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There’s plenty to read about how millionaires get rich.But what about mistakes that hold us back? Financial planners and advisors say not investing early, or not investing at all, are key factors.Failing to track your spending and having only one source of income can also stand in the way.Check out Vanguard Personal Advisor Services® to get the investment advice you need to help build the life you want » When I hear about a person who has a net worth of over $1 million, I find myself wondering what I can learn from them.Did they invest in certain stocks or funds that helped grow their wealth? Did they discover ways to make passive income that require a low amount of capital to get started? Did they work with a financial expert who helped pave the way to their positive cash flow?
While there are many articles, books, podcast episodes, and thought leaders preaching what to do if you want to have over seven figures in assets, I recently found myself curious about something not many people speak about: the biggest mistakes people like me make that can keep us from becoming millionaires.So I asked financial advisors.
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Relying on one source of income Even though I invest a lot of my time in my work so that I can bring home income to meet my financial goals, financial advisor Sally Stevens says that focusing on just making income from one source makes it very hard to make millions.
“Just like a single steel stand cannot hold the weight of an entire wall, similarly, a single source of money can never uplift the burden of our increasing lifestyle expenses,” says Stevens.”Your first step to becoming a future millionaire is by creating multiple sources of income .”
2.Not tracking your spending For most of my 20s, I didn’t pay close enough attention to my finances; I checked up on my accounts and funds only once a month.Matthew Jenkins , a financial advisor and financial planner, recognizes this as one big setback to building your wealth.
“Most people have no idea what they spend money on and would be astounded to find out,” says Jenkins.”Like a leaking pipe can cause massive damage if not found early on, a leaky budget can deprive you from accumulating meaningful savings over your life.Sit down and track your spending .”
3.Being scared to invest Once I got my finances in a good place and didn’t have any outstanding debt, I decided it was time to start investing.
When I went to put some of my money in the stock market, though, I found myself confused and nervous.Jenkins says while this is a common feeling, investing can be integral to making your money grow.
“Investing is scary.
You can lose a ton of money in a hurry.It’s stressful and full of anxiety.
Investing is also essential to building wealth,” says Jenkins.”Whether you invest in real estate, stocks, crypto, etc., make sure you have a plan to follow when things get tough.Work with an advisor or even a trusted friend.
They can help you work through the inevitable periods where the market is down, and help you stay disciplined over a long period of time.”
4.Not utilizing retirement accounts to their full potential Planning for retirement can feel complicated, but it’s essential to a secure future.Financial planner Adam Deady recommends making sure you’re maximizing your retirement accounts and investing your funds wisely so you can add to your portfolio and get the tax advantages.
“Qualified retirement accounts [such as 401(k)s and traditional IRAs ] allow you to grow your money tax-deferred.
Instead of paying taxes along the way, your money can grow tax-deferred, and therefore grow faster,” says Deady.
Accounts like Roth IRAs and Roth 401(k)s allow you to invest after-tax money that can then grow tax-free for years to come.
5.Not investing early While becoming a millionaire can happen through many different financial strategies, financial planner Paula Brancato says one important thing most people don’t consider is making sure they are investing as early as possible.
“One big mistake I often see people make is not saving enough early on.If you save $10,000 a year and earn a modest 5% per year, starting at age 25, you will have $1,200,000 by age 65.Start 10 years later at age 35 and you will have only $664,388,” says Brancato.
“This loss is exponential.At age 45, you only have half again, about $330,660.
Subtract a doubling of your funds for every 10 years you waited.”
Jen Glantz Jen Glantz is the founder of the viral business Bridesmaid for Hire , the creator of the project Finally the Bride , the voice of the podcast ” You’re Not Getting Any Younger, ” and the author of the Amazon-bestselling books ” All My Friends are Engaged ” and ” Always a Bridesmaid for Hire ,” published by Simon and Schuster.Read more Read less More Financial Planner Coverage
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