We all want to accumulate wealth, either during our careers or in time for retirement. However, countless Americans wind up sabotaging their efforts by repeating the same critical errors. Here are just a few of the habits that'll prevent you from amassing your fortune.
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Though gambling is illegal in some parts of the country, many folks have no trouble accessing casinos, be it online or through travel. And while some might consider it an easy way to get rich quickly, the reality is that most people who gamble end up poorer than when they started. In fact, last year, Americans lost a collective $116.9 billion gambling.
If you're spending a large chunk of your income on card games and slot machines, it's time to rethink that habit -- even if you do occasionally walk away a winner. If you really can't tear yourself away, visit casinos on a limited basis, bring only a certain amount of cash with you when you go, and leave your credit and debit cards at home. That way, you'll remove the option to go overboard.
2. Impulse shopping
It's one thing to spend money on the things you need, or even fork over some cash on occasion for the things you want. But if you let yourself fall victim to impulse shopping repeatedly, you could end up hurting your finances irreparably. It's estimated that 84% of Americans regularly make impulse purchases, and of those who do, 20% have been known to blow $1,000 or more on a whim.
If you're in the habit of making impulse buys, be smart about how you shop. Avoiding buying things online, where your options for spending are virtually limitless, and when you shop in stores, only bring enough cash for the things you initially set out to purchase. This will help you avoid temptation -- and the overspending that typically comes with it.
3. Not budgeting
Although budgeting is one of the most effective means of tracking spending and identifying savings opportunities, only 41% of Americans actually do it. If you're not keeping tabs on your expenses regularly, then you're basically setting yourself up to overspend and get into debt, both of which will hamper your long-term goals.
Even if you've never followed a budget before, setting one up is easy. All you need to do is list out your monthly expenses (including one-time expenses, which you'll allocate over 12 months), compare the amount you're spending to the amount you're earning, and make sure those numbers not only align, but offer room for a reasonable amount of savings (which, for our purposes, is at least 10% of your income, and ideally more). If you're maxing out your salary, or, worse yet, spending more than your take-home pay, you'll need to re-examine your budget and start cutting corners. Immediately.
4. Overspending on housing
Housing is the typical American household's single greatest monthly expense, but some take that to an unhealthy extreme. A good 39 million Americans can't afford their homes, or so says a report from Harvard's Joint Center for Housing Studies. Furthermore, 19 million households are spending upward of 50% of their income on housing, which is over 20% more than the outer limit of what the average person or family should be paying.
If your housing costs constitute more than 30% of your take-home pay, you'd be wise to consider downsizing or moving to a more affordable space. Otherwise, you're apt to struggle to save as long as you have that mortgage to keep up with.
5. Failing to invest
Though most Americans aren't good at saving money, there are those who manage to sock away a decent chunk of their income each month. But if you're not putting that money to work by investing it, you're limiting your ability to turn it into an even greater sum.
Imagine you're able to set aside $500 a month over a 40-year period. Here's what that money will grow into, based on where you choose to put it:
Parking your money in a savings account and letting it be won't get you nearly as far as investing that cash instead. Furthermore, while there's nothing wrong with putting some of your money into bonds, if you really want to build wealth, you'll need a stock-focused strategy. Though the market does carry some risk, if you're willing to invest for the long haul, you stand to come out ahead -- and then some.
Many people who wind up wealthy don't get there because they come from rich families or inherit huge windfalls. Rather, they're mindful of their spending and make smart investment choices. Avoid these major pitfalls, and you stand to reap a host of financial rewards in your lifetime.
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