’ll be looking for an auto, and if I don’t use the motability scheme then it will be from a quality 2nd hand dealer.

You feel entitlement: If you believe you deserve to live a certain lifestyle, have certain things and spend a certain amount before you have earned to live that way, you will have to borrow money. That large chunk of debt will keep you from building wealth.

I feel this point can work for or against you. You can look at it the way the author has, or look at it my way. I feel entitled to my standard of living, and know the only way I’ll be able to keep it is by looking after my money well.

You lack diversification: There is a reason one of the oldest pieces of financial advice is to not keep all your eggs in a single basket. Having a diversified investment portfolio makes it much less likely that wealth will suddenly disappear.

I’m currently reading different saving and investments books. Before I start diversifying, I want to know how different investments work and what the risks are.

You started too late: The magic of compound interest works best over long periods of time. If you find you’re always saying there will be time to save and invest in a couple more years, you’ll wake up one day to find retirement is just around the corner and there is still nothing in your retirement account.

I’m 30 this year, and have had to use my ‘rainy day’ savings as I’ve had a few rainy days! So I’m starting again, but am sure it’s not too late to have compound interest work in my favour.

You don’t do what you enjoy: While your job doesn’t necessarily need to be your dream job, you need to enjoy it. If you choose a job you don’t like just for the money, you’ll likely spend all that extra cash trying to relieve the stress of doing work you hate.

I’m not sure about this one. If you don’t 100% enjoy your job, doesn’t it even out if you can pay your bills? My personal opinion is that people take work a bit too seriously. We work to live, not the other way round. If my job gives me enough to live and save, does it really matter if I find it boring?

You don’t like to learn: You may have assumed that once you graduated from college, there was no need to study or learn. That attitude might be enough to get you your first job or keep you employed, but it will never make you rich. A willingness to learn to improve your career and finances are essential if you want to eventually become wealthy.

I love learning. I’ve started buying the weekend edition of the Financial Times, and have a book that’s almost like a dictionary to help me with investments and terminology I don’t understand.

You buy things you don’t use: Take a look around your house, in the closets, basement, attic and garage and see if there are a lot of things you haven’t used in the past year. If there are, chances are that all those things you purchased were wasted money that could have been used to increase your net worth.

I used to be like this, but have cut it out now. I realised that ‘things’ don’t make me happy.

You don’t understand value: You buy things for any number of reasons besides the value that the purchase brings to you. This is not limited to those who feel the need to buy the most expensive items, but can also apply to those who always purchase the cheapest goods. Rarely are either the best value, and it’s only when you learn to purchase good value that you have money left over to invest for your future.

This is something I’m learning slowly. I do this for my flat already, it’s just too small to have lots of things in it. I need extend that into my clothes.

Your house is too big: When you buy a house that is bigger than you can afford or need, you end up spending extra money on longer debt payments, increased taxes, higher upkeep and more things to fill it. Some people will try to argue that the increased value of the house makes it a good investment, but the truth is that unless you are willing to downgrade your living standards, which most people are not, it will never be a liquid asset or money that you can ever use and enjoy.

Good point.

You fail to take advantage of opportunities: There has probably been more than one occasion where you heard about someone who has made it big and thought to yourself, “I could have thought of that.” There are plenty of opportunities if you have the will and determination to keep your eyes open.

I think knowing yourself is key. I’m not really a creative person, so for me I feel my time would be best spend learning about the stock market and different types of bonds.

I think creating wealth is a bit like dieting. Everyone knows how it can be done, but prefer to find a quick fix than put the effort in. The rule I see on every personal finance blog, every personal finance book is spend less than you earn, but people don’t want to believe it’s so easy.

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