If you’re still waiting to amass your first million, you’re not alone. But is your attitude to money holding you back?
The sad truth is most of us aren’t as rich as we had hoped we’d be. Nor are we well on the way to acquiring great wealth. But why?
You might put it down to the fact your job doesn’t pay enough, or that you haven’t been fortunate to come up with a once-in-a-lifetime business idea. Maybe you just forgot to buy your lottery ticket the week your numbers came up.
But could there be other reasons why you’re not a millionaire that have more to do with your approach and attitude to money?
Follow these 10 tips to set yourself on the road to wealth.
1. Live within your means
If you’re relying on borrowing through loans and credit cards to fund most of your spending, you are never going to be able to build up your wealth.
A dependency on credit means your future earnings will end up going towards debt repayment rather than adding to your own nest egg. This is the more or less the problem facing the UK economy at the moment.
If your credit-card debt is growing by 15 per cent a year – a typical rate – this means you are paying considerably more for goods and services than people who only spend the money they have.
2. Cut out wasteful habits
Where does all your money go? If you’re spending a large chunk of what you earn on alcohol and cigarettes, it could explain why your wealth isn’t growing.
In isolation, a packet of cigarettes or a lunchtime pint may not cost all that much, but they quickly add up.
Cutting these vices back – or stopping them altogether – could free up an awful lot of cash.
For example, if you give up a 20-a-day smoking habit, you’ll save almost £2,500 a year at current prices. Try our cost calculator to see how the little things add up.
3. Set budgets and targets
A lot of rich people are, unsurprisingly, very disciplined when it comes to money. So that’s what you need to be.
This means setting yourself strict, but realistic, budgets, and targets for how much money you want to save, for example.
Draw up a list with your income and outgoings on it. Are there any areas of spending – such as smoking or drinking, as mentioned above – that you could cut back on?
Are your debts costing you too much? These may need to be paid off as soon as possible, otherwise they’ll be a constant drain on your finances.
Sticking to a budget is easier said than done, of course, but if you don’t try, you won’t be able to accumulate wealth. Read our article on how to budget in 60 minutes.
4. Take control of your money
When it comes to looking after your cash, don’t rely on advice from people you know: work it out for yourself.
This could apply to getting a mortgage, choosing a bank account, or making investments. The more you rely on yourself, the more you’ll understand about how money – and growing it – works.
5. Don’t expect to get rich overnight
One simple way to lose a lot of money is to try and make a lot of money quickly.
For example, investing in “can’t fail” ventures recommended by your friends may sound like a great idea, but they are inevitably full of risk. For every one that comes off, perhaps 10 will fail, and you’ll lose all your investment.
It’s fine to use your money like this if you understand the gamble you’re taking: but for most people, it’s unlikely to be a short cut to wealth.
6. Keep it simple
Investing in anything where you don’t understand how you’ll make money is another recipe for disaster. If a financial adviser says: “Just trust me,” then just don’t.
If someone can’t explain in a couple of sentences how a money-making scheme is going to work, treat that as a warning sign.
Look at the people who invested with fraudsters like, who kept providing the returns without explaining how he was making so much money.
7. Don’t be cautious
By putting all your money in a savings account, you’re keeping it safe but missing out on the chance to get significantly higher growth.
Once you have enough spare cash to cover rainy-day emergencies (three months’ after-tax salary as a rule of thumb), consider investing in higher-risk shares or funds, for example.
8. Face up to your finances
If you’re having problems with money, burying your head in the sand isn’t going to help.
Working out how to clear debts – or even calculating how much you owe in the first place – is the first step towards sorting things out.
9. Don’t expect it to be plain sailing
One of the reasons a lot of people struggle financially is because they are hit by emergencies that cost hundreds or even thousands of pounds to put right.
That’s why you need to make sure you have proper insurance cover: this means protection against losing your job or falling ill and being unable to work.
And don’t forget the basics: decent home insurance and car insurance policies are a must.