Don’t make these mistakes if you want to build wealth
Since my early 30s, my main goal was to reach financial independence. I eventually achieved it but made many mistakes along the way. In this post, I’ll share my top 9 reasons why many of us remain poor.
#1 — We don’t understand compound interest
This is a big one. I come across many people that want to build wealth, but they dismiss the idea of making smaller amounts. They just don’t realize how small amounts can grow over time.
When I mentioned in a forum that I had a side hustle that paid $150 a month, many laughed and called me deluded. But if you invest $150 a month at 10% return over 30 years, you’ll end up with over $300,000. That’s a big deal and was one thing that helped me build my wealth.
#2 — We don’t set goals for ourselves
This is something I failed to do in my 20s. It’s why I was still in debt at age 29. It’s only from then onwards that I managed to turn my life around from such a poor start.
By setting goals, I had a target to aim at. Things didn’t run smoothly the whole time, but that’s something you have to accept. Sometimes you’ll veer off course. But with your goals in mind, you can easily get back onto the right path.
#3 — We buy crap we don’t need
If you want to build wealth, you have to stop buying crap you don’t need. I know quite a few people that have well-paid careers, yet are also in debt. These are the people that always need to have the latest flat-screen TV, a new car every few years, and a whole other host of other pointless things. They seem more interested in showing off than in building wealth.
I’ve never bought a new car in my entire life. My wife bought a new car before I met her, but she still has it 17 years later. It’s well looked after and still runs perfectly. Well, almost perfectly.
#4 — We don’t keep our skills up to date
I see this quite often. People get made redundant, they can’t get another job using the skills they have, so give up. They either think they aren’t able to re-train or don’t want to.
The world is changing at an increasingly rapid pace so we need to keep our skills up to date. The more skills we have, the more we’ll earn.
#5 — We miss opportunities because we’re stuck in the past
This is related to not updating our skills. Here I’m thinking about bitcoin and other cryptocurrencies. This is the biggest opportunity that most of us will see in our lifetimes, yet some still dismiss it as a scam. Why? Because they’re stuck in old ways of thinking and won’t move forward.
#6 — We seek financial advice from those that aren’t financially successful
This is more common than you think. If you want to be successful in any domain, you need to model yourself on other successful people in that domain. If you want a successful relationship with your partner, for example, you should model yourself on couples that have such a relationship. It’s no good asking for advice from couples that have bad relationships.
It’s the same with financial success. Seek advice from those that have achieved what you want. Don’t ask those that have failed financially.
#7 — We won’t take risks
If you want to be wealthy you need to take risks. I don’t mean crazy risks that could bankrupt you. I mean calculated risks. For example, you could invest 1-5% of your money in bitcoin, stocks, property, or similar assets. You won’t make money if you just keep your cash in a safe, low-interest bank account.
You’ll be getting 0.1% interest while inflation is running at 5-7%. That means you’re losing money every year. Bitcoin has compounded at around 200% a year for the last 13 years. This is an example of how others build wealth.
It can also be property. Millions are too frightened to buy because they worry about price drops. My grandparents bought their house for £200. It’s now worth over £100,000. My parents bought their first house for £1,500. It’s now worth over £150,000. I bought my first condo for £47,000. It recently sold for over £500,000 (not by me).
Think long-term. Be prepared to risk a small percentage of your money. Or stay poor.
#8 — We think wealthy people are bad people or criminals
This is a mindset problem. If you think every wealthy person got their money illegally, why would you want to be wealthy? You wouldn’t. You’d keep yourself poor so that you stay a “good” person.
#9 -We’re scared of what our friends will think
If we’re currently at the same level as our friends, what will they think if we move ahead? Maybe they won’t like us any longer.
I think this is a legitimate worry. As we grow our wealth we will likely drift away from friends that don’t want to come along for the ride. The solution is to try to bring your friends along with you. If they don’t want to come you can easily make new friends. Whatever situation you’re in, most people don’t have the same friends throughout life anyway.
Your other option is to stay at the same level as them and stay poor.
I hope this list helps you move forward in life and gets you to where you deserve to be.