The definition is different for everyone, but the theme is common in most people I interact with. They WANT to be rich or at least have all the things they associate with wealth. To be fair, I want some of those fancy ass things too, a boat and a cabin on a lake sound about right (in time, Mr. AE, in time). If you’re curious why you’re not rich yet, maybe one of these reasons apply to you.
As someone who pays close attention to all things money, I consistently see and hear people devaluing hard work and focus. Instead of actually giving props when they are due, they attribute success to luck instead of what it actually took.
An example: Paying off student loans
I have brought up the fact that we paid off my student loans when the topic arises (as it does frequently with Millennials) and you know what the usual response is?
“Did your parents pay for most of your tuition?”
“You’re so Lucky”
Or my favorite Minnesotan comment:
“Oh – That must be nice”
(said with a heavy dose of passive aggression that implies you had help)
It is “Nice” but making extra payments, spending hours refinancing (twice*), and throwing financial windfalls at my student loans weren’t “Nice”
It sucked. There was very little luck involved.
The same logic applies to building wealth. While I assume it is also “Nice” to be wealthy I know that it doesn’t magically fall into the vast majority of peoples lap. It takes work. It takes Focus.
*Pro- tip: Save yourself some time and give SoFI a call first
Why You’re Not Rich Yet
It’s not because you haven’t won the lottery, caught your “Big Break” or found a sugar daddy/momma to boost you into wealth. Those are the stories you see in the news, but they are not how the vast majority of people get rich.
Side note: You could be doing everything right and still not be there. We aren’t rich yet either as one of the below reasons applies to us 🙂
Why You’re Not Rich Yet…Your Definition of Rich is Wrong
I remember when I was pretty young (12 or 13) telling one of my relatives that my friend’s parents were “loaded” and they responded with:
“They aren’t loaded, they just are able to afford more debt”
I wish I would have done some due diligence on that statement in my younger years before taking on a massive pile of student loans because, more often than not, they were right.
Cars, Boats, Toys, Houses, Jewelry, Electronics, all the way down to the fancy dinner and drinks do not make you rich. Especially if those indulgences are backed by the bank via debt, then they are making you less rich.
Its called Lifestyle Inflation, earning more matched by spending more is a wealth-destroying cycle that entraps many. Instead of stuff, view being rich as having options. The option to use your FU Fund to buy time or a better work-life balance. The option to spend more time with your family or travel the world if you so desire.
I have zero, ZERO! issues with spending on stuff that makes you happy. That is why you earn it in the first place, but if you are spending just to appear like someone who has their act together – What’s the famous saying?
“A Fool and their money are soon parted”
Why You’re Not Rich Yet…Lack of Patience
In the age of “Get Rich Quick” no one wants to stick it out for the 10-20 years that it actually takes for wealth to build. The progress “appears” to be too slow for most of the crowd (if this sounds like you I suggest checking out the growth curve below).
Growth starts to get reaaaally interesting after the first 15-20 years. Some numbers to give the above graph context (Assuming 8% growth, investing $400/month):
- 20 years in – you have invested $96,000 and earned $133,063
- 40 years in – you have invested $192,000 and earned $1,104,721
Be patient!!!! Every time you try a new “get rich quick plan” then quit and start over a few months later you are delaying that steep incline at the end where the compounding gets super sexy.
I’m not telling you to do something you hate, I’m telling you to ditch the get rich quick (*Cough*….MLM….*Cough*) strategies that don’t work for 99.9% of the people that join them. Beware of the pyramid scheme. There are far better ways.
Why You’re Not Rich Yet…Not Investing Enough
Breaking this down into two distinct (equally important) buckets
Not investing enough in yourself
The successful people I know (both in the side hustle and/or professional world) are not shy about investing in themselves via time or money. They take on optional Classes. Certifications. Speaking Arrangements. Challenging Projects. or anything else they can use to their advantage in the future.
They push their comfort zone – consistently.
They are also constantly learning, whether it be something that directly applies to their job/side hustle or for pleasure (which also makes them a well-rounded person).
Skills get you paid, which helps a lot with the next point:
Why you’re not rich yet……Not Investing Enough Money
This could be an income problem, a spending problem, a fear of investing problem or some combination of all 3. Outside of finding ways to increase your income, investing early and often is my number one secret to success.
“Enough” depends on your goals, but the average American is saving far too little today to even have a comfortable average retirement. If you want an above average bank account, you need to save and invest an above average amount.
Don’t seek perfection, start now and tweak the investments as you learn what investing is all about.
If you want to see the power of investing over time check out the next section
Why You’re Not Rich Yet…Time
I said one of these categories applies to us – and here it is.
Time, or specifically Time In the Market is critical for us to hit our long-term milestones. It is hard as hell to become rich without giving your money enough time to double, multiple times.
We got a fairly young start at ~27 and my only regret is not figuring this out sooner
If you want to get rich “quick” your options are limited:
- Own your own (successful) business
- Make a huge salary and live off less than 20% of it
- Inherit it
- Be an incredibly successful stock picker (good luck)
- The lottery (puke)
All of these options are incredibly risky, difficult, stupid or a combo of all three. The easiest way to wealth is to invest early and often, don’t touch it and let it do its thing (remember the chart from above).
Time in the market can only be made up by investing MORE (usually a lot more) money later.
Breaking down some numbers*:
- If you invested $400 per month starting at 20 = $1,934,675
- $400 per month if you started investing at 30 = $862,541
- $400 per month if you started investing at 40 = $365,936
- And finally, $400 per month if you started investing at 50 = $135,911
If you waited until you were 30 (instead of 20) to start investing you would have to invest over $900 per month to amass $1,934,675 at 65. That is over double what the 20-year-old needs to save. Every year you tack on without saving requires a significantly higher savings target to match your younger self.
*Assumes 8% annual return, retiring and investing until age 65. Keep in mind that inflation would eat a huge chunk of that total as well ($1,934,675 in today’s dollars is $534,461 at a 2.9% annual inflation rate)
It all comes down to Action (with a side of patience)
In order for time to be on your side, you need to Take Action today. Learn new skills, make more money, understand that being rich isn’t an overnight endeavor and most importantly Invest.
I think ESIMoney said it best If You Want What I Have You Have to Do What I’ve Done and he has done what most people don’t. Put in the time and work. If you don’t want to do that, maybe this whole being rich thing isn’t in the cards for ya, there is always the 1 in 1,000,000,000 shot of hitting the powerball.
What do you think if my “Why you’re not rich yet” reasoning?
I used the Compound Interest Calculator from Bankrate for this post.