Like it or not, money talks. It’s no surprise then that the most influential people in the world today are men and women of vast fortunes. Their having more money has been able to afford them the freedom to live truly fulfilling lives and helped them make their mark on the world. And they are always one call away from getting whatever they want on account of their deep pockets. They no know nothing of the nagging money worries most of us ordinary folks experience. It’s a life we all secretly wish for but sadly, that isn’t the reality for most. And there’s reason for this. It’s not down to a lack of money as some would assume but a dearth of the right money habits. The rich don’t only make more money, but maintain the right money habits as well. That’s what has brought them into financial security. So if you’ve been dreaming of financial security, this is the article for you. Now let’s find out what some of these money habits of the rich really are so you could start doing them.
(1) Have a budget
Don’t tell me what you value, show me your budget and I’ll tell you what you value. – Joe Biden.
You must gain control over your money or the lack of it will forever control you. – Dave Ramsey.
Economists say human wants are insatiable. But while that is the case, the resources to match aren’t infinite.
Even so, some wants require far more urgency than others in importance. But since we’re usually confronted with so many choices, it’s more than likely we might misjudge and fall into the temptation of expending the limited resources at our disposal on needs that aren’t really that pressing. In avoiding this temptation of wasteful spending, economists have often advanced the concept of scale of preference as a checkmate on unnecessary expense. And this is where the idea of budgeting comes really into its own. A well written budget structures your spending and encourages wise spending. It arranges your needs in order of priority and helps you avoid impulse spending.
It’s something all wealthy people do. Sure, they may have more money than you but that doesn’t mean they don’t budget. They all do use a budget to keep a tight rein on their earnings, so they don’t blow it all away in the blink of an eye. It may take a lifetime to make a fortune but without a budget, you could lose it all in a heartbeat.
Start budgeting now if you haven’t.
(2) Diversity Your Sources of Income.
How many millionaires do you know who have become wealthy by investing in savings account – I rest my case. – Robert G Allen.
It’s not how much money you make but how much money you keep, how hard it works for you and how many generations you keep it for. – Robert Kiyosaki
For some time now, we’ve been hearing a lot about how 10% of the people in the world earn roughly what the 90% are earning. “Unfair!” someone might say. But is it really? At the superficial level maybe. But it doesn’t take much figuring out to really see why there’s such a bizarre income disequilibrium. It all comes down to risk-taking really. While ours is a world of equal opportunities, sadly though, not very many avail themselves of these opportunities. And what’s the use of having an opportunity you won’t seize? Conventional wisdom tells us that a university degree is the open sesame to affluence. We’re told that if we could just keep our heads down while at university and get good grades. Then, our stellar grades would pay off and get us an elite job and then we can get to live the rest of our lives on easy street. But while that isn’t altogether untrue, still, it’s only half the story. Sure, getting an education is a worthwhile investment, if not for a lifetime. Nevertheless, it only gives you a head start in the long tiring pursuit of financial freedom. It can get you a measure of comfort by getting you a JOB. But if your goal is to be wealthy enough to be free of money worries, then getting a JOB – a single source of income – won’t cut it.
The wealthiest people in the world and around us aren’t your average nine to five desk workers. In reality, they’re totally averse to the idea of trading their time for money, which is the major underpinning of the millennial desk office job.
“If you don’t find a way to make money while you sleep, you will work until you die” Says Warren Buffet. That’s a very telling utterance coming from the very lips of the world’s second richest man. These wealthy men are all educated, of course but they didn’t stop there. They are extraordinary risk-takers in their own rights, who constantly seek to multiply their sources of income by investing their money in several investment options. So take a cue from them and do the same.
You may need a JOB to give you a leg up in your pursuit of financial security but never lose sight of the big picture – be on the constant lookout for opportunities to invest your salary and multiply what comes in each month. At the moment, there several opportunities out there. You’ve got peer to peer lending, high interest savings, shares and bonds, money market funds and several others.
(3) Save A Portion Of What You Earn
A simple fact that is hard to learn is that the time to save money is when you have some. – Joe More
The habit of savings is itself an education. It fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought and so broadens the mind. – T.T. Munger.
The habit of saving is a difficult one for most people. It seems to run contrary with our nature for extravagant living. Can we really find anyone out there who doesn’t want to live it up? Unlikely! And the problem is the media. The media portrays celebrity lifestyles in so subtle and yet powerful a way that so many of us have bought into the idea that we have to live it big and possibly spend ourselves big (to our last dime) just for social approval. This social conditioning is fully at play in our finances and such that the more money we make, the more we spend. But this same horrible lifestyle is the reason why so many are always finding themselves broke. Don’t make this same mistake. It may be the only reason you never ever become truly rich.
Start cultivating the habit of putting away a portion of your earnings. Doing this has myriad benefits. First, you’ll have more money in reserve for investing. Second, it can be an ideal way to plan for future emergencies – the rainy day – and avoid any ensuing panic. You can save for things like education, vacation, marriage and similar things. It’s planting a tree before you ever need one. Getting rich isn’t spending big, it’s saving big. It isn’t making more to spend more, it’s less for more.
(4) Pay Yourself First
It’s our choices that show who we truly are, far more than our abilities. – JK Rowling
Never spend your money before you have earned it. – Thomas Jefferson.
Whenever it comes to the habit of saving and investing most of us are in the know. But we actually fail the test when it comes round to putting that knowledge into action. In my personal experience, saving in particular is a lot of work. However, there’s another simple way to cultivate this habit. As you might guess, it’s called “paying yourself first” every time you get that monthly paycheck. The logic behind this simple habit is to be found in Fred Siegel’s The Richest Man In Babylon For Today. “A part of all you earn is yours to keep. This may not sound like much but is what you need to save money” he says.
So how much should you pay yourself?
It can be as little as little as 10% of what you earn while the rest can go to your personal budget. Putting the 10% you pay yourself as savings won’t seem that difficult to do.
(5) Spend Less Than You Earn
Annual income £20, annual expenditure nineteen six, result happiness. Annual expenditure twenty pound ought & six, result misery. – Charles Dickens.
Financial Peace isn’t the acquisition of stuff, it’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this. – Dave Ramsey.
That Man is richest whose pleasures are cheapest. – Henry David Thoreau
The great Greek philosopher, Epictetus once remarked that “wealth consists not in having great possessions but in having few wants”. It’s a great piece of wisdom for wealth accumulation. But as consumerism has grown to dominate our expenditures in this era, few have given heed to this advice and the net result has been untold financial ruin. When you spend more than you make, you’re engaging in what is popularly known as lifestyle inflation. And that is bad for your financial future.
The truth is that a lot of us work in fields where we make enough money. But the trouble with most of us is that we’ve been lulled into thinking we have to “spend ourselves poor” just to look rich. “Got a salary raise!” “Must buy the latest gadget”, “Got promoted at work, salary is twice over” “Should get a new car, and maybe move to an expensive neighborhood”. It’s how most think nowadays, our spending tends to be status-related even when it’s uncalled for.
But the really rich don’t live that way. They have less lion sized lifestyles to maintain, keep their expenses down to a minimum thereby freeing up money for more rewarding future investments. We might admire them for how much money they make, but they are equally past masters at getting by on with little.
That’s exactly how they build their massive net worth’s. Earn more but buy less stuff.
(6) Do Away With Debt
I am indeed rich, since my income is superior to my expense and my expense is equal to my wishes. – Edward Gibbon.
Every time you borrow money, you’re robbing your future self. – Nathan W Morris.
While there’s a growing social stigma attached to financial indebtedness, the idea of burrowing isn’t wrong in itself. A lot of it depends on the purpose for which a debt was secured. There’s the world of difference between a debt incurred to get let’s say, an education or finance a start-up and one spent on buying a car or other consumables. The former is a good debt since they both have the potential to increase earning potential. The latter is not. It’s essentially a bad debt as it depreciates in value and has no earning potential. It’s debt in this category that can harm your financial situation. “If it won’t go up in value or generate income you shouldn’t go into debt to buy it” says the Investopedia. So avoid burrowing to buy anything that won’t bring in more money.
(7) Be On The Look Out For Investment Opportunities
Money is only a tool, it will take you wherever you wish but it will not replace you as the driver. – Ayn Rand.
Opportunity is missed by most people because it is dressed in overalls and looks like work. – Thomas Edison.
Money can beget money, and it’s offspring can beget more, and so on. Five shillings turned to six…and so on till it becomes a hundred pounds. – Benjamin Franklin.
As much as the habit of saving is encouraged, money put in some savings account isn’t an investment in the strict sense of the word unless it yields some kind of compound interest. Even so, the interest rates are often so low that inflation could reduce the real value of your money over time. But if you’re looking to grow your money long-term, you can invest in other investment vehicles with more yields. Sure, there are more risks inherent going this route, but it’s also where you could make a killing. You can also come up with a list of other business avenues you could put your money into. I’ve explained the ways to generate these great ideas in a previous article.
(8) Don’t Lend Money To Friends And Family
The best way to keep your friends is to never burrow from them and never lend them anything. – Paul de Kock.
You love your family and friends, don’t you? You’d do anything for them, right? Even if that means parting with your last dime. That’s admirable! I wouldn’t do any less.
Everybody loves a Good Samaritan. And if you’re generous enough with your money, you’ll be loved the more for it. And so will your friends.
Our relationships, as always, could have a significant bearing on our financial position. It’s why you need to be very firm whenever money topics come up in your relationships with others. This doesn’t mean you have to turn down needy friends or family members. Just don’t be a soft touch.
As you make more money, you’ll become an easy mark for grabby friends and inconsiderate family members who would feel they’re entitled to share in your money and this may come in the form of requests for a loan.
In 9/10 times they never pay back. And threats don’t work either. Besides causing a strain on your relationship, irresponsible lending to friends can hurt you financially.
So don’t lend. If however you want to, let it be a gift.
(9) Take Investment Advice From Only Financial advisors
For by wise counsel thou shalt make thy war: and in the multitude of counselors there’s safety. – Proverbs 24:6 (KJV)
Investing may be the surest way to grow one’s money but that isn’t to say every attempt will be bang-on.
That said, you could hedge against certain losses resulting from bad investment decisions by first taking advice from financial advisors on investments, risk management and insurance amongst others. This will sure save you the headache of making a bad investment decision by taking a novices bum steer.
(10) Invest In Yourself
Formal education will make you a living; self-education will make you a fortune. – Jim Rohn.
Rich people have small TVs and big libraries and poor people have small libraries and big TVs. – Zig Ziglar.
Financial literacy is something that’s rarely emphasized enough in our schools. And that explains why skilled professions like lawyers and doctors can’t even read something as simple as a financial statement. But if your goal is to build wealth, then financial education is a must for you. And you don’t need a college degree to have it. You can completely self-study by reading up finance books in libraries and bookstores. Financial education will put you in the know on how to identify the best investment options with the highest return and the lowest risk. Equally, it’ll teach you the fundamental skills you need to make wise investment decisions.
An investment in financial education is unarguably the best investment decision you can make. It’ll boost your earning potential in every way and pave the way for financial security.
Do you have other money habits that have helped you achieve financial security? We’d love to hear it. Tells us below.