There are numerous posts on this blog, and millions on other blogs and news sites, on the subject of what the rich do different, but it's worth repeating again, I guess. The principles are simple. Still, some two-thirds of Americans live paycheck to paycheck. For many, the act of using all of your monthly income to cover your monthly expenses — with no money left over and none for savings — is a fact of life.
Look, I've been there. It can be a mindset, and a trap. Best to get out of it if you're in it, as fast as possible.
Depending on the survey, the percentage of people living paycheck to paycheck runs from half of workers making under $50,000 (according to Nielsen data) to 74% of all employees (per recent reports from both the American Payroll Association and the National Endowment for Financial Education.) And almost three in 10 adults have no emergency savings at all, according to Bankrate’s latest Financial Security Index.Even many in the upper class are seeing their six-figure incomes slip through their fingers. The Nielsen study found that one in four families making $150,000 a year or more are living paycheck-to-paycheck, while one in three earning between $50,000 and $100,000 also depend on their next check to keep their heads above water.
If you want to build wealth, you cannot waste money on paying interest on consumer credit, such as credit cards and even car loans.
Because most credit cards charge notoriously high interest whenever you carry a balance, prioritize paying these balances off in full every month (and on time to keep a good credit score). Only charge what you know you can pay off and avoid store credit cards in general. (They are known for having low credit limits, high interest rates and limited usability.)
For the most part, cars depreciate in value the second you drive one off the lot.
Self-made millionaires typically buy, instead of lease, any new car with plans to hold onto it for a while. By keeping their cars long-term, they can use the time between car purchases to save up cash that would otherwise go towards a monthly payment.
If you need to finance the car, pay it off as soon as you can and plan to keep the car long after that loan is paid off.
Leveraging some of the below benefits can be helpful:
Employer retirement match: If you can afford to do so, make sure you are contributing enough to match any employer contributions. “The match is basically ‘free’ money to you,” Daugs says.
6. They don't try to keep up with the Joneses
When building wealth, fight the need to have the latest and greatest gadgets. So much money is wasted on constant ‘upgrades’ these days and can cost you both money and lost opportunity.
It’s only human to want to compare your life to others, but take another look at your lifestyle and budget, focusing on what’s most important for your own personal goals. These are your needs and wants that truly matter to your bottom line and happiness.
- Determine your income. Start with how much money you make after tax each month.
- Calculate Expenses. Let's break up your monthly spend into specific buckets
- Calculate the difference. If your expenses are already greater than your savings, you have 2 options
- Determine what to do with your savings.
- Make it a habit.
Self-made millionaires started by reducing their debts to increase cash flow and build their ‘rainy day fund,’ Once these were in place, they were then able to incorporate the other investment habits and really grow their assets.
No matter how simple or obvious a money habit may be, the point is that you stick to it. Discipline is key and with it you can build the financial future you desire.