I have read quite a few financial books and noticed common themes among individuals who achieve a high degree of financial success. Millionaires often share many common traits. Let’s take a look at 5 common habits that enable financially successful people to build wealth.
Financially Successful People…
1. Make Smart Buying Decisions
Wouldn’t it be great to have a shiny new Ferrari or a Lamborghini? While these status symbols may look nice in your driveway, they will hinder your long-term goal of accruing wealth. Financially successful people avoid buying “must have” status objects such as expensive luxury cars, boats, jewelry, and other luxury accessories. The problem with buying status symbols is that you always have to upgrade them and buy the latest models. Financially successful people save themselves from these hassles by avoiding gaudy status symbols. Trying to “keep up with the Jones’” will leave you in a never-ending cycle of being broke.
2. Live Below Their Means
Financially successful people are able to adequately live off of what they earn. Living below your means requires keeping your monthly expenses below your monthly income. Frivolous purchases and wants are postponed and only needs are met. It doesn’t mean that you can’t splurge occasionally but these purchases should be the exception rather than the rule. It is practically impossible to increase your wealth if you spend every dime that you have. Just because you have the money doesn’t mean you have to spend it.
3. Make Their Money Work for Them
Wealthy people do not stash all of their money under a mattress or store all their cash in sock drawers. They understand the importance of maximizing their dollars. They often take calculated risks with their money and seek solid returns for their dollars. Every dollar that they have produces for them and helps to build more wealth. They do not waste their dollars on speculative ventures and get-rich-quick schemes. Wealthy people understand that real wealth is built over time.
4. Pay Themselves First
Paying yourself first is a great principle to follow whether you make $20,000 or $200,000 per year. Before you pay any of your bills, you should pay yourself first. Paying yourself first helps you to make savings a priority. A good rule of thumb is taking 10% of your income and setting it aside as soon as you get paid. I am not suggesting that this interfere with charitable contributions such as tithing to your church. Making savings automatic is a great way of making saving money easier. Saving small amounts of money can add up over time.
5. Have a Plan and Stick to It
Millionaires plan to be financially independent. They devote their time, energy, and resources to building wealth. They create a financial plan and stick to their plan. Their goal is to be financially independent and they allocate their time accordingly to make this happen. It’s not about how much money you make but what you do with the money that you make.
Do you know anyone who is a millionaire, but you’d never know it by how they lived? What are some positive financial traits and characteristics they display on a daily basis? Contrast this with the 4 expensive habits that cost you money.
This is an article by Mark Riddix, an investment management professional and staff writer for the popular personal finance blog, Money Crashers. Check out the latest giveaway where you can file taxes online for a chance to win one of 3 Apple iPads by April 15th.
(Photo credit: Enkhtuvshin’s 40D)
Published or updated April 8, 2010.