Everyone is earning money somehow or the other. But when we talk about building wealth it does not only mean earning money or saving a small amount from it every month. It is much more that. So, we have picked out some very important financial habits that you need to follow now in order to build your wealth not only for a secure future.
Let us simply admit the fact that no one has ever spoken to us in our school or even our college about how we can build our wealth through multiple investment opportunities. If you are a teenager reading this or have just turned 18, do stick with us till the end since this is all you need to get things started.
It really does not matter how much you earn, either be it a $1000 or a $1 Million, you need to be able to adapt some basic financial habits or tricks to look forward towards growing your wealth in every step of the way. Here are 3 major financial habits you can adapt.
3 Financial Habits That Can Make You Wealthy
Before we can dive in to the three most essential money habits that are followed by millionaires themselves, make sure you understand that we have been doing our research to help you learn and grow. With these tricks and tips you will only be more open towards talking about money with people around you.
1. Set a Financial Goal
What comes first in your mind when we say Financial Goal? Is it setting an year plan or a retirement plan or simply a specific plan till you reach a certain age? It includes all of the above and more. You need to start off with setting a Financial Goal no matter where you are right now in your life or how much money you earn.
For example, if you are married and have a student debt as well as looking to own a house of your own someday. All of these needs to be planned and sorted out before you can start spending money on all the unnecessary things around you. Your Financial Goals might look somewhat like this.
- Pay $50,000 Student Loan in a year
- Increase your Income with $40,000 this year
- Save $100,000 for a new home for next 2 years
These are a rough idea on how things look like when you have a rough sketch in your mind. It does not only apply to those who are married or adults. If you are a teenger, you can set up a goal to save up a small amount of money every week to buy a PC for yourself in the next 6 months. All of these comes under short-term planning and long-term planning.
2. Create an Emergency Fund
For all of those reading this here, a huge percentage might never have thought about having an Emergency fund before. To be more clear, Emergency funds are meant to be created as a small part of your income that can be easily accessed in times of emergency such as Medical Bills, broken appliances, etc. It could mean anything when you have not enough money currently in your bank account and you need a significant sum of money at this hour.
With so much going around in the world, people are losing their jobs and it is under such circumstances that you might remain unemployed for more than 3 months. Hence you need an emergency fund that can easily cover up your basic living expense for around six months or so. It might sound a little too much at first but it is needed.
A lot of people fall into massive Credit Card debts due to such emergency situation since they never planned out beforehand. These emergency savings or funds are more of an insurance policy rather than simply falling into Credit Card debts that you may never be able to repay.
Now, this fund depends from person to person and is entirely on your income. You need to take out a small portion of your time and plan out things. The best ways you can keep this money is either by keeping a small portion as cash with you, investing some, and the other portion with your bank.
3. Invest, Invest, & Invest More
There is no better to say this, but if you have not started investing your money with everything you are earning, you are falling behind in meeting any of your financial goals. By Investing, we surely do not mean saving money. Those are completely different aspects.
Many people you will come across consider the investment as passive income. Well, we cannot disagree with this since it is only helping you build your wealth while you earn money through your job. Moving on, keeping aside all the expenses, emergency funds, insurance money, bills, etc, you need to invest a good sum of money every month to be able to use the money to meet your long-term goals such as buying a house.
One example we can look at here is that we have come across people who invest around 90% of the total money they earn. It does sound unrealistic but those who have little to no expense and are living with their parents can think of doing the same. Similarly, you can decide what part of your money should go into investment options such as Shares, Real Estate, Bonds, etc.
Let us take the example of someone who is earning $50,000 a year. As an early investor, you can start off by being clear in your financial short and long-term goals. Any investor you might come across will advise you to spend at least 10% – 15% of your income towards savings. This will easily come up to $500 each month. After extensive calculation, you can easily have a $1 Million at the age of 65 that will only help you clear of all your debt and achieve your goals.
What Have We Learned So Far?
Before we can conclude here, there is another important Financial habit that you might want to look at which is equally important. That is creating a brief yet detailed report of your inflow and outflow of money. This means all your subscriptions, spending, bills, luxury, vacations, and everything else. It will only help you to cut on unnecessary things and have a smarter financial plan for the future.
Now, since we have enough ideas to get things started with, make sure you have everything planned out. If not long term yet but short-term goals help to reach the long term plans as well. Moreover, with every penny you save, you get closer to all your goals. Plan, create emergency assets and invest. That is all you need to know as someone who might have no clue about money and more.