It takes $2.4 million to be considered rich in the United States, according to a 2017 Charles Schwab survey. That’s close to 30 times the median net worth of U.S. households.
With just 10.8 million millionaires in the entire country in 2016, most people won’t come anywhere near that $2.4 million magic number. In fact, around 16.6 million American families have a negative net worth and owe more than they own.
If you don’t want to be one of the millions whose net worth is too low for your liking, it’s time to look at what you may be doing to sabotage your efforts to build real wealth. The good news is, with a few simple tweaks, you very well could join the ranks of the millionaires — even if your salary is just average.
1. You aren’t banking your raises
The data is clear: As income goes up, spending goes with it. What’s more, many Americans in the most common income brackets are spending somewhere around 90% or more of after-tax take-home pay.
That spending so closely tracks income suggests Americans who get raises increase expenses until funds flowing out match funds coming in. Most of this money goes to big-ticket items — cars and homes — which are illiquid assets often accompanied by loans that are difficult to escape from..
While lifestyle creep is common, families who avoid it are far better off. Take an average 30-year-old earning $4,000 monthly. A 3% annual raise would bump the worker’s salary to $55,645 by age 35. What if, instead of spending the extra $7,645 in annual income, it was invested each year from age 35 to 65 in a 401(k) earning 8%? The industrious worker who invested his or her raise would end up with a nest egg of $866,050. Not $2.4 million, but more than 10 times the median net worth for American households — just from pocketing a few years’ raises.
You can be that worker. When your boss raises your salary, go directly to HR to set up automatic transfers of the extra cash to your 401(k). You’ll never get used to the money, spending won’t increase, and you’ll be on your way to becoming wealthy.
2. You’re paying interest on depreciating assets
America is a nation of debtors. In the third quarter of 2017, households collectively owed $12.96 trillion, according to the Central Reserve Bank of New York. Being in debt is costly, with the average American paying more than $8,000 in annual interest.
Some debts, like mortgage and student loan debt, are considered “good” debts because education increases earning power and real estate usually goes up in value. But car loans and credit card interest are definitely not good debt. Paying interest on these debts is a big loser because the car and whatever you charged on your credit card lose value immediately.
Many Americans buy new cars so regularly, they spend just six years of a 45-year working life without a car loan. If you stop this cycle starting at age 35, pay cash for reliable used cars, and invest the savings from not constantly paying a car loan, you’d end up with more than $294,000 in your retirement account. Add that to the $866,050 you’re saving by banking your raises, and you’ve got more than $1 million.
Pay off the credit cards, starting at 35, and invest the $855 per year saved from interest. You’d have another $96,857 to add to your growing stash of cash.
3. You’re relying solely on Social Security to provide for your retirement
Speaking of retirement, if you’re not saving for it, not only will you not become rich but you’re also likely to struggle as a senior. However, a quarter of millennials and more than four in 10 pre-retirees 50 and over plan to rely on Social Security as a major source of retirement income, according to a 2017 Gallup poll.
The problem is, the most recent report from the Social Security Administration shows average benefits for retirees — which vary based on age of retirement — would produce far too little income for most seniors to live on.
Living on Social Security alone puts you near the federal poverty level and leaves little disposable income to cover high healthcare costs seniors often must pay. And not only are Social Security benefits insufficient to keep up with costs of living, but there are also serious concerns about the program’s solvency.
Bottom line: If you rely on Social Security to take care of you, prosperity is definitely not in the cards.
4. You’re delaying your retirement savings
Waiting too long to save for retirement is a key reason many Americans won’t end up rich. While you can invest a reasonable amount of an average income and retire a millionaire if you start young, as this chart shows, delaying makes it almost impossible to amass $1 million or more. Chart data is based on investing the same amount throughout your career in a retirement account earning 7%. Income is based on the median pre-tax earnings at the end of 2016.
If you wait until 40 to start saving, you’d need to put aside almost $14,000 more annually than if you’d started at 20. By delaying, you’re jeopardizing your chances of becoming wealthy.
5. You aren’t keeping a careful eye on your investments
The majority of 401(k) participants have no idea what their plans cost or what fees they’re paying. If you’re one of them, the loss of your financial security may be the price paid for inattention. As this chart shows, fees could cost more than $350,000, depending on just how much you pay.
You could also miss out on your chance to become rich if you don’t have enough of your portfolio in stocks or if you don’t rebalance your portfolio periodically. When you’ve made the effort to invest, don’t neglect basic account management necessary to make your money work for you.
Becoming rich is within your reach. Knowing the mistakes that hold you back is key to putting yourself on the path toward true prosperity. Whether this means you join that elite 3% of the population with more than $1 million or you simply save enough to have a little peace of mind, it’s worth the effort.
This article originally appeared on Motley Fool.