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For many people, earning a six-figure salary is a major financial goal. According to a 2023 Zippia study, only 18% of Americans earn more than $100,000 annually. Reaching this benchmark may feel like it’s the key to unlocking financial security and becoming a millionaire, but is it really?
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Millennial money coach Rachel Covert wrote in a recent Instagram post that even those earning six-figure salaries may not become millionaires if they don’t handle their money responsibly. he claimed. Here are her top five signs you’ll never become a millionaire, even if you make more than $100,000.
Also see 9 Steps to Become a Millionaire in 5 Years.
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Cash can’t cover an unexpected $4,000 expense
Financial planning would be much easier if everything was 100% perfectly predictable, but life doesn’t work that way. Throughout your life, you will inevitably face emergencies and unforeseen situations that have equally unexpected costs. The key to protecting your financial health is having an emergency fund ready for when those expenses occur.
Covert claimed that if you don’t have at least $4,000 in an emergency fund (or similarly liquid account) to cover such expenses, it’s a sign you’ll never become a millionaire. . If you don’t have that money saved and you have a $4,000 emergency, you’ll have to go into debt. Debt, especially credit card debt, can be expensive, so not having a well-funded emergency fund can threaten your financial future.
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Running out of cash and using credit cards to cover necessities
Most salaried workers in the United States receive a paycheck every two weeks. Once you have money coming into your account, you may want to spend most of it out. But you have to wait another two weeks for your next paycheck. If you’re not careful, you can easily run out of money in that time.
According to Covert’s post, running out of cash and having to put essentials like groceries on a credit card is a sign that you won’t become a millionaire. People who can manage their money well and maintain it from paycheck to paycheck have a better ability to reach millionaire status even if their income does not increase. Resist the urge to spend money as soon as you get paid. Instead, focus on allocating enough of your salary for necessary expenses, saving some of your money, and planning for your future financial goals.
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Unable to delete credit card balance even after making a large payment
Credit card debt is a problem that plagues many people, including those with high incomes. Americans collectively carry more than $1 trillion in credit card debt, with the average borrower owing more than $6,000, according to TransUnion. With average interest rates over 21%, the average person is paying hundreds of dollars each year in credit card interest alone.
Covert believes that if you keep paying too much on your credit card balances and still can’t seem to get rid of your debt, it could be a sign that you’re not going to become a millionaire. . That’s because credit card debt is expensive and can quickly get out of hand as fees and interest payments add up.
If you’re making a large payment and can’t remove your credit card balance, it means your existing balance is too large or you’ve added enough monthly charges to offset the payment. Masu. In any case, you need to manage your credit card debt before you have a chance to increase your wealth to become a millionaire.
Justifying purchases you know you don’t need
It’s normal to want to buy more than the bare essentials. In fact, part of financial freedom is being able to afford what you want, not just what you need. However, if you find yourself justifying almost every purchase even though you know you probably shouldn’t buy something, that’s one of the covert signs that you’ll never become a millionaire.
Even with a six-figure salary, becoming a millionaire requires learning to say no to purchases you want if they don’t support your larger goals. Set stricter standards for your purchases to avoid wasting money.
I don’t know how much I spend each month
Finally, Covert says not knowing how much your monthly expenses are is the last sign you won’t become a millionaire. After all, how can you effectively budget to reach your financial goals if you don’t know how much you’re spending?
If you don’t know how much you’re spending, it’s easy for your spending to get out of control. Take the time to review your monthly expenses over the past few months and look for any surprises. If you notice that your spending habits aren’t keeping you on track, make a plan to cut back on your spending and start being more mindful about your money.
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This article originally appeared on GOBankingRates.com: 5 signs you won’t become a millionaire despite a six-figure salary, according to money coach Rachel Covert
