No doubt people stumble upon wealth while some are born into generational wealth; but a vast majority of wealthy people across the world have to earn their wealth in a hard way: with sweat and sacrifice; as such, picking up habits along the line that has helped them in achieving their dream of becoming very wealthy individuals.
If you desire to be wealthy; a self-made millionaire, here are ten of the best financial habits of the wealthy that can put you on the path to also becoming a wealthy person.
10 Financial Habits That Will Make You Wealthy
1. Avoid Unnecessary Debts
Avoiding unnecessary debts like credit card loans and other loans, especially loans with high interest.
There’s no way you save up, invest and build your wealth if you’re constantly getting off one loan or the other.
On the other hand, if you’re paying off a debt, you should focus on paying off your balances in full to avoid paying higher interest and also keeping a good credit score.
One sure way you can avoid unnecessary debt is by buying and holding your car long after making complete payment.
Keeping your car for long term use will surely help you save up on extra bucks while keeping your debt profile low.
2. Increase Your Savings and Make High Interest Investments
Irrespective of the amount you earn either from 9-5, or running your business, 20% of your income which also doubles as your emergency fund and retirement plan should go into high interest savings like treasury accounts, credit union savings, certificate of deposits, money market accounts and much more.
If after saving 20% of your salary and you still have more than enough left to cover your budget, then you should let your extra fund go into your savings.
Setting up standing order to automate your saving process makes it easier and also help you resist the temptation of spending outside of your budget.
Read Also: 6 Habits You Can Learn from Successful Savers
3. Have More Income Sources
Having more than one income source will help you keep up with your financial obligations, increase your savings and hasten your wealth building plan.
Hence, in order to generate an additional means of income, it is advisable to engage yourself in business, or work as a freelancer, and at the same time, invest in the stock markets or mutual funds.
Some of the most recommended forms of passive investments that are worth embracing include; stock investment, index investment, Real estate investment, bond investment among others.
Since money made from other income sources serves as an extra cash which you do not have plan for, more than 70% of the money you have made outside of your normal income should go into your savings.
Read Also: 9 Easy Passive Income Ideas for Women
4. Set ‘Smart,’ Short-Term and Long-Term Financial Goals
Without the ‘why,’ you wouldn’t have the motivation to practice habits that can make you wealthy.
The purpose of you wanting to be wealthy is a driving force. Hence, without any purpose or ambition (the why), you wouldn’t see any reason to take up these financial habits to making wealth.
To make it easy, your reasons are your goals. Hence, your financial goals can be short-term based like setting up an emergency fund, buying a car, fixing your home, or planning a vacation; medium-term based like saving up for a home, paying off high interest loan, or paying school fees, or long-term like saving up for early retirement, setting up a business, donating for a charitable cause, or building generational wealth.
Irrespective of your reasons for desiring to be wealthy, you must specify your financial goal which should be measurable, achievable and realistic, and you must set a reasonable time frame to achieve your goal. E.g. you want to own a home:
- Specificity: Your goal specification: to own a home
- Measurability: Do you want to save up for a $400,000 home? Or a $250,000 home? How much do you want to save monthly towards owning your dream home?
- Achievable: Given your income level and cashflow, is your goal achievable?
- Relevant: is your goal relevant to you? Does it align with your larger goals? Will it reduce your debt profile and help you achieve your dream?
- Time Specific: How long do you plan to save and own your dream house? 5 years, 10 years, or even 20 years?
Read Also: 7 Superb Financial Goals You Can Attain
5. Upskilling: Overcoming the Fear Change and Embracing Personal Growth and Development.
Those that were able to make this world a better place to live, are those who were willing to invest in themselves.
Therefore, if getting rich is something you are ready to get, then you should be ready to devote your time, energy, and money to become a better person with qualities more than what society deems appropriate.
Self-investment leads to increased earning capacity, sound decision making on financial matters as well as being on par with the current trends.
Hence, it makes you more competitive than your counterparts.
Self-investment can also mean taking up new courses to advance your skill, investing in your physical and mental wellbeing, creating business or professional connections and relationships, investing in your personal finance, time management, etc.
Read Also: Grow Your Money Faster: 9 Easy Investment Tips
6. Know Your Net Worth
Net worth can be described as the Assets less liabilities formula because it shows the value of assets owned less any corresponding loans or obligations owed.
This is good because it provides you with a clear and real picture of your financial position.
Monitoring your net worth will help you to adjust your financial goals, give you a good financial perspective, and help you to make sound financial decisions.
7. Be Critical Of Get-Rich-Quick Schemes That Promises Unrealistic Return On Investments
In trying to get rich quick, I had fallen for get-rich quick schemes that promises 20% monthly return on investments with compoundable interest.
It was the worst mistake I ever made in my life, but it was a good lesson learnt: do not trust or believe anything that is too good to be true.
Gathering wealth is not a task of days or weeks, or even months, it is a process, which requires great commitment, effort, time and determination.
8. Live Below Your Earning Limit
Trying to keep up with flashy lifestyle and societal demands can blow the lid off your budget, reduces your net worth by increasing your debt and liability, and derail you from your dream of being wealthy.
Therefore, if you truly want to build wealth, you should stick to a budget that is far less than your income by avoiding flashy lifestyles and unnecessary debt accumulation.
Read Also: How to Live Below Your Means: 7 Hacks You Were Not Told
9. Take Insurance Serious
With insurance, you will be prepared for the shocks of life such as accident, natural calamities, major damage to a house and many others, which can significantly erode your net worth.
For instance, your health insurance cover provides for your medical expenses should in future, you are hospitalized by a life threatening disease; property insurance will cater for the costs of rebuilding your house and replacing your properties in case there was fire outbreak or natural disaster in your home area.
10. Seek Financial Advice from Experts, Especially On Matters Relating To Tax
Poor financial decisions can make you lose a high percentage of your wealth.
Hence, it is absolutely crucial to seek advice from financial experts, especially on issues relating to tax matters which can take away a large chunk of your wealth or even see you ending up in prison for tax evasion.
Seeking financial advice can help you take advantage of tax deductions, tax credits, tax-advantaged accounts like 401 and IRA, and much more, while also helping you to take-up tax-efficient investments.
Conclusion
Wealth creation is not all about hard work, but also working smartly – taking up these 10 financial habits that will make you wealthy, and also seeking out more financial opportunities by being persistent, improving yourself, and seeking out financial advice from individuals who built their wealth from scratch.
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