9 habits that will help you build wealth

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How To Build Wealth As A Normal Person

While most people wish that they get to inherit large amount of money from some wealthy relatives or be promoted to a high income job so that they can one day become wealthy. The truth is that we have more control in our financial aspect than we think. It all comes down to how we spend our earned money.

According to Nancy Butler, a Certified Financial Planner™, most people earn more than a million dollars over their entire working time but not everyone becomes a millionaire. In fact, how people manage their finances really matter.

Here are the 9 habits to help you build wealth.

Read below.

1. Reverse your thinking.

We know: After taxes are taken out and the bills are paid, your paycheck can seem a little anemic — which can make the idea of having to save for retirement too seem like a real stretch. But to build wealth, a change in mindset is required. Namely, instead of spending the rest of your take-home pay, you’d actually take another cut of your paycheck and put it toward your biggest financial goals.

“Most people spend some money, pay their bills and save what’s left,” says Butler. “And that’s backwards: You should be saving for your financial goals first, paying your bills and and then consider spending the money you have leftover.” Another trap is putting your good money habits off till “later,” when life will get easier. The thing is, somehow the minute your income increases, the demands on your money seem to as well.

Now, keep in mind, we’re not suggesting you sock all of your money away and live on rice cakes. As Blaylock puts it: “I’m not asking you to put $1,000 away a month, I’m asking you to put away $50, or a small amount that you can afford. We really can’t underestimate the power of starting small, because most of the time that momentum builds, and once we see progress, we tend to repeat behaviors.”

2. Look where you want to go.

Just as performance athletes imagine themselves making the shot over and over again — check out this study for how goal setting improves motivation in athletes — knowing what you want your money to do for you gives your goals a better chance of being reached.

To get going on saving for the future, financial experts often suggest having a five-year plan, where you create specific money goals you’d like to achieve in five years and what you need to achieve those goals. (That is the goal of LearnVest’s 5-Year Planner.) For example, saving six months of income for an emergency fund, or saving for a big event, like a down payment on a house.

“Anytime we have a specific goal in mind, that helps us to save,” says Blaylock. “Whether that goal is emergency savings, or saving for a trip, or saving for college, it doesn’t matter.”

3. Adopt your own private mind tricks.

What if not spending $1,000 on a designer purse or new must-have gadget were as easy as following a rule that dictates you can’t spend more than $300 on something that isn’t essential to your life? The good news is you can create financial rules just like that for yourself; in fact, doing so can be a great habit to get into.

Also known as “heuristics,” these rule-of-thumb strategies we create for ourselves — such as not spending more than $15 on an item of baby clothing, or more than $50 on a pair of shoes — can help simplify the many choices we make in a day. Behavioral economists believe that adopting good heuristics can help one develop good money habits (see this piece for more on how and why they work).

If creating a great heuristic seems like an overwhelming task, Blaylock suggests starting with something simple, such as eating out only twice a week, or “not getting a cart at Target,” a heuristic that helped one of his colleagues save money.

4. Live like a ‘secret’ rich person.

For some, the image of a millionaire conjures visions of sprawling mansions and shiny Bentleys. But most millionaires don’t live large like that — rather, they tend to live well below their “means” and do more saving than spending. In other words, they’re not flashing their money, according to Dr. Thomas J. Stanley, co-author of “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy.” Stanley’s book, which details more than two decades worth of surveys and personal interviews with millionaires, reveals that much of the wealth in America is more often the result of hard work, diligent savings, and living below your means.

Las Vegas–based David Sapper, who owns a successful used car business, and his real-estate broker wife make a combined income of $500,000 per year. Yet they live like “secret” rich people, only spending $2,500 per month on all bills and extracurricular expenses like eating out, unlike many of their peers. By putting 90% of his income into savings and investments, Sapper says he’ll be able to retire early.

His advice? “Find the point that you get what you need and you’re happy and comfortable, and just stay there,” says Sapper. “I had an ‘aha!’ moment when I was watching MTV, and LL Cool J was saying, ‘I lease a Honda Accord for $399 a month,’ while other rappers are going broke.”

 

Check Business Insider for the full story.

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