It’s easy to think that the path to wealth is straightforward – just avoid obvious money pits like expensive cars, lavish vacations, and impulse purchases. But the reality is there are a number of more subtle “wealth killers” that can quietly drain your finances without you even realizing it.
In this in-depth post, we’ll dive into 7 surprising wealth killers that may be sabotaging your financial progress, along with actionable tips to overcome them. By the end, you’ll have a clearer roadmap for building sustainable wealth, no matter your current financial situation.
1. Your Obsession with Credit Scores
It’s a common misconception that having an excellent credit score is the key to building wealth. Many people become laser-focused on maintaining an 800+ credit score, believing it’s the golden ticket to financial success.
Your credit score is not an accurate reflection of your overall wealth. The FICO credit scoring system was created in 1989 as a way for banks to determine how likely you are to repay debt – not how much money you have or how wealthy you are.
“Your credit score doesn’t show you how wealthy you are, it doesn’t give you an indication of how much money you have, it doesn’t show you how rich you’re going to be. It shows you how good you are at paying back your debts, and it doesn’t always do a good job with that.”
While having a good credit score can help you qualify for lower interest rates on loans and mortgages, it doesn’t directly translate to building wealth. In fact, the constant pursuit of a higher credit score can actually lead you to take on more debt, which is the opposite of what you want when trying to build sustainable wealth.
Instead of obsessing over your credit score, focus on paying off debt, saving consistently, and investing in assets that will appreciate in value over time. Your net worth is a much better indicator of your overall financial health and wealth-building progress.
2. Financing Expensive Cars
One of the biggest wealth killers identifies is the tendency to finance expensive cars. In today’s culture, it’s become normalized to have monthly car payments of $800, $1,200, or even $1,300 or more.
But here’s the problem with that:
- Cars are depreciating assets – they lose value the moment you drive them off the lot. That $40,000 car you just bought will be worth $32,000 after just one year.
- Cars have a limited lifespan – even with proper maintenance, they won’t last forever. You’ll eventually have to replace it.
- Financing a car means you’re paying interest on top of the depreciation.
Instead of financing a brand new car, its recommend buying a used, reliable vehicle with cash. Even if it’s not as “nice” as the latest model, you’ll save a ton of money in the long run by avoiding the interest and rapid depreciation of a new car.
“If you take the $8,000 instead of using it on this car and use it to go out and buy an $88,000 car with cash…maybe it’s not going to be as nice as this car, but the $88,000 can buy you a used Toyota Corolla, maybe a used Toyota Camry…Now you can keep the $800 a month in your pocket and then you can take the $800 a month and save it, you can use the $800 a month and invest it, you can use $800 a month and make yourself rich.”
By avoiding car payments and buying used, you can free up hundreds of dollars per month to invest in assets that will actually grow your wealth over time. It may not be as flashy, but it’s a much smarter financial move in the long run.
3. Buying a Home You Can’t Afford
Another common wealth killer is the tendency to buy a home that stretches your budget to the max. Our points out that during the real estate boom in the early 2000s, there was a big push to get everyone into homeownership, even if they couldn’t really afford it.
This ultimately led to the 2008 housing market collapse, where many people lost everything. And the problem still persists today, with many home buyers regretting the home they purchased because it’s more than they can comfortably afford.
“There’s a major problem when you have people buying houses that they can’t afford…Your house is not going to make you rich. Your house is where you live.”
While homeownership can be a valuable wealth-building tool, it’s important not to let emotions and social pressure cloud your judgment. Just because you “qualify” for a certain mortgage amount doesn’t mean you should max it out.
Instead, We recommends only buying a home that you can truly afford, with room in your budget for other important financial goals like saving and investing. This may mean settling for a smaller or less glamorous home, but it will pay off in the long run by preventing you from becoming house-poor.
And if you’re not ready to buy a home yet, that’s okay too. Focus on building up your savings and investments first before taking on the significant financial responsibility of homeownership.
4. Excessive TV and Streaming Consumption
One of the more surprising wealth killer list is excessive TV and streaming consumption. According to the Bureau of Labor Statistics, the average American watches over 2 hours of TV per day – that’s over 730 hours per year!
“Over the next 10 years, you’re going to watch about 7,300 hours of television time. So when we talk about ‘I don’t have time to learn how to manage my money, I don’t have time to earn some extra money, I don’t have time to learn how to invest my money, I don’t have time to start a business’ – over the next 10 years you’re going to have thousands of hours thrown away watching Netflix.”
That’s an entire month of 24-hour days spent mindlessly consuming content instead of working on building wealth. Imagine what you could accomplish with that time – learning a new skill, starting a side hustle, or dedicating yourself to a wealth-building investment strategy.
Of course, some TV and streaming time is fine for relaxation and entertainment. But if you find yourself constantly zoning out in front of the screen, it may be time to set some limits. Try tracking your actual viewing time, then challenge yourself to cut it in half and redirect that time towards more productive activities.
5. Buying Luxury Before Building Assets
Another wealth killer we warns against is the tendency to buy luxury items before you’ve built a solid foundation of assets. It’s easy to get caught up in the allure of fancy cars, designer watches, and other status symbols, especially if you have the cash on hand to afford them.
However, Our cautions against this approach:
“If you have $10,000 in your bank account, pretty much everybody would say that you can afford a $10,000 Rolex. If you have $50,000 in your bank account, pretty much everybody would say that you can afford a $50,000 BMW. But here’s the thing – these things are luxury. And when we’re talking about buying luxury, I want you to really be able to afford them, which means own the assets before you own that luxury.”
The problem with buying luxury before assets is that it creates the illusion of wealth without the underlying financial security. You may look rich on the outside, but you haven’t actually built sustainable wealth through investments, real estate, or other appreciating assets.
We recommends following a “rule of five” when it comes to luxury purchases – if you can’t afford to buy five of the item in cash, you can’t really afford it. This ensures you have a solid financial foundation before indulging in high-end purchases.
6. Eating Out Too Much
Another seemingly innocuous wealth killer is the habit of frequently eating out or buying coffee and snacks on the go. While these individual purchases may seem small, they can add up quickly.
We points out that if you’re spending $10 per day on things like coffee, lunch, and other food outside the home, that’s an extra $3,000 per year in expenses. For someone making $5,000 per month after taxes, that’s a significant chunk of their monthly budget.
“If you’re struggling with money right now, you’re struggling with paying your bills, you don’t have any investment, you don’t have a lot of investments, and then you’re spending thousands of dollars a year on stupid stuff that you could just make at home for a fraction of the cost – I mean, if you want to make a tea or a coffee at home, it costs a fraction, a fraction of what it’s going to cost you at Starbucks.”
The solution is simple – try to cook and prepare more meals at home, and limit your spending on coffee, snacks, and dining out. Not only will this save you money, but it can also be healthier. Just be mindful of where your food budget is going each month.
Of course, the occasional treat or meal out is fine. But if you find yourself regularly blowing hundreds on takeout and coffee, it’s time to rein in those expenses and redirect that money towards your wealth-building goals.
7. Falling for Get-Rich-Quick Schemes
The final wealth killer identifies is the temptation to chase get-rich-quick schemes and other dubious “easy money” opportunities. When you’re struggling financially, the prospect of a fast and easy path to wealth can be very alluring.
“When you’re in that situation, you’re kind of desperate, you need some extra money…what happens? Well, you can get caught up with these simple and easy ways to make a lot of money – maybe you find some cryptocurrency, maybe you find a meme coin, maybe you find some stock that has this huge upside potential because everybody on the internet is talking about it.”
However, We cautions that these types of schemes are usually nothing more than scams designed to separate you from your money. While the promise of 10x or 100x returns may seem enticing, the reality is that the vast majority of people end up losing their investment.
Instead of chasing these get-rich-quick dreams, We recommends focusing on building sustainable wealth through proven strategies like:
- Investing in diversified index funds
- Buying real estate through platforms like Fundrise
- Starting an online business or side hustle
- Maximizing your savings and avoiding unnecessary debt
These approaches may not offer the same immediate gratification as a meme stock or cryptocurrency pump, but they’re far more likely to lead to lasting financial security and independence.
Bonus Wealth Killer: A Bad Partner
As a bonus, we adds one more wealth killer to the list – having a partner who is not aligned with your financial goals and priorities.
“A bad partner, a bad wife, a bad husband, a bad girlfriend, a bad boyfriend – somebody who just isn’t aligned with you when it comes to your money…If you’re working to save money, you’re working to earn money, and your partner, your boyfriend, girlfriend, husband, wife, is spending everything – you got a problem. You’re never going to be able to build wealth unless you both are on the same page.”
Even if you’re doing everything right on your end, an unsupportive or financially irresponsible partner can sabotage your wealth-building efforts. This is why it’s so important to have open and honest conversations about money with your significant other, and to make sure you’re both working towards the same financial goals.
If you find that you and your partner are simply not aligned when it comes to money management, it may be time to reevaluate the relationship. Divorce can be extremely costly, so it’s best to address these issues head-on before they spiral out of control.
Putting It All Together
Avoiding these 7 (plus 1) wealth killers won’t guarantee you’ll become a millionaire overnight. But by being mindful of these common financial pitfalls, you can make steady progress towards building sustainable wealth over time.
The key is to focus on the fundamentals – spend less than you earn, avoid unnecessary debt, and consistently invest in appreciating assets. It may not be as flashy as chasing the latest get-rich-quick scheme, but this disciplined approach is proven to work.
Remember, building wealth is a marathon, not a sprint. By steering clear of these common wealth killers and staying focused on the fundamentals, you can steadily make progress towards your financial goals, no matter where you’re starting from.