6 Things That Are Preventing You From Getting Rich

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If you have dreams of accumulating a nice nest egg for the future, no doubt you can appreciate the importance of saving money. But it’s no secret that the things we do today can either contribute to that or hinder it.

In this article, I’m going to go over some bad money habits that could be preventing you from getting there.

Money expert Clark Howard believes strongly that forming better money habits can make a world of difference in your wallet. He’s going to share some money tips below that can help your bottom line.

These Things Are Preventing You From Getting Rich

Despite earning enough, do you find yourself struggling to pay your bills every month? That could be a sign that your financial strategy could use some work. Have you found yourself in a large home too big for you and your family? That could be another issue to correct.

Let’s go over some things that could be impeding your way to financial prosperity.

1. Spending the Majority (or All) of Your Paycheck

Living paycheck to paycheck is something that will guarantee that you have no money at the end of the month. Instead of spending 100% of your paycheck, see if it’s possible to save a portion of it.

“It’s easy to say and it’s hard to do, but if you don’t set out upfront to take a portion of your paycheck out of the game, it’s hard to ever get ahead,” Clark says. “The old trite phrase is, ‘Pay yourself first.’ It’s simple but very accurate.”

“If you take a dime out of every dollar and live on the other 90 cents, slowly, steadily you’ll build up breathing space in your life,” Clark says.

2. Paying Interest on Debt

One of the easiest ways to throw money away is to continue to pay the minimum amount due on your credit cards. When you do that, you’re not only paying for what you borrowed but also the interest, which steadily accumulates.

“Nobody ever got rich paying 18% interest to Visa or Mastercard,” Clark says.

To get out of debt, start paying the bill with the highest interest rate

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It’s also a good idea to reconsider the things you go into debt for. Ask yourself: Do I really need it?

For example, the price tag for a new piece of clothing may say $30, But Clark says when you borrow money to pay for it, the cost can be much higher than that. “It may be $40 or $50 or $60 when you calculate how much it’s actually costing you with all the interest charged,” he says.

“When you borrow money, particularly for lifestyle — I consider anything lifestyle except for the house you live in — it just really hurts you so much when it comes to your long-term financial health,” Clark says.

3. Obsessing Over the Stock Market

Clark says there’s no need to get too worked up when the market plunges or skyrockets. The reality is that markets often go up and down.

“It’s a really bad idea to worry about the noise of the moment with the market going up and down or individual stocks going up or down,” he says. 

“The healthiest investing habit is to know why you’re investing and what your time goal is for it. And as long as you have the money, and it’s well-diversified, you just don’t worry about the noise that happens with rises and falls,” Clark says.

4. Buying a New Car

The vehicle market is pretty crazy right now due to inventory issues. But when it comes to buying a new car versus a used car, Clark is still on Team Used Car.

“A new car is the ultimate destructive lifestyle choice because of the depreciation and loss of value,” he says. “And the effective costs per month are gigantic for a new vehicle buyer.”

That said, Clark acknowledges that there are some instances where it makes sense to buy a new vehicle.

“If you buy a new vehicle and you keep it for 10 or more years, that’s fine,” he says. “But the reality is that most new vehicle buyers tend to short-cycle the loan, where they don’t even own it long enough where they finish paying off the loan they took out on it.”

5. Neglecting To Open a Roth IRA

Clark is a big fan of the Roth IRA (Individual Retirement Account) because of the long-term savings potential.

“A Roth IRA is the most efficient place for you to have money grow for your retirement because the money in it grows tax-free and is spent tax-free,” Clark says.

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6. Buying More House Than You Need

Many people who buy a large home think that their ultimate return on it will be higher than what they paid, but that’s not necessarily the case, according to Clark.

“The more square footage you buy, the more utilities you have to pay and over time, the greater the overall maintenance costs will be,” Clark says. “Plus you may face higher property tax by buying a bigger home. So the concept of buying the biggest house you possibly can is something that’s just accepted as fact, but it’s actually fiction because people will say, ‘Hey, I bought this big house and I paid this for it and I’m selling it 10 years later. Look how much more it’s worth.’ But they ignore all of the embedded costs they’ve had over that 10-year period of ownership.”

Final Thoughts

The key to wealth is to be a good steward of your money. Put away as much money as you can across various savings vehicles such as a Roth IRA. Also, make a conscious effort to cut down on unnecessary spending for “lifestyle” purchases.

If you haven’t done so already, create a budget and track your expenses so you can see where your money is going. Once you make the adjustments to cut back, your money will grow over time.

More Money Resources From Clark.com:

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