It’s Not Your Income That’s Holding You Back

What’s the number one reason you haven’t hit your money goals yet? If you think it’s because you don’t make money enough, you’re in good company. You’re also wrong.

Over the past several years, I’ve met thousands of people—through my blog and coaching business—who believe their income is to blame for their financial problems. But after analyzing their cash flow, budgets and daily habits, I’ve found the most common reason many of us struggle to hit our goals has nothing to do with the size of our paychecks.

Here's what’s really getting in the way of our success.

1. We don’t spend with our goals in mind.

Take a second to think about your top financial goals. Maybe it’s to pay off debt, buy a home or just stop stressing about money. Now think about your spending habits, and tell me how they’re serving those goals. I’ll wait.

When a bigger portion of our incomes goes to eating out, cable and car loans than to auto-transfers to savings and retirement contributions, it’s no wonder our goals feel unreachable. How we spend our money today has a direct impact on where we’ll end up tomorrow.

I’m not suggesting we should never spend money on fun stuff—just that it’s important to set aside cash for our goals first. Fortunately, that can be pretty painless: Setting up automatic transfers to savings or an investment account means we won’t have a chance to miss the money. And there are literally hundreds of easy ways to cut back and save more.

2. We let our mind play tricks on us.

All too often, we overspend on impulse or emotion, then justify it to ourselves later with logic. It’s like financing a $50,000 car on a $50,000 salary. In reality, we purchased it because we work hard and deserve it (the emotion), but we explain it away with reason: It gets great gas mileage, has a TV in the back for the kids, is the safest on the road and so on.

We repeat this process over and over, causing us to live outside our means—and maybe even rack up debt. Eventually, we convince ourselves that the problem is that our income isn’t big enough to maintain our lifestyle, when our behavior is to blame.

We need to retrain our brains to value long-term success over instant gratification, and start patting ourselves on the back for saving or investing our hard-earned money—not spending it. As author and financial educator Dave Ramsey says, “If you will live like no one else [today], you can live and give like no one else later.”

3. We don’t put our money to work.

It’s easy to believe it’s pointless to invest until we have hundreds or even thousands per month to contribute, or to put it off until we’ve checked off other goals like paying off debt. But this hampers our ability to grow wealth over the long term.

Chris Hogan, author of “Retire Inspired,” illustrates the power of compounding returns with a story about planting a Bamboo tree. For years after planting tiny seedlings, you might not see any sign of life. But one day, five years later, a bamboo shoot will sprout up. Then another, and another. Suddenly, there’s exponential growth. Some bamboo species can grow almost three feet in one day!

This is what happens to our money when we invest. Setting aside $100 per month might not seem like it’s adding up to much now. But five years later, you’ve amassed more than $7,000 (based on an average 6 percent annual return). By the 20-year mark, you’ll have nearly $50,000.

Bottom line? We can’t afford to delay investing until we earn more. We’ll never have more time than we do now to let our money grow—if we put it to work.

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