3 Types of High-Income People Who Won’t Become Millionaires, According to Money Coach Rachel Covert

Rachel Covert is a money coach who has gained a following on Instagram by giving financial tips , usually for high-income individuals who want to manage their finances more effectively. She sells her own coaching program, which she says is meant to help women ditch the paycheck-to-paycheck lifestyle. In an interview, she said that her average client is “an educated, successful woman in her late 20s to early 40s who has never learned the fundamentals of personal finance.”

In a June 2024 Instagram post , Covert lists three types of high-income earners who, despite their substantial salaries, struggle to build lasting wealth. Here are those three categories and some tips to help you save and invest your money so you can be more successful in reaching your financial goals .

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Money mistakes the super wealthy never make - that you might be doing now.

The 3 Types of High-Income Earners Missing Out on Millionaire Status

1. The Cash Hoarders

Cash hoarders earn a significant income and diligently save money, but they keep most of their wealth in cash. They might have $50,000 or more sitting idle in a savings account, where it loses value due to inflation. They are unsure how to invest or make their money work for them, so they opt for the perceived safety of cash.

Why they won’t become millionaires:

• Inflation erodes savings: Keeping large sums in low-interest accounts means their money doesn’t grow enough to keep up with inflation.
• They miss out on opportunities: Without investing, they miss out on potential returns that could significantly increase their wealth over time.
• They don’t have a financial strategy: Not knowing where to start prevents them from taking any actionable steps toward building wealth.

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2. The Cash Rejecters

Cash rejecters have a high income but find it difficult to save. They may deposit money into a savings account but end up withdrawing from it regularly — often two out of every three months. Living paycheck to paycheck, they use incoming funds to address immediate expenses, which means that they aren’t building substantial savings.

Why they won’t become millionaires:

• Inconsistent saving habits: Needing to withdraw from savings frequently hinders growth and may even come with financial penalties, depending on where the money is.
• Impulse spending: Without a controlled budget, money can be spent just as quickly as it’s earned.
• Paycheck-to-paycheck stress: Constantly waiting for the next paycheck can create a stressful cycle that’s hard to break.

3. The Debt Delusionals

Debt delusional individuals earn lots of money but rely too heavily on credit cards for everyday expenses. Despite making substantial payments toward their credit cards each month, their credit card balances never seem to decrease. They juggle payments between cards to keep everything afloat, but they keep accumulating high-interest debt.

Why they won’t become millionaires:

• High-interest payments: Interest charges consume a significant portion of their income.
• Debt dependency: Spending and credit card payments prevent them from allocating funds toward savings or investments.
• Financial instability: Constant debt juggling can create a precarious financial situation

Saving Money as a High-Income Earner

So what can you do if you are in this situation? First, it can be a good idea to sit down with your bank statement and a notebook and write down exactly where your money is going each month. Your mobile banking app may also have a section where your expenses are broken down by category.

Many items in your life may be significantly more expensive than they used to be. Because of inflation, an income of $100,000 in August 2024 would be worth the same as an income of $75,557.50 in August 2014. This means that your money can buy almost 25% fewer goods and services than it could 10 years ago. In addition, certain essentials have gotten much more expensive. Average housing costs in U.S. cities are now 43.5% more than they were in August 2014, according to the St. Louis Fed.

This means that it’s even more important to have a concrete plan if you want to be able to save your money. Here are a few tips:

1. Set specific goals: Define specific, measurable goals for your financial future. Then you can research and plan the steps you will need to take to get there.
2. Create a budget: Look into different types of budgets, such as the 50/30/20 budget, and decide on something you can stick to realistically.
3. Save for emergencies: Build an emergency fund to cover unexpected expenses or income disruptions. Aim to save at least three to six months’ worth of living expenses.
4. Pay off credit cards first: Prioritize paying off high-interest debts, such as credit card balances. Reducing debt lowers financial stress and frees up additional funds for saving and investing. If you already have a high-interest credit card balance, then paying it off is one of the best investments you can make. Very few investments you can make will reliably give you higher returns than your credit card will charge you, so investing that money instead might not be worth it.
5. Don’t spend more when you make more: Try to resist the urge to inflate your lifestyle as your income increases. Maintaining a modest lifestyle relative to your earnings allows you to save a larger portion of your income for the future. It can be helpful to consider whether a purchase is a need or a want and whether it’s something you’ll look back on as worth it.
6. Invest your money: Begin investing to grow your wealth over time. Explore options like stocks, bonds, mutual funds or real estate. It may be a good idea to consult with a financial advisor to develop an investment strategy tailored for you.
7. Automate savings: If you can, set up automatic transfers to savings accounts and investment portfolios. Automating these contributions helps you stay consistent and reduces the temptation to spend disposable income on nonessential items. Make sure you have enough left over so you don’t need to dip into savings for essentials.

This article originally appeared on GOBankingRates.com : 3 Types of High-Income People Who Won’t Become Millionaires, According to Money Coach Rachel Covert