If you want to stop living paycheck to paycheck and start building real wealth, you must make wise financial decisions and avoid making mistakes that impact your financial goals.
Fortunately, it’s never too early or too late to make wise financial decisions. You can grow your wealth much faster if you don’t fall prey to these financial traps.
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1. Try to keep up with the Joneses
When you’re trying to keep up with the Joneses, you’re essentially spending money on things you didn’t want to do in the first place.
Probably no one else cares if your home has the same features as your neighbors or if you have the latest smartphone. But making those unnecessary purchases will likely inspire regret later.
Instead of using your financial resources to keep up with the Joneses, save them. This will help you keep up with the cost of living for years to come.
You’ll appreciate being able to pay your bills and live comfortably, much more so than the pool you put in 20 years ago.
2. Buy too much house
Larger houses cost more to start up, which means you’ll pay more to start with, but also expect higher running costs while you’re living in one.
With more space for heating or cooling, you can expect higher utility costs. Homeowners insurance and property taxes will also likely cost more.
Buying a home that’s the right size for you and your family will give you more money to save or do things you enjoy. Throwing money away on rooms you never use every month isn’t a good move to growing your wealth.
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3. Buy vehicles you don’t need
SUVs and trucks are popular vehicle options, but many people buy them for features they’ll never use. Off-road capability doesn’t matter if you only drive main roads, and these vehicles will continue to cost you money.
Many SUVs and trucks don’t have good mileage, so you spend more time and money refueling at the pump. All that extra money you pay for gas could go towards other expenses like your car payment or car insurance.
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4. Don’t look for higher income opportunities
It’s hard to save money if you don’t do much with it at first. Finding higher income opportunities allows you to save more and sacrifice less.
Even if you’re already making decent money, you can grow your savings even faster by taking home bigger paychecks.
If you can’t increase your regular salary, there are several ways to earn extra money. You can take a side job, look for passive sources of income, or ask for a raise. Further education or a better degree are also an option to get better-paying jobs.
5. Accumulation of debt
When you borrow money—whether it’s a mortgage or a credit card—you pay interest on the loan. That’s money you throw away every month, especially when it comes to credit card interest.
The more debt you have, the longer it will take to pay it off. This can prevent you from growing your savings as quickly as you would like.
It’s almost impossible to stay out of debt, but there are some steps you can take to ensure your financial goals aren’t compromised.
Don’t go into debt you can’t afford to pay back, choose low-interest credit cards, pay on time, and don’t swipe your credit card with every purchase.
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6. Fall victim to lifestyle inflation
When you’ve started making more money, sometimes it’s easy to spend the difference. After all, you can afford better things. But spending the extra money on non-essential items goes against your goal of increasing your wealth.
Using the money you gained from a raise or a better-paying job to ensure your financial health is a better option than spending it. You now have more money to save, invest and plan for your future.
7. Not maxing out employer contributions
Saving for retirement is a lot easier when your employer matches your contributions to your 401(k). You can grow your savings with money that doesn’t have to come from your wallet. Take advantage of employer-matched accounts by maximizing them.
To be sure you’re earning your employer contributions, you need to know what your employer’s maximum is. Many employers base this amount on a percentage of your income.
Once you know the amount your employer will cover, you can start getting as much free money as possible.
8. Wait to start saving
You don’t want to wait until retirement to start saving. It’s never too early to start and grow your savings accounts. Saving the amount you need for a comfortable retirement life isn’t going to be easy 10 or 20 years from now.
Social Security will not replace your pre-retirement income, and you need to account for inflation. But you don’t just have to save for retirement.
An emergency savings account is important in case you lose your job or face big and unexpected expenses.
9. Leave your money behind
Abandoning all your money may not lead to more. But you can take steps to grow your wealth with the money you already have.
Instead of keeping your money in a traditional savings account that pays a low interest rate, you can open a high-yield savings account that allows you to make money just by holding it there.
Investing is another option to make money from your current balance. Investing in financial instruments like mutual funds can provide returns that can help secure your financial life when you retire.
10. Not making wise investments
While investing is a good move to grow your wealth, you need to make the right ones. Bad investment decisions can result in losing your original investment.
Experts recommend assessing your risk tolerance before making any decisions, but there are things you can do to reduce your investment risks.
Diversifying your portfolio by investing in different types of assets prevents a single bad investment from affecting your entire investment portfolio.
Working with a financial advisor can also help reduce your risk and help you make investments that produce a return.
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bottom line
Sometimes knowing what not to do to get rich is just as important as knowing what to do.
If you find yourself making any of these mistakes, you can take action now to make better decisions. None of these actions are irreversible.
You can find smart ways to pay off your debt when you’ve overbought, or contribute more to your 401(k) when you’ve missed out on free money.
The sooner you start doing the right things, the faster you can grow your wealth.
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This article 10 Important Things You Should Never Do If You Want To Get Rich originally appeared on FinanceBuzz.
