Many of these wealth building habits are things anyone can apply to their life. Wealth doesn’t happy by accident or overnight. Sure there are some cases where people achieve huge financial success overnight. But in most cases it’s only after years of hard work. Here’s a few wealth building habits which can help anyone to gain more control over their finances:
- Live below your means
- Limit your desires
- Don’t do debt – or get out ASAP
- Pay off credit and mortgage early
- Get money wise
Wealth Building Habits – Live Below Your Means
Living below your means is a simple strategy which most people can adhere to. Sure, if you’re on the poverty line, it’s not so easy. But in many people’s lives they can cut out some unnecessary spending in order to put aside money every month into savings. Most people pay all their bills first and then spend what’s left. Wealthy people have learned to live below their means, pay themselves first and live on what’s left.
Wealth Building Habits – Pay Yourself First
The government figured out that asking people for their taxes once they’d already been paid was a disaster. They soon decided to take taxes at the point of payment instead. This ensured they would get their money! Why don’t we use this same principle for ourselves?
Wealthy people pay themselves first. That is, they pay directly into a savings account when they get paid first, before they pay anyone else. By doing this, it ensures they will have a certain amount going into savings each month. Over time, they will have built up a sum to either invest or act as a financial ‘buffer’ should they need one in case of emergency.
Wealth Building Habits – limit Your Desires
Living below your means can be frustrating. Especially if you want something. but if you know that your purchase will cost you each month and make you poor, perhaps that’s enough to make you think? Most people live to their means. Should they get more income, they don’t get wiser with their money. Instead they continue to live to their means by creating more desires.
Wealth people know that living below their means is the quickest and surest way to financial security. They are happy to forgo some of their wants for the sake of more later on. This does require some discipline. however, have you noticed how ofter you will use your bank account as your purchasing thermostat? If you have money in the bank, you’ll spend it. Set up an automated payment into a savings account each and every month and learn to live on less. This money will give you more financial security and make you feel good about having money, instead of feeling bad about spending it! See CNBC’s Frugal Habits of Millionaire and billionaires.
Wealth Building Habits – Don’t Do Debt
It’s easy to say but what if you’ve got a pile of it? You need to lower your interest rates and get out as soon as possible. Pay off the credit card which has the highest interest rates first, or the largest monthly payments. See David Bach’s book The Automatic Millionaire for more detail on how to get out of debt. Most people know how bad debt can be.
But until you’re in the grips of debt, it’s hard to explain how bad it really is. Debt is designed to keep you in it. The less you pay off, the more interest you’ll have to pay. Keep paying the minimum amount each month and you’ll quickly see your balance rising with interest payments. You need a plan to get out of debt if you’re in it, and a plan to stay out of it. Once you’re out of debt, you’ll save huge amounts of money, in interest payments alone.
Learn to live to your means and don’t buy anything you can’t immediately afford. Once out, use the debt payments you usually made to pay into savings instead, or pay off any outstanding borrowings or mortgage.
Wealth Building Habits – Pay Off Credit And Mortgage Early
Paying off your mortgage early seems like a fantasy for many. But it needn’t be. You can pay a few hundred extra a month if you cut back on some of your outgoings and luxuries. Paying off your mortgage will free up all that money which you pay on an ongoing basis. Plus, you will also save thousands on your interest payments over the term of your mortgage.
Obviously pay off credit first and debt, because you’ll likely be paying larger amounts of interest on them. Then, start paying extra towards your mortgage payments. Can’t afford it? Take a look at your outgoings!
Wealth Building Habits – Get Money Wise
Your outgoings are the thing you can definitely change. You may not be able to increase your income, but you may be able to lower your outgoings. Can’t afford to pay off debt? Can’t afford to pay more into your mortgage each month? Well before you decide this take a look at your weekly expenses. Do you drink? Do you smoke? What products do you buy and where from? Take an inventory of your spending and you’ll soon see where much of your income is going.
Wealth Building Habits – Inventory For Your Spending
David Bach calls this the “latte factor”. What’s your Latte factor? A Latte Factor refers to the money you spend every day on small luxuries such as a latte coffee. What small expenses do you justify to make life that little bit easier or better? Your Latte Factor could be costing you thousands a year. Let’s take the simple latte as an example. You buy a latte coffee and a piece of cake every day for lunch. That’s costing you around $5 a day. Not much you might argue. But over a week that’s $25. If we only count week days that’s $1300 a year on a latte and a piece of cake a day! 5 x 52 (weeks a year) = 260 times you buy a latte and a piece of cake each year.
How else are you spending your money? Do you smoke, drink or eat out? Take an inventory and see exactly how you can save this money for paying off debt, paying your mortgage early and building wealth. Warren buffet never spends more than $3.17 on breakfast. (Source https://www.cnbc.com/2017/09/21/frugal-habits-of-millionaires-and-billionaires.html)