Building wealth is not easy. It takes hard work and discipline.
But everyone can achieve success, if they can avoid the major roadblocks to wealth accumulation.
Now, there are many roadblocks to discuss but one big one is…. that we don’t cultivate a healthy relationship with money. We develop beliefs, attitudes and habits about money in our youth that hold us back from being able to generate wealth and enjoy the financial freedom we desire as we get older.
But the good news is, once you’re able to identify any “money roadblocks” in your own habits and behaviors, you’ll be able to overcome them once and for all — and finally be able to make enough money to create the life of your dreams.
Today, I am going to discuss five big obstacles that are keeping you from experiencing the wealth and success you deserve and the solutions to overcome them.
- Procrastination
Procrastination is related to unhealthy personal financial behaviors, such as postponing retirement savings, last minute shopping, and not paying bills on time. If you don’t look to the future, you won’t start saving—if you start early enough you can turn small dollars into big dollars over time…
A simple example: (doesn’t even factor in interest) Let’s say it’s Jan 2021 and you need $12,0000 by Dec 2022. If you start saving in Jan 2021, you need to save $500 a month. If you start in Jan 2022, you need to save $1,000 a month. The early you start, the less you have to save per month…..Don’t procrastinate!
2. Inflation
Inflation increases the price of goods and services over time, effectively decreasing the number of goods and services you can buy with a dollar in the future as opposed to a dollar today. In 1980, a gallon of milk was $1.12 and today milk is $3.32. It’s the same product! Now you can’t avoid inflation, but you can invest around/over it!
Historically, inflation has averaged between 2-3% per year. So the value of your dollar goes down by that amount each year…. To combat this, you would want your surplus money to be growing by more than 2-3% per year! I hear about so many people that leave hundreds of thousands of dollars in their checking accounts!
Checking accounts pay ZERO interest.
So, to get around this roadblock it is prudent to put your money in places that have the potential to appreciate by MORE than 2-3%. Equites, bonds, real estate have all averaged above 3% per year over the last 100 years….Note: there have been steep declines along the way…so plan accordingly.
3. Taxes
Taxes can hold you back financially if you aren’t organized enough. Asset location is very important. Different types of accounts have different taxability.
Tax free, tax deferred, taxable—It’s important to know/understand the difference
Every account has it’s own set of rules that you need to know, so you can maximize your dollars. (IRA Guide)
In addition, tax-efficient investing is important because you don’t get to live on your pre-tax returns. What matters most, is what hits your bank account after taxes are paid!
4) Fear
When building wealth, it is important to understand that you will be compensated for the risks you are willing to take. Historically, the stock market is the highest performing asset class available to the average investor, with an average return around 10% per year since 1926. But along the way there have been STEEP declines.
Most recently, 2000-2001, 2008-2010, and march 2020. About 30-40% drops!
These big market moves can scare people from investing and the common phrase I hear during these times is “I will just wait till the dust settles.” But in realty, when the dust finally does settle all the major gains have been missed!
So it is in your best interest to build a smart investing plan that you can hold on to during the ups AND downs of the market!
5) Spending habits (the biggest)
To build wealth we must be able to save money. (not rocket science, I know)
By either reducing our expenses or increasing our income, we must find a way to have surplus cash at the end of the month.
Here are some tips that should help you get overcome your bad spending habits!
- Identify and acknowledge the spending habits that might be hurting you. Start by asking yourself some questions: Do you really need the thing you’re going to buy, or is it just a want?
- Track your spending.
- Set specific savings goals.
- Watch how much you buy on credit.
- Shop from a list.
- Be diligent about fees and subscriptions.
Opportunity cost is the loss of the chance to do something more efficient with your money by opting to take another course of action.
All of the items listed are roadblocks to building wealth. You know them, you see them, you are aware of them. Now work yourself around them and reach financial success!
