While some of the wealthy in the world were born into it, most people become rich by following frugal habits and applying sound financial decisions when managing their money. Here are some of the habits of the wealthy. It makes sense to incorporate these into your everyday life if possible.
Live Below Your Means
At its core, building wealth is simple. You can’t save money if you spend more than you earn. However, forty-three percent of Americans do just that. There are many reasons for the overspending. For some, it’s keeping up with the Joneses, the instant gratification or the inability to say no to what they can’t afford. For others it is just not paying attention to finances, making minimum payments without looking at the total debt and keeping the same bad habits day in and day out. Out of the money you bring in, the more you save, the more secure your financial future will be.
Budget and Know Where the Money Goes
If you don’t know where or on what you spend your money, how can you cut expenses and find savings? You can’t learn without paying attention, especially when it comes to money. People who never scrutinize their spending are often shocked by the money that they spend without even thinking about it, especially little extras that add up quickly. A budget accounts for the cash flow and ensures that there is always money to pay for necessities. Budgeting doesn’t have to be complicated. There are various strategies for budgeting, so feel free to adjust and use whichever method sticks. You can track your spending to the dollar, use the envelope budgeting method, plan zero-spend days or any other idea that works.
Debt can be very useful; most people will need to borrow to buy a home, go to college or buy a first car. With steady income and regular payments debt doesn’t have to be crushing, but it’s easy to get in too deep. Avoid using plastic for extras like eating out and shopping trips with friends; plastic doesn’t feel like “real” money, so it’s easier to overspend. Credit cards also carry high interest rates, so if you don’t pay off the balance each month you incur interest and the balance grows. Always know your terms and payments before you borrow. The flip side of the coin is knowing how to pay debt. Pay high-interest debt first, stay current on payments to avoid fees and use any unexpected windfalls to make extra payments.
Never Stop Learning
Besides keeping your mind sharp, constantly learning increases your income and can decrease your expenses. Any opportunity to gain new job experience, attend workshops or seminars increases your marketability and value to your employer. At home, learning to do it yourself, from gardening to home repair to sewing and alterations can save you money.
Home, car and health insurance protect you against catastrophes that could destroy your finances in moments. Insurance is more than a policy; it’s the idea of being prepared for the worst. An income drop due to job loss is common in this economy and being unprepared for it can lead to falling behind on payments or having to pawn personal possessions. Don’t be among the sixty-four percent of Americans with less than $1,000 in emergency savings.
Major lifestyle changes don’t happen overnight. Start here, take control of your finances, and stay tuned for “5 More Habits of the Wealthy.”