For most of us, the 'millionaire' status is still the moniker of affluence and having 'made it'. But the reality today is that just the median house price in many of our capital cities is close to a million, which was unthinkable only two decades ago. Another reality is that we, as a country, are working harder and producing more than ever before. Unemployment is low and our collective incomes are high. I'm not saying that getting to a millionaire status is easy, but I am saying it's easier than you think. Here are five things that might be holding you back.
1. Spending more than you earn
Sounds simple, but a huge portion of us either live pay cheque to pay cheque or spend more than we earn. The brutal truth is that this at best ensures that we never build wealth or get ahead and at worst dictates that when an unexpected emergency occurs we go into debt (which can be hard to get out of). Make it a rule to spend less than you earn.
2. Using bad debt excessively
Bad debt is basically anything borrowed to fund something that's not an investment. Car loans, credit cards or buying now and paying later with Afterpay Touch Group Ltd (ASX: APT) are all recipes for disaster if not used thoughtfully and sparingly. It's fine to use a Commonwealth Bank of Australia (ASX: CBA) card for the frequent flyer points, but don't put your holiday on it if you can't pay for it.
3. Not asking for a pay rise
This might put some off, but maybe you're not being recognised for the benefits you bring your place of work. Try to make yourself invaluable to your employer and ask them to reflect that in your pay. You may be pleasantly surprised
4. Keeping up with the Kar… Joneses
This is a big trap that many fall into, but is oh too easy. Consider your last pay rise and where that money went. Was it on something constructive? Or something you 'deserved for your hard work'? Getting a pay rise and using it to upgrade your lifestyle with a new car, extravagant holiday or bigger house is common, but also highly damaging to your future, particularly if combined with higher debts. There's a reason why they say that the most common millionaire is the neighbour who you didn't know had money.
5. Not investing
The hard-earned money you've saved from steps one and two is no good in a term deposit these days. It's great to put away some money and watch it grow, but you have to make it work for you as well, not just the bank. If you have enough cash to cover your (hopefully frugal) lifestyle, consider buying some shares, managed funds or even an investment property. Investing is all about making your money work for you, so someday you don't have to work for money.
Foolish takeaway
I think anyone can dramatically improve their financial situation if you (at least in part) avoid some of these things. Any one of them can pull you off the road to becoming a millionaire, but by stepping back and seeing if you might be inadvertently doing one of these things, you might be doing yourself a big favour down the road.
