If you’re not rich, you may wonder how you can get rich at various intervals of your life. Building long-term wealth generally means making smart decisions with your finances like investing consistently and prioritizing paying off any debt.
What it doesn’t include is spending money on stuff that does not have lasting value. How do you know which purchases are preventing you from building wealth? Here’s what one financial planning expert does not recommend spending your money on if you want to be rich.
This includes designer clothing, expensive watches, vintage cars and any other high-priced status symbol items.
“Buying luxury items you can’t afford can be a significant drain on your finances,” said Ryan Cullen, co-founder and CEO of Cullen Cioffi Capital Management. Cullen recommends concentrating on building your wealth by investing in assets that appreciate in value over time, like stocks or real estate.
Impulse purchases can be lottery tickets or anything you might buy when you’re feeling a bit emotional, like going on a shopping spree after a difficult day at work. These add up over time and can drain your finances. The better approach, Cullen said, is to focus on building a solid financial plan and sticking to it.
“Renting may seem like a more affordable option than owning a home, but it can be more expensive in the long run,” said Cullen. “Focus on building your wealth by investing in real estate, whether that’s buying a home or investing in rental properties.”
Those who want to build their wealth but have credit card debt, payday loans or personal loans may find paying high-interest rates is quickly eating into these efforts.
To avoid high-interest debt, Cullen recommends living within your means, creating a budget and paying off any outstanding debts in full as soon as possible.
Overpriced Financial Products
“Financial products like annuities, whole life insurance or high-fee mutual funds may promise high returns, but they often come with significant fees that can erode your returns,” said Cullen.
If you don’t want to invest in these products but still want to grow your wealth, Cullen recommends considering low-cost index funds or exchange-traded funds (ETFs). These are inexpensive and offer diversified exposure to the stock market.
More From GOBankingRates