Everyone wants to be rich in their life and the fact is everyone is working for the same. But in the crowd of becoming rich only a few of them are able to achieve success, why is so?
In this article, we’ll understand 10 reasons you aren’t rich, and of course solutions too.
1. You care what your neighbors think.
This is huge! One of the reasons I’m leaving Mumbai, India is that so many people around this area care about things like what you drive, where you work, etc. It gets old and really, the people worth knowing aren’t the ones who care about what kind of car you drive or what kind of shoes you wear. Live your life in a way that makes you happy and comfortable and who cares what others think!
2. You aren’t patient.
In today’s world of easy credit and instant gratification, it can be hard to wait to buy something until you have the cash. But, the advantages of waiting are:
- You save money in interest.
- You tend to appreciate things you have to work hard to get instead of those that come easily.
- Waiting gives you time to decide if you really want something rather than just following your impulse.
- Saving up gives you time to do your homework and find the best deal on whatever it is that you want.
3. You have bad habits.
This includes your “Latte Factor”. The three hardest things to give up are coffee, alcohol, and cigarettes. It’s not a coincidence that they’re also the most expensive and the worst for your health. Cutting back on those vices not only saves you money today but also in the future on health care costs.
4. You have no goals.
The first question I ask is: “If you don’t know where you’re going, how will you know when you get there?” The answer to that question is: You don’t. Without goals, you’re just floating along rather than moving forward with a purpose. IMO, goal setting is the most important part of financial planning but is also the most overlooked.
5. You haven’t prepared.
This is why you need an emergency fund. It’s a fact of life: Stuff happens. No matter how prepared you are, you aren’t prepared for everything. But, you can do your best.
The easiest thing you can do is establish an emergency fund. This fund should be in a cash account (or equivalent) that can be accessed quickly and without penalty.
You should aim to have at least 3 to 6 months’ worth of expenses in your account though some people like to keep much more. When you figure out how much you need, take an honest look at your life. Is your job steady? Do you have dependents? Do you own a house? Do you have adequate insurance? The answers to those questions will help you figure out how much (or how little) you need to have in your account to be secure.
6. You try to make a quick buck.
When people approach me about the best way to turn $1,000 into $10,000 in a week I have 2 standard responses:
- Go to Goa, India. At least there you get free drinks while you gamble with your money.
- Re-read “The Tortoise and the Hare” but this time, learn the lesson.
When it comes to investing, the vast majority of the time slow and steady will win over the long run. Set your investment up, make it automatic, and then forget about it except for when you re-balance twice a year.
7. You rely on others to take care of your money.
I’m a huge proponent of DIY. It’s why I started this blog with a mission to make things simple for everyone. I saw the aftereffects of too many people who had gotten screwed by investment advisors who sold them bad products. There is no reason why someone can’t manage their own money, particularly now that Target Retirement Funds exist.
If you’re just starting out, there are 2 books I recommend that every newbie read.
- The Automatic Millionaire by David Bach.
- Investing for Dummies by Eric Tyson.
The biggest thing to keep in mind: You are the only person who cares about your money!
8. You invest in things you don’t understand.
I did this when I first started investing. I started buying stocks without knowing what I was doing. Not only that, but I just listened to what others were buying and followed the herd. Not only did I lose a ton of money to transaction fees, but I also lost a ton in the investment itself. Since then, I’ve sold off the losers, held on to the winners (I did get a couple right), and have stuck to funds. I have realized that not only do I not have the knowledge to pick stocks, but I also don’t have the desire to learn the skill, so funds are the way to go.
You can even teach your children to learn about those investments at an early age, this could be a wonderful activity to aware your kids about the jungle of investments.
9. You’re financially afraid.
I see this all the time, especially in those who lost a lot of money in the dot-bomb. So many people who lost money during that time are too scared to invest in stocks again.
Every time I ask them about their experience, they were always almost 100% in tech stocks and freaked and sold when stocks went down. When I explain to them what would have happened had they A – been diversified and B – stuck to an investment plan instead of freaking out they start to calm down.
For those who are worried about investing in anything risky I usually suggest starting with a balanced fund. Such a fund is 60/40 stocks/bonds so, while it earns more than bonds it’s not as volatile as stocks. I then suggest they start adding small amounts into more aggressive funds once they’re used to being a bit more aggressive.
I also forbid them from checking their accounts more than once every 6 months. Frequent account reviews are the worst thing people who are risk averse can do. Any little dip will freak them out and trigger a panic reaction.
10. You ignore your finances.
I’m a big supporter of a hands-off money management style.
But, that’s very different from ignoring your money. To have a hands-off style, you first have to have a plan. Then, you can implement that plan, make it automatic and just check back a few times a year to make sure you’re on track. Find the balance that works for you – somewhere between checking every day and checking once a year is good.