Working Hard but Not Building Wealth? 8 Things To Do Immediately
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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You work hard, you make a decent income, so how come that money never seems to lead to this mythical wealth that finance experts suggest you can be making?
In fact, “Wealthy people rarely make money from just their salary alone,” according to Alex Blackwood, an investing expert, CEO and co-founder of Mogul Club, a fractional real estate investing app.
Most likely, you’re engaging in one or more habits or lack of financial strategies that are holding you back. Here are some reasons why you aren’t building wealth, and eight things to do about it.
Why Aren’t You Building Wealth
According to Erika Dox-Martinez, a financial wellness coach and the founder of Blissful Vida, some common reasons include:
- Lack of financial awareness
- Living paycheck to paycheck
- Money mindset blocks
- No defined financial plan
Additionally, Blackwood said other reasons could include:
- Not viewing your time as a resource
- Not letting your money work for you through investing and interest building
- Not taking advantage of external resources and learning from other individuals
Dox-Martinez is empathetic. “I’ve been there. Earning six figures, drowning in debt and living paycheck to paycheck. I should have felt like I’d made it, but I was overwhelmed, stressed and disconnected from my financial goals until I decided to turn things around.”
So just how do you turn it around, as she puts it? You should do the following things immediately.
Reframe Your Money Mindset
Financial success starts with your beliefs, Dox-Martinez pointed out. “Your money habits are often rooted in childhood experiences or generational beliefs.”
She recommended you reflect on your earliest money memories and write down any limiting beliefs you hold, like “Money is stressful” or “I’m bad with money,” and reframe them into empowering statements.
For example: “I’m not good with money” becomes “I’m learning to manage my money confidently,” she shared.
Track Where Your Money Is Going
Next, if you aren’t putting any structure around your money, it’s no wonder you’re not building wealth. Dox-Martinez recommended you start to track every single expense for one month via a spreadsheet, app or just reviewing your credit card and debit card statements.
“Awareness is the foundation of change. Without understanding your spending habits, you can’t create intentional plans for your money,” she said. By tracking your spending, you’ll start to notice how small purchases add up and where to eliminate “sneaky money leaks.”
Gain Ownership in a Growing Entity
Blackwood goes a step further, suggesting that in order to grow your wealth, “you have to have ownership in a growing entity, passive income streams or both.”
He recommended real estate as a great example of this. “When you have ownership in a growing entity, as time passes, your ownership grows in value while you work elsewhere.”
Contribute To a 401(k) Plan
Another savvy move is to put as much money into your 401(k) as you can, especially if you’re getting any employer matching funds, Blackwood said. “The earlier you are in your career, the more this will help. 401(k)s collect compound interest,” which gives you a better chance of building wealth faster.
Automate Your Savings and Investments
If you’re spending money before you have a chance to save or invest it, then you should begin to automate it, Dox-Martinez said.
“Automation … helps you pay yourself first, a key principle of building wealth,” she said. She recommended automatic transfers of at minimum 5% of your income (but 15% is a great goal) to a savings account, preferably a high-yield one, for emergencies and short-term goals and an investment account for long-term growth.
Invest In Stocks
Saving money in a savings account won’t significantly grow your wealth, however. You’ll want to look into stocks and bonds, Blackwood said.
If you’re not a stock market aficionado, he recommended getting started with a low-fee S&P 500 exchange-traded fund (ETF) like VOO (Vanguard S&P 500 ETF) or SPY (SPDR S&P 500 ETF Trust) “that can increase your exposure to the stock market, while decreasing the risk associated with investing in a company.”
Remember, too, he said, that “timing the market is impossible.”
He recommended an investment strategy called “weighted-dollar-cost averaging that is a way to mitigate against timing risk.” In other words: Invest a little bit each month as opposed to all at once.
Look Into Bonds
For an investment that could turn into an income stream, Blackwood recommended bonds. “Bonds, to most, are considered stable but unsexy, but they yield income. In the event of a collapse, bondholders are the first to be paid, and so, bonds are considered a stable investment that yields.”
Invest In Fractional Real Estate
Blackwood said that no matter how much money you make, it can be hard to start investing, and to be patient enough for your money to compound and appreciate. If you’re not quite up for getting into traditional, high-quality real estate, consider fractional ownership platforms where anyone can invest in shares of quality, institutionally-vetted real estate properties for as little as $250.
“Fractional real estate investing makes high-quality, income-generating real estate accessible at much lower upfront costs and without the stress of maintenance, upkeep and management,” he said.
No matter what you do, remember that building wealth isn’t about working harder, Dox-Martinez said, it’s about working smarter with your money.
“You don’t have to ditch everything you enjoy in life to build wealth. You just need a clear plan and a commitment to taking small, consistent steps forward,” she said.
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