Like most aspects of life, it’s difficult to get ahead without building and maintaining positive habits. This is especially true when it comes to personal finances. Just like forming good habits propels you forward, the inverse is unfortunately true for bad habits. If you’re continually spending before you’re saving, you’re severely diminishing your ability to build long term wealth. Follow these four financial habits that will help you build personal wealth.
Set Clear Financial Goals
Being able to set attainable financial goals is no easy-task. It’s common for people to shoot for the moon when it comes to wealth. While it’s great to be ambitious it’s equally important to be realistic. Just know that in order to truly build sustainable wealth, you need to start with baby steps.
As you start to achieve some of your goals and realize your earning potential you can begin to set more ambitious targets. Try to keep your goals concise and specific so you’re clear on when they are met. Take the following two goals for example:
- Goal A: Increase ROI on investments
- Goal B: Increase ROI on stock portfolio by at least 15% this year.
Goal A leaves the achievement open-ended while Goal B allows you to accurately determine if your goal was met or not. This will allow you to adjust wherever necessary when lining up your next goals.
Clear Your Debts
One of the biggest factors holding anyone back from financial stability is debt. People often like to put off their debt and pay it off over long-periods of time. Since debt continues to compound it often becomes one of your most expensive liabilities.
A good strategy is to pay off a little bit of your debt as soon as you receive your paycheck. If you’re consistent with this habit, you’ll be able to stay close to debt free and start putting money away into your savings.
Seek Multiple Sources of Income
Never put all your eggs in one basket. Even if you have a steady job, you should always be looking for alternative sources of income. If you limit yourself to a salary, then you’re capping your earning potential.
There are plenty of part time jobs or side gigs you can take on that will make extra money on the side. Stick to your areas of expertise so you can provide maximum value with minimal effort. If you’re a marketing whiz for example, you can offer consulting services or create and sell an online marketing course.
Ideally you can create a few passive income streams, which are instrumental in building sustainable long term wealth.
Don’t Fear Money
The absolute worst habit you can develop is the fear of money. If you’re more afraid of losing money than you are joyful about being rich, you have the wrong mindset.
In life most things are about our state of mind. When it comes to building wealth, you need to stay positive. Take these two mindsets for example: Both individuals are struggling to pay their bills, however one is afraid of money and one is not.
- Person A: Struggles every month to pay their phone bill. They continue to go to work because of the fear of losing their phone.
- Person B: Struggles ever month to meet their car payments. Continues to go to work with the joy of being able to one day purchase the car of their dreams.
The difference in mindset is very simple. You have to view money as a means to achieving your goals, not as your life blood. If you form good financial habits around a positive money mindset, then you’re well on your way to financial stability
In the end of the day, people will form habits best fitting to their lifestyle. If you’re looking to build personal wealth, start by building and maintaining these four financial habits.