Anyone can be rich but in order to be truly wealthy, one has to adopt good Money Saving habits.
Here’s a little pop quiz for you. Let’s say Stella makes $500,000 a year but has nothing saved and is in massive debt. Now, let’s say David makes the same amount but has $2,000,000 saved with zero debt.
Which person do you think is truly wealthy? The answer should be obvious. David of course.
This same rule of thumb can be applied to many different income scenarios. An individual with a $50,000 a year income can be wealthier than someone making $200,000 a year. What does it mostly come down to? Your Money Saving Habits.
When I talk about Money Saving habits, I’m not only referring to direct habits that influence how much money you save. I’m also referring to indirect habits that will have a positive impact on your finances in the long run, for choices you make today. I will elaborate on this shortly.
Here I discuss direct and indirect Money Saving habits of the truly wealthy people:
1. Wealthy People Have A Positive Money Saving Mindset
Wealthy people tend to have a positive money mindset. This leads them to make better financial decisions which results in more savings and less debt for them. Regardless of income, you will never become financially free with an unhealthy mindset about money.
Your money mindset is your individual set of beliefs about money. More specifically, it shapes your attitude around money, and ultimately, is the driver of your financial behavior.
A healthy money mindset will allow you to take control of your finances so that you can reach your financial goals. An unhealthy money mindset will allow your finances to take control of you resulting in you feeling hopeless and helpless.
If you have a negative money mindset, here’s a step-by-step guide on how to change that: 7 Bulletproof Steps To Transform Your Money Mindset.
2. Wealthy People Follow A Budget
A big misconception some have is that rich people don’t have to budget. This couldn’t be further from the truth.
While it’s true that a person does not have to budget, the ability to create and follow a budget is something that wealthy people often do. In fact, contrary to popular belief, wealthy people live a frugal lifestyle when you look at their expenditures in relation to their earnings.
They tend to save and invest the majority of their income while incurring little to no debt thus increasing their net worth.
Net worth is defined as assets minus liabilities. So if someone has $100,000 in assets but has $200,000 in debt, their net worth would actually be in the negative.
The wealthy are always in control of their finances. In order to take control of your finances, you have to be in control of your budget. Making a budget is the first step in this process. Without a budget, it becomes very difficult to save.
If this is something you struggle with, check out my article on How To Create A Budget That You Can Actually Stick To. I cover exactly how to create a realistic budget that will work.
You can get my FREE Downloadable Budget Spreadsheet to get started.
3. Wealthy People Live Within Their Means
When looking at a wealthy person’s belongings, people are usually quick to assume that it’s all a facade. That the only way a person can afford those luxury items is by incurring massive debt.
While I agree that it is the case at times, it definitely does not apply to all. A wealthy person understands money. They understand what they can afford and what they can’t. They understand how to live within their means.
Living within your means basically means spending less than you earn.
Sounds simple, however, a large portion of the population are not following this basic rule. This is the main reason why a lot of Americans are reliant on credit cards to supplement their income.
In this article, 3 Insanely Easy Tips On How To Start Saving Today, I cover this topic in great detail. I go over exactly how much you should be spending on different necessities and how much you should be saving.
4. Wealthy People Prioritize Spending
Another positive money saving habit that the wealthy have is their ability to prioritize their spending. They always pay their bills and save first, then spend later.
Once you get into the habit of doing this, it becomes a no brainer. When creating a budget make sure you are always allocating a minimum of 10-20% of your monthly income towards savings.
Look at that as a payment to yourself. With a budget, you will know exactly what you have left each month to spend on entertainment expenses after you have paid your bills and yourself.
5. Wealthy People Avoid Impulse Buying
Most wealthy people do not impulse buy, especially when it comes to large purchases. They tend to wait a little bit to contemplate if it’s something they really want or need.
It is extremely important to understand the difference between a need and a want. A need is essential and something needed to survive. A want is something that you desire but isn’t essential.
For larger purchases, make a commitment to wait a minimum of 24 hours prior to making a decision.
If it’s something that will incur a monthly payment, add it into your budget to see if it makes sense. If after adding the payment into your budget it takes away from your ability to pay your other bills and/or save, then don’t make the purchase.
Once you get in the habit of doing this, it will come naturally to you.
6. Wealthy People Have An Emergency Fund
An emergency fund is crucial for everyone to have in order to avoid going into debt. We all have emergency expenses that come up from time to time.
If you don’t have the funds to cover those unforeseen expenses, you will likely turn to credit cards to help.
That is why having an emergency fund is extremely important and something all wealthy people have. The goal is to save a minimum of 3-6 months worth of expenses.
If you don’t have money saved and would like to start saving but don’t know where to start check out my article on How To Save Money.
7. Wealthy People Maintain Good Credit
Earlier I talked about direct and indirect money saving habits. Maintaining good credit is an indirect money saving habit that is also very important. Let me elaborate.
People with good credit will get better rates for things like homes and cars. Better rates means lower payments and less money paid out in interest.
Lower payments will help free up more money for savings. Lower interest rates will also mean less money spent on interest over the life of the loan.
Having and maintaining good credit is something everyone should strive for. In addition to getting better rates, it just makes life easier when it comes to purchases that need financing.
If your credit is already good, then just continue to maintain it. However, if you don’t have good credit and would like to improve it, check out my article on 8 Ways To Rebuild Credit.
8. Wealthy People Invest Their Money
Make your money work for you by investing your money regularly.
Whether investing in mutual funds, stocks, or businesses, wealthy people are always finding ways to make their money work for them.
After you have established an emergency fund, I highly recommend investing your money. If your company offers a 401k plan, look into that or speak to a financial advisor about your other options.
Investing your money will ensure financial security for your future. The sooner you invest, the better.
It takes an average of 66 days to make a habit. If you apply these money saving habits to your financial routine, your ability to save and reach your financial goals will drastically improve.
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