What sets us apart from self-made millionaires? The obvious answer is money, but the surprising truth is that most millionaires simply have better money management than other people. Read on to learn about financial habits of millionaires that can put you on the path to becoming a millionaire yourself.
1. They Set Financial Goals
One self-made millionaire said, “Someone once told me, if you don’t know how you’re going to spend your money, then you’re never going to make that money.” Most millionaires set financial goals for both the short and long-term. They make it a priority to plan for the next couple of years as well as many years down the road. This way they can adjust their investments and their spending habits in order to meet their goals. Set aside some time to think about your financial goals for this year, in 5 years and 10 years and then find out what steps you need to take to reach them.
2. They Live Below Their Means
Self-made millionaires exhibit a strong sense of self-control...otherwise they wouldn’t be millionaires. Most did not come from wealthy families so they have a keen sense of their “wants” and “needs” and they are able to live well below their means in order to save money. Rather than upgrading their house and car each time they got a raise, instead, most continued to live the same way and save more money until they achieved their intended goals. According to Business Insider, the median millionaire saves 64% of their income. Consider ways that you can live below your means in order to set aside more money for your savings or investment accounts.
3. They Make Investing Automatic
In order to get to where they are financially, many millionaires set up automatic transfers from their bank account to their investing accounts. When you set up automatic payments to investment accounts your money can grow without you having to touch it. Of course most millionaires check their portfolios quite regularly, but they automate the transfer of funds so that it is one less thing to worry about. As your income grows be sure to increase your automatic transfers to investment accounts accordingly.
4. They Have A Growth Mindset
A growth mindset is the idea that you can develop your abilities. This is in contrast to a fixed mindset, which holds that intelligence is static. People with a growth mindset are continuous learners and are persistent in the face of obstacles. They are open-minded and they learn from criticism as well as mistakes. This allows millionaires to achieve goals that others may shy away from and to have grit, or perseverance for long-term goals. Learn more about the growth mindset and how you can develop it to reach your financial and life goals.
5. They Sacrifice In The Short-Term
Many self-made millionaires sacrificed for a few years before they were able to get comfortable and settle down a bit. Their work-life balance suffered while they developed their careers or their businesses. They kept their focus on their goals despite enduring hardships. Having a solid work ethic and toughing it out until you land your dream job or your business takes off may be a necessary stepping stone to success.
6. They Have More Than One Source of Income
Business Insider found that the majority of the millionaires they surveyed had multiple streams of income, including from real estate, dividends, side businesses and other investments. Having multiple sources of income provides a safety net in case you are laid off or furloughed, which is especially important in the current times of the Coronavirus pandemic. Even in times when the economy is strong, having more than one source of income allows you to grow your savings and take some weight off your shoulders. This prevents people from taking out loans or racking up debt in times of crisis.
7. They Save A Lot of Their Income
Many millionaires are known to save (or invest) the majority of their income. This goes hand in hand with living below their means. While they might not all have a budget simply because they no longer need to, most did follow a budget when their finances were tighter. As their income grew, many did not change their spending habits so the extra money went straight to savings and investment accounts. As you earn more money try to avoid changing your lifestyle and spending habits so that you can save more.
8. They Make Low Cost Investments
There is some prejudice that millionaires all make risky investments and happen to get lucky. While that might be true for a select few, most millionaires simply climbed the corporate ladder and advanced their careers or started their own business while keeping their spending under control. When it comes to investing, many claim that they prefer low cost investments such as stock index funds so they don’t have to continuously monitor the market.
9. They Invest In Their 401(k) From A Young Age
Your 401(k) is a valuable tool to growing your net worth. If your employer offers a company match you should be maxing it out to get the full benefit. If you start to save for retirement in your 20s or 30s, you’ll have more money in your pocket when you retire than if you saved the same amount later in life. This is because of compound interest building over time. Read Start Saving For Retirement In Your 20's: Here’s Why & How.
If you want to achieve financial freedom try to start following some of these habits. It will take commitment and self-control but if you set your financial goals and stay dedicated to them you can achieve whatever you set your mind to.
Financial freedom begins with good habits!
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