Most of the people who ask me for financial advice have a similar goal: gaining financial freedom.

They’d like to get to the point in their lives where work becomes optional; where there’s plenty of cash to cover living expenses without fear of running out of money.

And there’s good news: a wise plan can use your financial resources to achieve that financial freedom.

If you’re younger than 55, there are still a good number of years to work toward that goal.

However, there are several ways you could be sabotaging your success. Building wealth means strengthening your financial resources, rather than diluting them.

You’ll have a much harder time building wealth if any of the following sound familiar.

1. You are underearning in your career.

Did you know that earning power is often neglected in financial planning?

If you’re seeking financial planning advice, you’ll be knee-deep in tips to reduce expenses and advice for investing, but not enough information is centered on the need to grow income, empowering you to reach financial goals.

I know people are tired of being told not to buy their latte (points if you’re reading this while in line at your fave coffee shop). We all need the little daily luxuries that fuel us to perform at our best. So if $5 a day on coffee is your thing, then go right ahead.

What I want you to start thinking about is how your income stacks up to your earning potential. And remember this: you can make six figures and still be an underearner.

If you are making $150,000 in a role where your peers are rightfully earning $200,000, then you will be behind financially. That $50,000 difference per year will have a huge impact on your current lifestyle, your ability to invest, your ability to pay off debt, and whether or not you can send your kids to college without substantial debt. Yikes!

“You can make six figures and still be an underearner.”

Think about the work experience you have; think about your credentials and your track record, and ask yourself these questions:

Are you maximizing and monetizing what you know?
What are your top-performing peers earning and what are they doing to command higher incomes?
When was the last time you took an interview to understand the current market rate for your skills?
If you run a business, when was the last time you increased your prices?
Is your income even keeping up with inflation (2 to 3 percent each year)?
What do you need to do each year to provide more value so you can earn more money?
Reflect on these guidelines and create an action plan around your thoughts to increase your earnings.

As an advisor, I can only work with the earnings and resources you have. The more money you have to invest, the quicker we can help you reach the finish line.

If you are under retirement age, now is the time to grow your income to reach financial freedom.

2. You are living beyond your means.

The most fundamental rule of personal finance is this: have a surplus and then invest it for growth.

Regardless of how much money you earn, you will have a hard time building wealth and reaching financial freedom if you are spending too much (or everything!) of what you earn. It’s surprising how easily your expenses will rise to the level of your income if you let it happen.

“If you aren’t intentional, your expenses will rise to the level of your income.”

Rather than succumbing to lifestyle creep, you have to be intentional and plan for a different outcome.

If you’re living beyond your means, you’re not alone. Growth in consumer debt shows many people are living beyond their means.

But how do you go about reining in your spending? Living below your means requires having an understanding of your income and expenses. Reviewing categories where your spending habits fall can help you find the spots where you can slim down.

Instead of focusing on tiny subscriptions that won’t have as great an impact on your cash flow, I want you to look at the big three or four categories. The top categories of spending are typically housing, transportation, food, and childcare. While I know these are the hardest areas to make change in, you’ll also find that the savings will improve your financial trajectory.

Once you identify the areas causing your budget to fail, then you can start to take steps to trim things back. If not, then you’ll need a new target for the minimum income required to afford your lifestyle.

3. You won’t protect your most valuable asset.

For the most part, I work with people in their 30s and 40s and health isn’t yet a top-of-mind concern for this age cohort.

As the advisor, I have to remind people that their financial plan hinges on their ability to earn. With that in mind, you have to plan for any unforeseen event that can wipe out progress you’ve made.

This means prioritizing your health and taking good care of the goose that’s laying the golden egg. The decisions you are making now regarding your diet, your sleep, and your fitness will have a huge impact on your health care costs later in life. It already has an impact on your insurance premiums now. Smokers and those with higher BMI or body mass index are asked to pay more for health, life, and disability insurance.

While we’re discussing insurance, I want to highlight disability insurance. Many people think this is optional and something you need only when you have lots of extra money. Think of disability insurance as part of the costs of doing business or having income. It’s not a luxury to be put off until you somehow have more income. If your most valuable asset while young is your ability to earn, you have to protect it with insurance.

“If your most valuable asset is your ability to earn, you have to protect it.”

If you get hurt or sick and can’t work for several months or years, you want to have a disability policy that will pay you some income. Buy whatever coverage you consider sufficient and affordable. You can always add more coverage as your income grows.

While most people may have a group disability policy via work, you’ll find that the terms and coverage levels aren’t as favorable as the one you could buy privately. In addition, there can be restrictions around portability, meaning you will likely need to leave the policy behind when you change jobs. And with the average tenure at a company under 4 years, that is a lot of uncertainty regarding disability coverage.

And what happens if you are older and less healthy when you need to buy such a policy? You’ll be facing higher premiums on the open market, assuming you are still insurable. Remember, any risk that you can’t afford on your own should be outsourced. You outsource risk by buying insurance.

4. You are not investing in the stock market.

Many people make great incomes, yet are reluctant to invest in the stock market.

Unfortunately, your savings account alone isn’t going to help you reach financial freedom. You want your emergency fund to be in an accessible, high-yield savings account. But beyond your target emergency fund, you should be focused on the returns you are earning on the rest of your savings — whether for retirement, college, or other future goals.

Every year, inflation is eroding the purchasing power of every dollar you have saved. To stay ahead, your money should be stored and invested in a way to reach returns that exceed the inflation rate. If inflation is 2 percent then keeping the bulk of your nest egg in cash means your wealth grows very slowly or not at all. You essentially lose money by not protecting the bulk of your savings from inflation.

“Keeping the bulk of your nest-egg in cash means your wealth grows very slowly or not at all.”

With the historical average annual stock market returns at 10 percent, you are certainly leaving money on the table by not investing.

If you’re ready to make sure your savings are earning for your future, it’s best to have a solid strategy, and understand your long-term outlook before putting your money in the stock market.

5. You are trying to do it all by yourself.

You know you can do it yourself, so while you’re not happy with the state of your savings or progress toward financial freedom, you haven’t asked for outside help. Or maybe you’ve heard great action steps but just haven’t had time to follow through on them.

But perhaps you’re asking yourself the wrong question. It’s not can you do it, but do you have the energy, time, and follow-through to do so?

No one can maintain a successful full-time career while also juggling all of life’s demands on their own. You have to be proactive about closing whatever knowledge or executional gaps you have to achieve your goals.

“Be proactive about closing knowledge or executional gaps in the way of achieving your goals.”

There are certain areas that will require you hiring someone to help you implement consistently so you can focus on your own expertise. Or perhaps you need an extra set of hands to take certain tasks off your plate.

This may mean hiring a career coach, a babysitter, a business coach, a bookkeeper, an accountant, or a financial advisor. Take mental inventory of the areas of your life that need improvement and think of the results you can achieve if you get some help.

Too often, the focus can be on the cost of getting help – I get it! You should also be thinking about the return on investment of that cost. Maybe hiring someone to clean your home gives you an extra couple of hours to exercise. A healthier body and mind means you spend less on healthcare costs now and in the future. Or maybe outsourcing your tax preparation to a CPA helps reduce your tax liabilities by tens of thousands via a strategy you wouldn’t have known to implement. If outsourcing a task frees you up to perform at your best, make or save more money, then it’s worthwhile. Getting outside help might be just what you need to get the breakthrough in your mindset, confidence, and know-how to accomplish your goals.

You are in the driver’s seat of your life. The results you achieve will be closely correlated with the effort you put in.

If you put in the time to improve your finances in any or all of these areas, you’ll have a much better chance of building and maintaining wealth.

Should you need expert guidance and accountability to improve your finances, please reach out to me at kaya@earnintowealth.com or schedule a consultation.

Disclaimer: This blog post is not intended to be a substitute for specific financial, tax or legal advice. The article is for general informational purposes only. Reproduction of this material is not permitted without written permission.