Tuesday, April 8, 2014

15 Habits of financially successful people.




No matter who you are or where you’re from, you probably have the same financial goals as everyone else – to be comfortable and build wealth.  Lucky for us, we can learn from the habits and traits that successful people all share.  They have a certain relationship with money that allows them to get ahead, no matter what life circumstances, up’s and down’s in business, or fluctuations in the market they may face. Here are 15 habits that people who are well off and live comfortably all have.  They...

1. Diversify.
People who do well financially never put all of their eggs in one basket – they diversify their investments and income streams, whether it’s the stock market, real estate, or investing in their own company.  By diversifying, they minimize their risk and

2. Track and analyze their expenditures.
Financially successful people pay close attention to their financial picture.  They track all of the income and expenses, whether it’s by inputting them into a spreadsheet, saving receipts, or using tracking software.  This allows them to analyze their expenditures every month and reduce unnecessary or impulse purchases.

3. Live below your means.
Research consistently shows that the millionaire next door rarely is interested in showing off their wealth.  They believe in buying quality but then holding on to it for the long term, whether it’s their car or home.  They’re more interested in saving and reinvesting then throwing around “flash” money to impress other people and keep up with the Joneses.
 
4. Make moves for the long term.
People who live comfortably and amass wealth rarely are tempted by get-rich-quick scheme nor chase any shortcuts to wealth.  They don’t buy and sell assets frequently or expect short-term gains – they buy quality investments and hold them, with the eye toward cashing in way in the future or at least based on market fluctuations. 

5. Automatically save.
Not only do wealthy people save, but they save automatically.  Most often, putting a portion of their paycheck into savings is the very first thing they do, followed by funding investments and paying bills.  Savings isn’t an afterthought for the wealthy - it’s automatic.

6. Plan for every eventuality.
Financially comfortable people understand that life will throw them some twists and turns, and sometime tragedy, so they make sure they plan for all of it.  They get life insurance to cover their families, great health insurance locked in when they’re young, disability insurance, and leave a clear will.

7. Live within a budget.
Being smart with your money isn’t the same thing as being cheap or not having fun.  In fact, wealthy people often spend on vacations, luxury items, and fun for their families, but they plan it.  They budget carefully and exhibit the discipline to follow it, not giving in to impulse purchases.

8. Invest young.
One of the consistent traits of people who are financially comfortable later in life is that they started investing young.  Even in their 20’s or sometimes their teens, they understand the time value of money.  By putting money into 401k’s, Roth IRA’s and the like when they’re young, they benefit from compounding returns and a windfall as they get closer to retirement.  

9. Always have a solid emergency fund.
Financial planners always shake their heads at the lack of savings among Americans these days.  Despite all of our income, wealth, and big purchases like houses, boats, cars, etc., people still do not follow the golden rule of finances – ALWAYS have an emergency fund of at least 6 months expenditures (and a year is much better!)  There are so many people who look like they’re doing well but are one paycheck or a medical emergency or divorce away from losing it all because they don’t have an emergency fund.

10. Pay off bad debt.
One of the most important characteristics of financially stable and savvy people is that they abhor bad debt, which includes credit cards, installment loans, and any other high-interest type of debt (different than mortgages or business loans that serve a purpose.)  They understand that they’re basically renting money at an exorbitant rate, and all of the savings and investments are for naught if they’re giving the money right back through debt payments.  The first thing on any financial To Do list to analyze your debt load and come up with a viable plan to make extra payments, and “stack” or “snowball” principle, allowing you to pay them off aggressively.

11. Pay bills immediately.
People who are smart with their money never wait until the end of the month or the last days before the due date to pay their bills.  Every month, they pay all of their bills immediately, right after they automatically save and invest.  This eliminates interest charges and solidifies the financial discipline to budget carefully with what they have left.

12. Invest in education.
Being good with money doesn’t mean you have to be a financial planner or get a university degree in economics, but everyone should read books, magazines, and do their fair share of research.  No one is going to care about your money more than you will, and trusting slick-talking sales people or following hot financial trends and get-rich-quick infomercials are a surefire way to lose.  Instead, invest time and energy into knowing who to hire, what questions to ask, and the basic principles about the risks and rewards of investments. 

13. Set goals and plan.
Just like any achievements in life, setting tangible goals with concrete timetables and planning the action steps to achieve them is crucial to success.  People who are wealthy never get that way by accident – there’s always a history of goal setting and careful planning, along with consistent reevaluation of their plan based on changing circumstances.

14. Work with the best team.
Truly financially stable individuals want to work with the best financial planners, CPA’s and tax professionals, and attorneys they can find.  They understand that this may cost a little more, but it’s nearly impossible to get ahead with a second-rate team behind you.  They definitely resist the temptation to try and do everything themselves, which is about ego – not financial smarts. 

15. Focus on the right things.
It’s amazing to see a direct correlation with how someone lives their life and what they sow from it.  Financially comfortable people almost always understand that true wealth comes from things you can’t buy – their health, spending time with family, their faith, and giving back to charity and community.  Those are the things they cherish above all else, and somehow it helps the rest fall into place.





1 comment:

  1. Wonderful article! you just nailed it with this well researched and organized content. Almost all the points are valid. And so if you want to be successful businessman, you should adapt these valuable tips.

    ReplyDelete