Beautifully Frugal: 10 Things Keeping You From Building Your Wealth
Building wealth is a goal many aspire to achieve, however, unexpected medical bills, poor financial habits, or lack of educational resources can make it seem out of reach. Understanding what is stopping you from building wealth is the first step to overcoming these challenges and starting your financial growth journey.
In this month’s Beautifully Frugal blog, we'll break down a few obstacles keeping you from building wealth and provide actionable tips to help you overcome them.
Living Beyond Your Means
A significant factor preventing people from building wealth is spending more than they earn. What does this look like? Online shopping without checking your account balance. This might look like telling yourself, “I can put this on my credit card and pay it off later!” The quick boost of serotonin from hitting purchase slowly fades once your statement balance rolls around and you don’t have the funds to pay it off. Living beyond your means, often driven by lifestyle inflation or societal pressures, creates a gap between income and savings. This imbalance can delay financial growth and increase the risk of debt accumulation.
Solution: Begin tracking your spending.
Creating a budget that accounts for necessities, savings, and discretionary spending can help you visualize what you’re able to spend after your bills are accounted for. If you’re looking for a free resource to get started, check out my Personal Monthly Budget Tracker! This comprehensive Excel sheet works with you to create a realistic mock budget of all of your expenses.
By prioritizing your saving and spending habits, even if it's just a small amount at first, your wealth will grow over time!
Lack of Financial Literacy
It can be challenging to build your wealth when personal finance basics aren’t taught in school or at home. Without a solid understanding of how money works, it's easy to make costly mistakes or overlook opportunities to grow wealth. Lacking knowledge of key concepts like saving, investing, and managing debt can leave individuals feeling overwhelmed or lead them to make financial decisions without understanding the outcome.
Solution: Invest time in understanding financial literacy.
Reading books or online blogs, taking online courses, or talking with a Financial Advisor are all great ways to educate yourself on financial literacy and begin to understand key concepts. Whether it’s budgeting, investing, or debt management, education will give you the confidence to make informed financial decisions. A few books I recommend to get you started include:
Everyday Millionaires by Chris Hogan
Total Money Makeover by Dave Ramsey
The Bogleheads' – Guide to Investing by Mel Lindauer
High Levels of Debt
Debt, especially high-interest debt like credit cards, can be a significant roadblock to wealth building. Interest payments eat into your income, leaving less money for savings and investments. If you’re struggling with debt, it can feel like you’re working hard without making any real progress toward financial independence. I also struggled with debt, so I recorded a webinar about my experience and how I overcame my debt problems. You can watch it here.
Solution: Consider the Debt Snowball Method or Debt Avalanche Method
Debt Snowball Method: This method involves paying off debts in order from smallest to largest, providing quick psychological wins and motivation as smaller debts are rapidly eliminated.
The Avalanche Method: This method prioritizes paying off debts with the highest interest rates first, saving more money in interest over time and potentially shortening the overall repayment period.
My family and I found the debt snowball method highly effective when paying off our debts.
Not Investing Early Enough
Time is one of the most powerful tools when it comes to wealth building. The earlier you start investing, the more your money can grow! People delay investing when they believe a large sum of money is required to get started, they’re unsure how to begin, or thinking they will have enough time “later.” This last sentiment is a common mindset for young individuals.
Solution: Start investing as early as possible, even if it’s just a small amount.
Whether you choose stocks, bonds, real estate, or retirement accounts, investing consistently over time allows compound interest to work in your favor. Even small, regular contributions can make a big difference in the long run. My first investment was in a Roth IRA, so I talk about this often with a lot of our younger clients! If this is something you want to learn more about you can schedule a meeting with me here.
Fear of Risk and Inaction
Fear of losing money can also hold individuals back. Whether it’s fear of stock market volatility or anxiety about making the wrong financial decision, fear of risk can paralyze your wealth-building efforts.
Solution: Recognize all investments carry some risk, however, with risk comes the potential for reward!
Educate yourself on the types of investments that align with your financial goals and risk tolerance. Starting small, diversifying, and taking a long-term approach can help reduce the fear of risk. The key is to take informed action, even if it’s a step at a time. If this is something you struggle with, ask your financial advisor questions so you can become more educated to make financial decisions in the future.
Lack of Consistency
Building wealth doesn’t happen overnight—it requires consistency. Many people start saving or investing but fail to stick with it, either due to impatience, changing priorities, or life circumstances. Wealth is built over time through steady, consistent actions. I say this often: investing is a marathon, not a race!
Solution: Develop financial habits that prioritize consistency.
Automate savings and investments so you’re contributing regularly without having to think about it. Setting small, achievable financial goals can also help you stay motivated and on track. This is usually achievable through your company’s allocation preferences, or you could set up recurring payment transfers from your checking account into a savings account.
Not Having a Clear Financial Plan
Without a clear financial plan, it’s easy to wander through life, leaving you stuck in a cycle of living paycheck to paycheck. Whether it’s saving for retirement, buying a home, or building an emergency fund, a lack of planning makes it difficult to achieve long-term financial goals.
Solution: Create a financial plan outlining your goals, timelines, and action steps.
Make sure to include both short-term and long-term goals, and reassess your plan regularly to stay on track. Having a roadmap gives you a clear sense of purpose and helps you stay disciplined in your wealth-building efforts.
Example: Jane Doe wants to create a financial plan for herself to build a $10,000 emergency fund, increase her retirement contributions, and pay off $30,000 in student loans.
Actionable Steps:
For an emergency fund, she will automate a $400 monthly transfer to a high-yield savings account, and allocate 50% of any bonuses or tax refunds to this fund.
For retirement contributions, she will increase her 401(k) contributions by 1% every six months. Additionally, she can open a Roth IRA and contribute $100 monthly, increasing by $25 each year.
For student loan repayment: Jane will refinance her loans to a lower interest rate while paying an extra $200 per month towards the highest-interest loan.
Timeline(s):
Months 1-18: Focus on building her emergency fund.
Months 19-24: Redirect emergency fund savings towards extra student loan payments.
Every January and July: Increase 401(k) contributions.
Every December: Review and adjust the plan.
What would this financial plan achieve after two years? Jane would have achieved her emergency fund goal of $10,000, increased her retirement contributions by 4%, and reduced her student loan balance by 50%.
If you’re looking to create a goal with incredible accomplishments like Jane's, meet with our advisors today!
Underestimating the Importance of Networking
Your financial growth doesn’t happen in isolation. Networking and surrounding yourself with people who have similar goals and financial know-how can open up opportunities, whether through advice, partnerships, or business opportunities. Many people underestimate the power of social and professional networks in supporting their wealth-building journey.
Solution: Connect with like-minded individuals.
Actively seek out mentors, attend financial seminars, or join online communities dedicated to wealth building. Surrounding yourself with financially savvy individuals can offer valuable insights, strategies, and opportunities you might not have otherwise considered.
Not Setting Long-Term Goals
A common mistake is focusing too much on short-term financial goals while neglecting long-term wealth-building strategies. This short-sighted approach can leave you stuck in a cycle of temporary fixes rather than progressing toward financial independence.
Solution: Set clear, long-term financial goals
Whether it’s buying a home, retiring early, or achieving a specific net worth, creating a strategy to achieve them is just the beginning. Break down your long-term goals into smaller, more manageable steps that you can work toward each year. One of my husband and I’s personal goals is to be able to retire early. We won’t be able to achieve this if we are not continuously making strides now, getting closer to that goal every year!
External Circumstances Beyond Your Control
Sometimes, factors beyond your control, such as unexpected medical expenses, job loss, or economic uncertainty can make building wealth seem impossible. These challenges can knock you off course, and it’s easy to feel discouraged.
Solution: Focus on Controlling what you can ACTUALLY control.
Although you can't control every situation, you do have control over how you react.
Start by building an emergency fund to provide a financial safety net during challenging times. Focus on the things you can control—like reducing expenses, enhancing your skills, and exploring new income opportunities—so when unexpected events occur, you'll be more prepared.
If the stock market takes a downturn, remember you're in it for the long term. The only investors who lose in these situations are those who sell during market declines!
Let’s Build Your Wealth!
Building wealth is a long-term process, and it’s natural to face challenges along the way. Identifying areas keeping you from financial success is the first step in overcoming them. Whether it’s poor financial habits, lack of knowledge, or external obstacles, with the right strategies, you can make steady progress toward your wealth-building goals.
Take it one step at a time, stay consistent, and remember that small actions today can lead to significant financial rewards tomorrow! If you want to get started, reach out for a free consultation with our KerberRose Wealth Management team.
Alexandria Miller, CPFA® Financial Wellness Advocate