What's Holding You Back? You Are

The end of 2019 nears. This is always a good time of year to review your goals and plans and update them for the next year.

It's also a good time to review the basic principals for sound financial planning and maintaining your financial freedom -- and if you've not gained financial freedom yet, continue with your striving for that goal. It's a life changer.

So what has been holding you back? Still living paycheck to paycheck? Or do you have too much debt and maybe having difficulty paying it down? Here are some of the most common ways people are subconsciously (or even consciously) sabotaging their own financial well-being.

1. You don't follow a budget

Following a budget is important for anyone, regardless of their net worth. Without one, you might do more spending than saving. That could lead to debt and it will certainly hamper your ability to prepare for your future.

Study this article on How Do I Create A Budget. Then do it. 

2. You don't set clear financial goals

Most people aren't likely to save just for the sake of saving, but they're more willing to do so when they have a clear idea of what that money is going to get them. You probably have some financial goals even if you haven't sat down and thought about them before. Maybe you want to buy a home or a new car, take a vacation, or retire by a certain age.

Think about what kind of money each of these goals will take and start budgeting for them. You might find that with a little diligence, you don't need to be a millionaire in order to achieve many of the things that you want to do. Although if becoming a millionaire is one of your goals, you can start planning for it too by trying some of the other tips listed here.

3. You're carrying a lot of debt

Nearly everyone carries some debt at some point in their lives, but large amounts of debt can cripple your ability to save for your future or improve your lifestyle. It can be the number-one wealth-buster. Taking steps to pay down your debt now will free up more cash you can put toward your other financial goals. Consider reducing your spending and putting extra money toward your debt. Use tax refunds and year-end bonuses too. Refinancing might help you score a lower interest rate.

There are two effective ways to pay off your debt. Pick the one that works for you. I used the second one to pay off all my debt and became debt free.

1. Prioritize your debts with the highest interest rate first. Make the minimum payment on all your debts and then throw all your extra cash at this one until it's paid off, then move onto the next one and keep doing this until you're debt-free.
2. Prioritize your debts by the smallest balance due first. Make the minimum payment on all your debts and then throw all your extra cash at this one until it's paid off, then move onto the next one and keep doing this until you're debt-free. 

4. You don't have an emergency fund

An emergency fund may not seem like a key to becoming wealthy, but it's a cornerstone of your financial security. Your emergency fund covers unplanned expenses like a job loss, medical emergency, or insurance claim, so that you don't have to take on debt when a financial emergency arises. A single financial emergency that you're unprepared for can take weeks, months or even years to recover from, all the while you're not able to put any extra money toward saving for your future.

An emergency fund should contain at least three months of living expenses. Six months is better if you want an extra cushion. If you have high-deductible health insurance, make sure your emergency fund contains at least enough to cover this deductible in case of a medical emergency.

If you don't have one, start with an initial goal of $2,400.

5. You don't invest

Some people shy away from investing because they see it as risky, and there is definitely an element of risk to it. But these people often overlook the guaranteed loss of money if you keep it in a savings account. Inflation drives up living costs over time, which means your dollars have less buying power every year. Yes, savings accounts do offer interest, but the national average is just 0.07% APY. Inflation averages about 3% per year. When you invest, you can earn at least 7% or 8% annual rate of return, depending on how you allocate that money.

Another barrier that keeps people from investing is a lack of knowledge. But today, there are robo-advisors that you can use even if you don't know anything about investing. You could also employ a professional to help you choose your investments and manage your money effectively.

6. You live beyond your means

A lot of people try to live like millionaires even when they aren't millionaires themselves. But the truth is, most people with a seven-figure net worth aren't that different from the rest of us. They're not out driving fancy sports cars and yachting between their multiple private islands. They still have a job and they still have a budget that they stick to.

Our media is always trying to get us interested in the latest and greatest thing, but it's important to be realistic about how these items are really going to impact your life. Don't buy things just because you think it'll impress others or make you feel rich. There's always going to be another thing you want and that cycle will never end if you give in to it. Instead of trying to look rich, focus on actually becoming rich by saving and planning appropriately for your long-term financial goals.

7. You don't expect to become wealthy

It doesn't sound like it would make much of a difference, but if you don't expect to become wealthy, you could be setting yourself up to fail. You might be less likely to try investing or start your own business because you just assume you can't make it work. It's true that some people have an easier road to wealth than others, but people from all types of backgrounds have become wealthy and you can too if you're determined enough.

8. Other tips for financial well-being:

• Automate your savings
• Be on the same page as your significant other
• Invest in yourself. Have a philosophy and educate yourself. Continuously
• Take steps to minimize your taxes
• Develop a second (or third) income stream