The Number One Reason Your Money Isn’t Growing

Investing to become wealthy can be simple, but isn’t always easy

Many people embark on the journey of wealth-building investing and think it is a complicated and elusive task. But the path to growing your wealth is often much simpler than most realise. However, the process isn’t always easy, and in that lies the challenge...

…Before diving deeper into the issue at hand, let’s first clarify the difference between ‘simple’ and ‘easy,’ as it’s essential to understand these concepts in the context of wealth-building.

Before elaborating on the issue, and its simple solution, let’s define the terms ‘simple’ and ‘easy’ with the help of an online dictionary:

• Simple: having few parts, not complicated or involved.
• Easy: Capable of being accomplished or acquired with ease; posing no difficulty.

In practical terms, consider the comparison to physical health. The process of getting and staying in top physical shape is relatively simple: exercise regularly, drink plenty of water, sleep well, and eat healthy foods. However, many people will confirm that sticking to an exercise routine, staying well-hydrated, sleeping well, and maintaining a healthy diet is not always an easy task. It requires effort, discipline, and consistency.

The same concept applies to investing and building wealth. While the core principles are simple, the execution can be difficult for many. And that’s where people commonly go wrong.

The Issue: Why Your Money Isn’t Growing

The primary reason why most people’s money doesn’t grow as they’d like it to is simple: they don’t invest enough of it to begin with.

Most people, at some point in their lives, make the mistake of putting off investing. They may contribute small amounts to a retirement fund such as a KiwiSaver Scheme, or even worse, not contribute anything at all, assuming wealth will magically appear with time. However, this is a common misconception that leads to stagnation in their financial growth.

In New Zealand, for example, most people rely on KiwiSaver accounts to build their retirement savings. But a small contribution to such a scheme, particularly early on, is often insufficient to achieve significant financial growth. Many KiwiSaver investors fail to realise that if they invested more upfront, or an increased contribution consistently, they would see substantially greater returns over time.

While the growth of wealth may seem slow initially, the key to long-term success lies in the power of compounding returns. But compounding requires a solid investment base. And for compounding to work effectively, you need to invest enough money from the start.

The Solution: How to Get Your Money Growing

The solution to this problem is simple — although not always easy: invest more.

It sounds straightforward, but the discipline required to take this action is what many people find challenging. Investing more, whether it’s through regular contributions or lump-sum investments, is the fundamental strategy for growing your wealth.

For instance, the regulator of New Zealand’s financial markets outlines the expected long-term growth rates for investments in various KiwiSaver schemes. For an aggressive investment fund, the expected return is 5.5% annually after taxes and fees. Let’s break this down to see how this works in real life with some starting balances:

• If you start with a balance of $5,000, your annual return would be $275.
• For the current average KiwiSaver balance of around $32,000, the return would be $1,760.
• If you have $200,000 invested, you see an annual return of $11,000.

If you think about it logically and look at the example sums above, it becomes clear that if you want your money to grow faster, you need to increase the amount of money you put into your investments, no matter how small they may seem at first. Whether that’s more frequent contributions or increasing the size of your lump-sum deposits, every dollar you invest today will contribute to greater wealth tomorrow.

Wealth-Building Example: Consistency is Key

Building wealth isn’t an overnight phenomenon. It’s a gradual process that requires discipline, patience, and consistency. Wealth-building doesn’t only happen with large sums of money — it can also happen through smaller, regular contributions.

Consider this: You may not have the luxury of a large lump sum to invest right now, but by committing to invest a portion of your income regularly, you’re setting yourself up for future financial success. Even during challenging economic times, such as a recession, it’s still possible to position yourself for future wealth growth.

There are several ways to increase your potential for investment, even if you’re feeling financially stretched:

• Invest in yourself: Perhaps one of the most overlooked but impactful investments is investing in your own skills, education, and career development. This can significantly increase your future earning potential, which in turn allows you to invest more later.
• Increase your investment frequency: Rather than waiting for a large lump sum to invest, consider making smaller, regular contributions. This can be done by setting up an automatic transfer from your bank account into your investment accounts or KiwiSaver every pay day.
• Aim for higher income: Aiming to earn a six-figure salary can be a transformative career goal for many people. While it may take years of hard work, education, and networking, higher income gives you the opportunity to increase your savings rate and invest more over time.
• Explore high-paying job opportunities: Sometimes, a career pivot or a change in job focus can lead to significantly better-paying roles. This can create the financial breathing room needed to boost your investment potential over time.

The Bottom Line: The Number One Reason Your Money Isn’t Growing

The truth is, growing wealth is simple, even though it can be far from easy.

The core principles discussed above — investing early, investing regularly, and investing more — are straightforward to understand. But the real challenge comes in sticking to these principles with discipline, patience, and consistency.

So, if you want your money to grow, the first step is to invest more of it. This doesn’t mean making a huge change overnight, but gradually increasing your investment over time, whether through lump sums or regular contributions. The sooner you start, the more time your money will grow.

If you're unsure about the best way to start or want more personalised guidance, the team here would be happy to have a complimentary and no-obligation chat with you about your financial freedom. Whether you’re looking at KiwiSaver Schemes, non-KiwiSaver investments, property investment, or something else, we’re standing by to point you in the right direction. Let’s work together to help make your financial goals a reality!