More than half (51%) of Americans believe they'll be wealthy someday, a survey from MagnifyMoney found. Becoming rich is a dream many people share, but few actually achieve. However, although growing your wealth isn't easy, that doesn't mean it's impossible.
Although the definition of "rich" depends on who you ask, it is possible to grow your wealth substantially even if you're currently living paycheck to paycheck. In fact, sometimes you may be the only thing holding yourself back.
If you want to eventually become rich, make sure you avoid these common beliefs that could be standing in your way.
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1. You think you should always play it safe with your money
It stands to reason that if you want to earn as much money as possible, you should err on the side of caution and play it safe. However, sometimes that way of thinking can actually hurt you financially.
This is particularly true when it comes to investing for the future. You may think that one of the best ways to protect your money is to stash it in a savings account rather than investing it in the stock market. But although savings accounts are not subject to the ups and downs of the stock market, they typically earn much lower rates of return. Even the best savings accounts only have interest rates of close to 2% per year, which won't even keep up with inflation over time. In other words, if you keep your cash in a savings account long term, your money could actually lose value.
Although the stock market can be riskier, you're likely to see returns of around 6% to 10% year over year. And even though there will be downturns, you'll typically see positive returns over the long run. So, by investing your cash in the stock market, you could potentially earn tens or even hundreds of thousands of dollars more than if you stashed it in a savings account.
2. You find it too stressful to talk about finances
A whopping 57% of Americans intentionally avoid talking about finances with their friends, a survey from eMoney Advisor found. In addition, 43% said that talking about personal finance makes them feel embarrassed, stressed, or confused.
Talking honestly about money, though, is critical to improving your financial situation. While you don't need to share every detail about your financial life, getting comfortable talking about money can open you up to new information and advice. Maybe you can learn some new saving techniques from someone who's a whiz at managing their money, or perhaps talking about your retirement savings with coworkers or friends can encourage you to save more.
The important thing to keep in mind is that your goal should be to learn, not to compare yourself. There will always be someone with a bigger bank account, a higher salary, or more money in savings. If you get discouraged by comparing your progress (or lack thereof) to that of your friends, remind yourself that the more you learn about finance, the better chance you have of improving your financial situation.
3. You believe your financial situation will get better once you reach a certain milestone
It's easy to fall into the trap of thinking you'll be wealthy once you finally get that raise, find your perfect new job, pay off your debt, etc. But the more time you spend waiting for that milestone to arrive, the less time you have to actually achieve your goal of increasing your wealth.
Especially when you're saving for long-term goals like retirement, time is your most valuable asset. For example, say you started saving for retirement at age 25, stashing away $300 per month. By age 67, you'd have more than $830,000 accumulated, assuming you're earning a 7% annual rate of return on your investments. But if you'd waited until age 40 to begin saving, all other factors remaining the same, you'd only have around $176,000 in your retirement fund by age 67.
Although your financial situation may improve once you hit a certain milestone, it's dangerous to sit around waiting for that to happen. Rather, it's better to take the situation into your own hands and start building wealth now. You may not be able to predict the future, but you can ensure you're doing everything possible to become rich.
If you've set your sights on becoming rich someday, know that it is possible even if you're far from wealthy now. By changing the way you think about your finances, you can make smarter choices and develop healthy money habits that will improve every aspect of your financial life.
