5 Things Stopping You from Becoming Wealthy

Have you ever wondered why, as hard as you work, building wealth seems to be forever out of reach? Here are 5 things that get in your way on the path to financial freedom, and how to do things differently.


Opher Ganel

2 years ago | 9 min read

And how you can start building wealth even during the pandemic…

Let’s start by acknowledging a few critical things.

Yes, we’re currently going through the biggest health crisis in over a century.

One that as of this writing has already killed nearly 5.2 million people worldwide according to Johns Hopkins, and which will undoubtedly kill millions more before we overcome it.

Yes, the economic and financial fallout of the pandemic on Americans is hard to overstate.

Yes, even in the best of times, building wealth isn’t something most people accomplish.

However, having myself started from a negative net worth in 1992 when I arrived in the US, and over time managing to go very far in the other direction, I can attest that it isn’t impossible by any means.

At least it isn’t if you realize what’s stopping you, and do something different.

First, Where Does Your Money Go?

According to, data from the Bureau of Labor Statistics (BLS) shows the average consumer spends the most on the following 5 categories:

  1. Housing — 33.1%
  2. Transportation — 15.9%
  3. Food — 12.9%
  4. Personal insurance and pension — 11.3%
  5. Healthcare — 8.2%

However, these data miss one critical category — taxes — and it’s a doozy!

The Elephant in the Middle of Your Finance Room

According to The Balance, an analysis of BLS data showed that on average, American families paid 24% for federal income tax, Social Security and Medicare taxes, and property taxes.

This excludes employers’ 7.65% contribution to Social Security and Medicare taxes, which arguable would have gone to employees if employers didn’t have to pay them.

It also excludes sales taxes and state and local income taxes.

According to the Tax Foundation, the middle of the pack for combined statewide and local sales tax of the 50 states plus DC is 26th-ranked North Carolina, at 6.97%.

Wallethub meanwhile finds that Massachusetts is the 26th-ranked for state and local income taxes, at 10.87%.

Altogether (with a bit of mix-and-matching), this comes to a “tax wedge” of about 49.5%, making taxes far and away the largest drain on the average American family’s finances.

Make the Right Choices where It Makes the most Difference

If you want to build wealth over time, you’d get the most “buck-for-your-bang” by concentrating on the top categories.

Below are 5 things that get in the way of building your wealth, and what you can do to get past them.

Taxes: You Don’t Take Full Advantage of Available Tax Benefits

Depending on your specific situation, there are many deductions and credits that would save you money and let you to set more aside.

Some examples you may not be taking advantage of include:

  • Maxing contributions to tax-advantaged retirement plans.
  • Saving for kids’ college costs in a 529 college investment plan. This can save a good chunk of change from your state income tax, which all but 9 states have.
  • Putting money into a Health Savings Account (HSA) and keeping it for when you’re retired rather than using it in the same year you contribute it.
  • Qualified Business Income Deduction (QBID), which you may be able to deduct for some investment-related income, even if you don’t own a business.
  • Deducting mileage driven for charity-related reasons, as well as for business reasons (commuting from your home to your business doesn’t count, but driving between business locations should).
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Do This Instead:

My personal preference is to work with a good accountant. However, that’s because our taxes are complicated and would take a lot of time and effort to do on our own.

Whether you use an accountant or a good tax-prep software package, look at all the deductions and credits you may be eligible for.

Do this first at the start of the year so you can plan ahead and start taking needed actions early, when your budget has the most time to accommodate it.

Contribute as much as you can (increasing over time until you hit the maximum allowed) to both employer-sponsored retirement plans (see more on these below) and individual ones.

In addition, if your health insurance is HSA-compatible, open an HSA that allows investments and contribute to it as much as you can up to the limit.

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Housing: You Rent Your Home even when You Can and Should Buy

To be clear, not everyone can buy a home, and not everyone who can buy one should.

However, if you’re planning to stay in place for a few years and can afford the down-payment, you’d most likely save a lot of money by buying.

It isn’t that owning a home builds wealth. My data show that on average owning a home, even long after you’ve paid off the mortgage, costs more than typical price appreciation offsets.

However, the full cost of owning a home, even when accounting for the opportunity cost of tying up capital in the home’s equity, beats the average annual cost of renting a similar place.

Do This Instead:

If you’re renting but plan to stay in place for years, see if you can find a similar home to buy.

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Better yet, see if you can find a duplex or quad to buy, living in one part and renting out the other part(s) to others so their rent pays your mortgage.

Transportation: You Replace Your Car with a New One Every 2–3 Years, or Keep a Clunker too Long

If you buy or lease a new car every 2–3 years you enjoy the experience of driving a new car most of the time, but each time you replace a car that’s still nearly new, it costs you the huge depreciation new cars suffer especially in the first couple of years.

On the other end of the spectrum, from personal experience, if you keep a car too long, you may end up spending huge sums of money to keep it going.

I used to own a Ford Taurus which I bought when it was 3 years old. I kept it until it was 11. Had I sold it a year earlier, I’d have saved $4000 in repairs.

Do This Instead:

If you need a car, I believe in buying new rather than used, but only if you keep those new cars for at least 10 years, until maintenance costs start mounting.

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However, make sure not to keep cars beyond the point where annual maintenance and repair costs are higher than half the value of the car.

One caveat - if you’re handy with cars and can do most repairs and maintenance work yourself, you’ll save a lot of money by keeping cars far longer, until they take more effort than you’re willing to put into them.

Food etc.: You’re too Frugal on the Wrong Things

Any number of “financial gurus” will tell you to stop buying your daily latte and to start brown-bagging your lunches.

If you’re working remotel, that’s actually easier than stopping at a Starbucks or going out for lunch. However, once things go back to normal, wasting your limited willpower on things that save you a few dollars a day isn’t smart.

Even for things that seem to cost a lot more than a few dollars, in some circumstances spending more actually helps you build wealth.

For example, say you own a business (that’s still in operation despite the pandemic) or have an employer who needs you to work overtime (and is willing to pay extra for it).

In such circumstances, ordering in or going out to dinner may make more sense than spending the time it takes to make a shopping list, go shopping for the ingredients, cook, clean the prep area, and clean up after your meal.

At least that may be the case if the time you save by not doing those things lets you work more on your business or overtime, so you earn even more extra after-tax dollars than you “overspend” on restaurant meals.

However, do take into account that dollars and cents aren’t the be-all and end-all here. Restaurant meals are usually less healthy than what you’d make at home.

You can also shop, cook, and clean up together with your partner, strengthening your relationship.

Do This Instead:

Save your willpower for making the right choices on big-ticket items, or ones where you can make a single decision and then automate that behavior.

As for frugality, try to look at the full implications of your decisions, including any extra time you’d have to spend to lower your costs.

Sometimes the extra time spent is far more valuable than the money your frugality would save. This becomes especially so as your income grows, and even more if and when you start a business.

Finally: You Leave Free Money on the Table

Employer-sponsored retirement plans include pensions, also known as “defined benefit plans,” and the much more prevalent “defined contribution plans” such as 401(k), 403(b), 457(b), SIMPLE IRAs, etc.

According to the Pew Trusts, over 65% of employees of private employers have access to such employer-sponsored plans. However, as many as 22% of employees didn’t enroll in an offered defined benefit plan, and 28% didn’t enroll in an offered defined contribution plan.

According to, over 76% of employers offering a traditional 401(k) plan match contributions their employees make into those plans, some more generously than others.

When I worked for the University of Maryland, the university contributed 7.25% of salary for us, regardless of our own contributions. Other employers match dollar-for-dollar or $0.50-for-dollar, up to a set percentage of salary.

Some employers I know report that as few as 15% to 20% of their employees participate in their retirement plan, even with a dollar-for-dollar match!

That’s purely leaving free money on the table!

Another way you leave free money on the table is if you use credit cards that don’t offer cash rewards.

Do This Instead:

If you’re currently employed and have access to a retirement plan with employer matching, contribute enough to capture the match in full.

If you can’t afford that, increase your contribution as much as you can now, and increase your contribution by at least half of any raise you get until you max out the matching.

Once you hit that maximum match, divert any additional money you can toward an IRA. A Roth IRA would most likely serve you best.

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If you’re using credit cards that don’t offer a reward, try applying for good no-fee cash reward cards.

My favorites are cards that offer actual cash rather than gift cards, statement credits, or credits toward future purchases. That’s because you can take that cash and put it into e.g. a high-interest savings account where it will build up over time without any budgetary pain.

Some of the more generous cards give you unlimited 2% cash back on everything (e.g., Citi Double Cash card), or 5% reward for future purchases (Amazon Prime Visa). Some cards offer especially generous rewards on specific categories of purchases (with or without maximum reward amounts).

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If the card is issued by the same bank where you have a deposit account, they may even give you a bonus if you deposit the rewards into your account with them. Bank of America, for example, offers up to 75% bonus through their “Preferred Rewards” program.

The Bottom Line

Even in this time of pandemic and huge economic and financial disruption, you can make a huge difference for your long-term wealth.

Using the above guidance, make the right choices regarding your biggest money drains: taxes, housing, transportation, and food. Then, make sure not to leave free money on the table.

Together, these will help you build your net worth over time, letting you achieve your personal finance goals.


This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

About the Author

Opher Ganel has set up several successful small businesses, including a consulting practice supporting NASA and government contractors. His most recent venture is a financial strategy service for independent professionals. You can connect with him there, or by following him here or on his Medium publication, Financial Strategy.


Created by

Opher Ganel

Consultant | physicist | systems engineer | writer | financial strategist | avid reader | amateur photographer & artist | support my writing (and read much more financial insight) here ➜







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