You’ve worked hard to save and invest your assets, but you know there’s more you could be doing to make progress toward your financial goals. While the world’s wealthiest often have resources available to them that the millionaire next door may not, they’ve also developed a repertoire of repeatable financial habits anyone can use to accumulate and protect their wealth.
So without further ado, here’s a quick glance at some of the top financial habits of the wealthy to implement into your daily life:
- Pay yourself first
- Know your values
- Use debt strategically
- Recognize opportunity costs
- Invest in yourself
1. Pay Yourself First
If you’re like most people, you spend before you save. Once you receive your paycheck, you use that money to cover your expenses. (Naturally, right?) It’s only after your expenses are paid that you save whatever is left over. And for some people, this works just fine.
But the wealthy do the opposite. The first thing they do when they receive a paycheck is make a transfer to a savings or brokerage account. In other words, they pay themselves first. Then they use what’s left over to cover their expenses.
Now, this financial habit requires you to know your monthly expenses and how much you need to save per month to reach your goals. If you’ve been winging it, spend the next few months revisiting your expenses and spending habits. Discover what percentage of your income you’re saving.
If you’re not happy with your findings, figure out where in your budget you can cut back that will cause the least amount of pain to your lifestyle. Make a commitment to save and invest a certain percentage of your income every month. This, my friend, is how the wealthy get rich.
Pro tip: Set up an automatic transfer to the account(s) of your choosing. These transfers should happen after every direct deposit you receive. This way, you won’t miss that money!
2. Know Your Values
Believe it or not, some of the wealthiest people I know are quite frugal. And while I’m certainly not suggesting that you eat rice and beans every night or drive an old beater car, I am suggesting that you stop wasting money on things that don’t bring you joy.
To make this a financial habit, revisit your core values. What is most important to you when you picture your ideal life? Spending good quality time with friends and family? Having the freedom to stop working when you want? Living a healthy lifestyle?
Whatever your core values are, spend your money on the experiences and things that allow you to live out those values. Practice frugality on the things that don’t add value to your life.
Pro tip: Review your monthly expenses for old subscriptions you forgot you’re still paying for: streaming services, gym memberships, audiobooks, online publications—you name it. Cancel the ones that don’t align with your core values.
3. Use Debt Strategically
While some financial gurus preach that all debt is bad debt, the wealthy know how to use debt strategically. Sure, credit card debt is almost always something you want to avoid. The interest rates on credit cards are simply too high, and people don’t typically use credit cards to purchase assets that appreciate.
But leveraging low-cost debt to purchase assets that have the potential to increase in value can be a smart financial move—think business loans and mortgages on investment properties. Even if you have the cash to buy certain assets outright, the ability to secure low-interest loans for these types of investments can free up your cash to earn more money in the markets.
Pro tip: Remember that using debt as leverage is a personal choice. Even though it usually makes more financial sense to pay the minimum on low-interest debt and invest the rest, some people prefer the peace of mind they get from knowing they own their assets outright. Know your options and make decisions you feel confident about.
4. Recognize Opportunity Costs
The wealthy recognize the opportunity costs of all their big financial decisions. Now, this isn’t to say that the wealthy don’t splurge and enjoy their lives—they absolutely do, and you should too—but they do understand that every financial choice they make doesn’t happen in a vacuum. There’s always an opportunity cost.
When you have an intimate understanding of the future you envision for yourself and your family, you’re in a better position to appreciate the opportunity costs of financial choices you’re making today. Making financial decisions through this lens is another way to ensure your purchases—especially the big ones—are aligned with your values.
Pro tip: Take your values into account when considering opportunity costs—money and numbers aren’t the only factors at play here.
5. Invest in Yourself
Have you ever heard the phrase, “What you don’t know won’t hurt you?” This maxim does not apply to finances. The wealthy consider themselves lifelong learners, especially when it comes to their money. Take it from a financial advisor with more than 25 years of experience in the industry—there is always something new to learn in the realm of personal finance.
To adopt this financial habit, make a commitment to read personal finance books, listen to finance podcasts, attend classes and seminars, and partner with knowledgeable financial professionals that can help you make informed decisions with your money.
Pro tip: Commit to small, manageable amounts of learning every single day. For example, read 10 pages of a personal finance book or listen to 10 minutes of a personal finance podcast. After one year, you’ll have read about 15 personal finance books or listened to over 60 hours of educational finance content!
How the Team at Legacy Planning Can Help You Develop Healthy Financial Habits
As a financial advisor for high-net-worth families and couples, I know a large part of your ability to reach your financial goals starts with the decisions you make today. And because your wealth is built over a lifetime, your daily financial habits play a big role in the lifestyle you’ll live 10, 20, or 30 years from now.
As your financial advocate, I work to help you adopt money habits that will serve you for the long haul. To see how I can help you develop a comprehensive plan for the financial future you want for yourself, click here to schedule a complimentary conversation with me today.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
