People who aspire to be successful or at least attain some level of financial stability must first of all, learn to be responsible when it comes to handling money. Having an idea of healthy money habits is the first step on your journey to financial success.
Of course, financial success is not guaranteed by earning a fat pay check at the end of each month. Aside from the random element of luck, much of what makes some people successful involves the cultivating of certain habits; Including money habits. Learning what these habits are and how to employ them in your own life is worthwhile. See; How To Control Lifestyle Inflation.
To that end, here are 7 of the most often-cited money habits of successful people.
If you took a guess, you would likely have come up with budgeting, as among the money habits of successful people. If you read this blog pretty often too, you would most likely observe that budgeting as a topic in personal finance can simply not be over emphasized.
Budgeting in a nutshell, involves making a list of your expenses within a given period (monthly ideally), and then matching it against your income (after your savings have been safely deposited in an interest yielding savings account). If nations can come up with budgets, so can you!
2. Frugal Living
This is the most basic healthy money habit from which all other money habits are derived, but it is usually the most under-utilized.
Frugal living is a lifestyle that involves careful planning and spending as well as avoiding waste. Being frugal is not the same as being stingy – Where a stingy person reduces spending even at the cost of reducing their quality of life, a frugal person reduces spending without compromising their quality of life.
A frugal lifestyle is one that optimizes both money and quality of life.
3. Prioritize Savings
Successful people prioritize their savings. As I mentioned earlier, that before one begins to spend, must first set aside a portion of their earnings to go into savings; At least 20% of your monthly income.
This is why it is important to create a budget plan so that money which you allocated to savings goes untouched.
4. They live within their means (or Below!)
If you are able to apply the first three above, living within your means becomes less hassle. Successful people avoid overspending. Instead, they buy only what they can afford without going into debt. The result is financial success through the simple act of resisting lifestyle inflation.
You don’t have to increase your cost of living to match an increase in your earnings. If you do this, you might end up spending more than can you save or not save anything at all!
5. They Avoid Debt
There are good debts, and there are bad debts. Good debts give you long-term benefits. You basically have something of value that you keep even after you pay the debt off, an example is mortgage. By contrast, bad debt doesn’t give you long-term benefits. It just gives you debt, an example is taking a loan to purchase a private vehicle which you do not intend to commercialize.
Unlike a house, a car begins to lose value the moment one drives it out of the parking lot. Successful people avoid bad debts.
Sometimes too, a good debt can turn into into a bad debt if one fails to meet the timeline of loan repayment. The reason experts recommend that before taking out a mortgage loan, you should have enough money, at least 6 months worth of savings stashed in your emergency funds account.
In all, try to stay out of debts. Read more about good and bad debts. See here.
6. They embrace delayed gratification
Delaying gratification means sacrificing short-term happiness to achieve long term goals. When you apply healthy money habits to your daily life, you may feel a slight discomfort at some point. But then, so did other successful people! Achieving your financial goals is worth it in the end.
Resisting the impulse to buy an expensive new hand bag will leave you with spare money that could be added to your retirement account or a trust fund for your children.
7. They plan early for retirement
Successful people start planning for retirement early in life. Many begin saving and investing even in their 20s!
Think about how much you will need when you retire, how often and how much you will need to save in order to reach your retirement goal. You might realize that saving alone will not help you reach your goal faster, hence the need to invest.
Investing while you are young puts you in the best position to take advantage of high risk, yet profitable investment portfolios such as stocks. This way you will have enough time to ride out the turbulence of the stock market. A study showed that if you started investing at age forty, you’ll need to invest eight times as much as someone who started in their 20s in order to bridge the gap.
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