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You May Think You're Building Wealth, But These 14 Signs Say No

You might not be as ready for retirement as you think.

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Updated July 6, 2025
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Enjoying lasting financial security is a goal many of us share, but the path is far from simple. It's easy to think that earning a good salary is all it takes to become wealthy, but some habits can derail you quite quickly.

The reality is that building wealth is more than just one or two choices; it's a series of smart decisions that you continue to make. Beyond earning money, you also need to know how to manage and invest it to achieve true financial growth.

Here are a few warning signs that indicate you're actually not building wealth, even though your income might say otherwise.

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You buy depreciating assets on credit

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Perhaps you bought that luxury car you've been dreaming about by way of an auto loan. Some cars depreciate faster than a loan can be paid down, which means you could owe more than your vehicle is worth, and today's higher interest rates will only accelerate the process.

Use as little credit as possible when buying automobiles and other depreciating assets, such as furniture, appliances, and computers.

You carry high-interest debt while investing

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Let's say you own a diversified investment portfolio that grows 7% every year, which is healthy considering you started with $20,000. But your credit cards have an average APR of 20% with total balances of $7,000. In this scenario, the credit card interest wipes out the investment interest you gain.

You might feel more secure in your financial future, like my family did, by cutting back on credit card purchases alongside creating a savings account to dip into.

You feel stressed about finances, even with a high income

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If you bring home more than $8,000 a month after taxes but you have less than $500 of disposable income every month, then you're in a risky spot. What happens if you need a car repair or have an expensive medical bill?

As impossible as it sounds, reducing your expenses, paying down debt, and adding to a savings account are your top priorities and will build real wealth as you move toward retirement.

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You focus on gross income rather than net worth growth

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Does your net worth grow with your income? Do your assets expand and your liabilities shrink? Do you have a healthy amount in savings? How much do you owe every year in taxes, interest, and debt?

Think about quality over quantity by creating a plan for keeping more of your wealth. Our rule as a family is to spend, save, and donate a little each month to maintain a healthy growth pattern.

All of your investments are in an employer 401(k)

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Perhaps you have an employer-backed 401(k). This type of investment offers an outstanding way to build pre-tax retirement income. But what happens if you leave that job? Will you lose the momentum you built for your nest egg?

You could roll the 401(k) over to your next employer or to an individual retirement account (IRA). However, you might not see the same contribution amounts, reducing the overall ROI if this is your only retirement account. Another option is to cash out your employer-backed 401(k) and reinvest it.

You don't have adequate emergency funds

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Financial experts agree you should have anywhere from three to six months of expenses saved as an emergency fund in case a major financial setback occurs. For instance, if you spend $4,000 a month, you should save $12,000 to $24,000 in case something unexpected occurs.

You can start small by setting up an automatic transfer from your paycheck into a designated high-yield savings account.

You lack diversified income sources

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Do you have multiple ways to make money beyond employment? Truly wealthy people earn income beyond their wages by investing a portion of their money in passive income streams to help them earn more without having to work.

You have several options available to you as you help grow your wealth. Think about owning rental properties, buying stock, earning dividends from investments, or selling assets.

You live paycheck to paycheck with a six-figure income

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Perhaps you still live paycheck to paycheck despite making more than $100K a year. You're not alone. Twenty percent of U.S. households earning $150,000 or more in 2024 lived paycheck to paycheck, according to Bank of America. This is defined as spending more than 95% of income on necessities.

If your take-home pay is $120,000 and your monthly disposable income is $6,000, how much are you setting aside for investments?

You measure success by possessions rather than financial freedom

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Do you have enough money set aside that, if you wanted to quit your job tomorrow, you could be happy and free from a set schedule, meeting deadlines, and going into the office five days a week?

If your happiness is tied to your possessions, perhaps it's time to re-evaluate what you really want in retirement. You might need to make some adjustments to achieve your dreams as you look forward to your golden years.

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You try to keep up with the Joneses

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Let's say you look out your window one day to see your neighbor's brand-new landscaping project transforming their backyard. Maybe your boss just gushed over a lavish vacation to a tropical island. Hearing about these luxury purchases doesn't mean your finances can take these hits.

Weigh your options carefully when making lifestyle choices and purchases associated with them. Do they provide long-term benefits or improve your financial situation? Or do certain purchases only deliver temporary feelings of happiness and joy?

You don't track your spending

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Perhaps you don't realize how much you spend every month. Knowing your expenses is a basic tenet of any financial plan. If you don't track expenses, you might not realize how much wealth you have when comparing it to your overall income.

Check your bank account weekly or use a budgeting app that shows your overall spending. Then, build a plan that helps you save a little each month as you move toward retirement.

You prioritize new possessions or lavish experiences over investments

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Do you love collecting fine jewelry or exclusive, one-of-a-kind items? Ask yourself if you value finer things over long-term financial security. Could you drive a new vehicle that costs less? Would you still be happy spending less money on a month-long vacation?

You might find that sacrificing bigger-ticket items is worth the long-term security, like my family did when building an emergency fund. Peace of mind can be priceless.

Most of your wealth is tied up in your primary residence

DOC RABE Media/Adobe female hand with real estate concept puzzle

Real estate prices have skyrocketed in the past five years. However, home values may decrease at any time. Interest rates, supply and demand, home trends, and economic conditions could all cause home values to fluctuate.

If most of your wealth is in your primary residence, what happens if your home value drops? Truly wealthy people diversify their investments to weather any setbacks.

You work for money instead of making your money work for you

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Do you work 80 hours a week to make a salary that's your main source of income? Think about converting some of your wages into investment opportunities.

Start simple, such as opening a high-yield savings account or putting $5,000 into a stock portfolio. My high-yield account has more than $25,000 in it after 2 years, and I'll continue to add to it as I approach retirement.

Bottom line

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The good news is that the path to growing wealth might be easier than you think. Recognizing the warning signs early is key to changing course and building a more secure financial future. By addressing these red flags now, you can avoid costly setbacks and set yourself up for retirement with confidence, stability, and peace of mind. Even something as small as opening a savings account with $1,000 can get you moving in the right direction.

It's never too late to save for retirement, giving you an opportunity to enjoy your golden years rather than wonder how you could have planned better for your future.

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