While it’s tempting to believe that wealth is about being lucky, the reality is that it’s mostly about using God-given wisdom and developing the smart money habits.
If you can do that, and avoid too many foolish mistakes with your money, there’s a very good chance that you will have more money than you need.
And that is a good place to be in.
Because, while I strongly believe in sacrificial giving (giving when it hurts), there is no denying that when you only have 2 nickels to rub together, you can only give 2 nickels – at most.
But if you have a lot more, you can give a lot more. That is what I am aiming for.
So here are 9 money habits for you to start implementing today:
1. Live Beneath Your Means
This is the most fundamental habit of the wealthy. That’s because no other wealth building strategy is likely to work if you don’t get this one under control. Quite simply, living beneath your means will provide the capital that you will need to do everything else that will be necessary in order to become wealthy.
This means that whatever you earn, you will live on something less. You can set up a percentage, such as 70% or 80% of your income, that you will live on. The rest will be used to fund your efforts to build wealth.
This will mean living in a less expensive home than you can afford, driving an older car, preparing meals at home, and learning to enjoy inexpensive pleasures.
2. Pay God First
“But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” – Matthew 6:20-21
Not nearly all wealth exists on earth. You should want to allocate some of that wealth to your Eternal future. There’s an earthbound benefits to this as well – when you give money, you are demonstrating your ability to live without it.
That’s an important part of learning to live beneath your means, and avoiding the human tendency to allow money to rule your life.
Think of it as a process of letting go, so that you can concentrate on more important things.
3. Pay Yourself Second
Just as with the case of giving to God, when you “pay yourself” – which is allocating a percentage of your income to savings – you prevent yourself from spending it. That will help you to develop discipline to both live beneath your means, and to accumulate money.
Just as important, it’s a form of automating the capital accumulation process. When you immediately put money into savings, you develop a fast, efficient way of building capital. Basically, it takes the money out of your hands, and puts it where it will do more good.
4. Become Self-Funding
Or put another way, you should avoid debt. Any debt you avoid now will mean more cash flow in the future. That’s because debt payments reduce cash flow, and make it more difficult to accumulate savings.
This is another aspect of living beneath your means. You’ve heard it before, and you need to incorporate the concept into your own life – if you have to borrow to pay for something, you can’t afford it. And if you can’t afford it, you don’t need to have it.
Debt creates future obligations that you don’t need if you want to become wealthy. It also creates the kind of debilitating stress that keeps you from reaching your goals.
5. Invest, But Don’t Speculate
This means investing your money in assets that have a proven track record. That can take the form of investing your money in high dividend paying stocks or in index funds, rather than in individual stocks.
While it’s sometimes true that speculative investments can make you rich, it’s far more likely that they will crash and reduce your wealth. And since we all have a limited amount of time in this life, you don’t have time to be losing money. Better to invest on a slow and steady course, then to subject yourself to wild swings in investment values.
6. Diversify Your Investments
There’s no such thing as a truly all-weather investment. That’s why you need to have your money spread across different asset classes.
People sometimes get carried away during bull markets in stocks, and put all their money into the market. That can produce miraculous returns on the way up, but it can lead to painful crashes in wealth when the market reverses.
Spread your money across stocks, interest-bearing investments, real estate, and even commodities. Each of those markets will go through a bull phase at some point in the future. But since you can’t know when that will be, you need to be positioned in advance.
Diversification will make that happen.
7. Set Goals and Create Plans to Reach Them
One of the reasons why so many people struggle is that they set their minds on just getting by. Goals aren’t just arbitrary – they represent the definition of your endgame. In effect, they create a mission that defines your future course. And they are absolutely necessary if you want to have a future course.
Once you set goals, you have to develop workable plans to reach them. A goal without a plan is just a wish. A plan makes it real, by creating a series of steps that you have to accomplish on the way to reaching the goal.
Those steps are your action plan, and they should define what you do each day on the way to your goals.
8. Control Your Habits and Hobbies
We’re all creatures of habit, and that’s both a blessing and a curse. You’ll want to do your best to make sure that your habits are full-on blessings. That means that you have to develop habits that will move you in the direction of your goals. Bad habits are any forms of behavior that will either slow or reverse your direction. You’ll have to sort out your habits, and make adjustments as necessary.
Hobbies are another area of major concern. Hobbies can be good if they are recreational in nature, and enable you to “recharge your battery”. Exercise and reading are two good examples. But others can be destructive.
Hobbies that are enabling you to improve your game need to be emphasized, while those that drain your time, energy, and money, need to go.
9. Never Give Up!
Wealth-building is not necessarily a straight line forward. Along the way, you will experience failures and disappointments. You need to be prepared for those outcomes. But even more important, you need to be ready to move beyond them.
Many people start out with solid goals, plans and intentions, but they get distracted and discouraged by troubles along the way. Never allow those troubles to take you completely off your game.
What other habits would you add?
Let us know in the comments!
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Kevin,
These are all great Habits to leverage! I can attest to the power of each one.
One more Habit that you might consider is to Prioritize Spending. You mention in #9 that trouble come to all of us from time to time. By Prioritizing Spending, the most important items will more likely be covered before the trouble hits and lesser important expenditures will be sacrificed when the money runs out. This will lessen the blow of hardships.