Everyone of us would like to have more money, but what makes the wealthy have so much more of it than the rest is the different habits and ways of thinking. These habits are most obvious when it comes to money management. These are some of the financial decisions that the wealthy make that keeps them rich – apply them in your daily life and save more of your money.
- Use the millionaire’s formula: Regular people remove their estimated expenditures from their incomes and then save what’s left. Wealthy people do the opposite and it’s called the millionaire’s formula. When you get your income, a portion goes to giving back to society, the second portion is for savings and investments, and what is left is spent. According to billionaire Warren Buffet, “Do not save what is left after spending, but spend what is left after saving.”
- Don’t buy to impress: “Stop buying things you don’t need, to impress people you don’t even like.” – Suze Orman. Everyone likes to own nice things, but our purchases should have limits based on what we can afford and whether or not we really need those items. Wealthy people don’t make purchases(especially if they can’t afford them) on things that aren’t necessary, with the sole aim of impressing people.
- Don’t spend impulsively: This goes hand in hand with not buying to impress. Everyone of us had made purchases on impulse before, be it in a mall, open markets or in online stores. The wealthy, however are masters in delayed gratification and as such can hold back on making impulsive buys. Studies show that people who can delay instant gratification for a better deal in the future reflect this in all aspects of their lives. They have lower BMIs, lower rates of addiction and a lower divorce rate.
- Small expenses pile up: Everyone is wary of purchases that take huge chunks out of our wallets, but we’re less mindful of expenses that seem “small”. Most of us forget that these smaller expenses are like little droplets that if left unchecked could easily add up to make a flood. Like wealthy people, “Look everywhere you can to cut a little bit from your expenses. It will all add up to a meaningful sum.” – Suze Orman.
- Be clear on the difference between wants and needs: Wealthy people know the difference between things they just want and stuff they need to move forward. A new house, a flashier car, a more expensive outfit…are they really necessary? Or do you just want them because they make you feel affluent and admired? Instead of spending large amounts on unnecessary items, wealthy people put their money into ventures that will earn them even more money.
- Track your spending and invest wisely: Most people don’t know how much they’re spending on a daily, monthly or yearly basis. When you begin to track expenses, you’ll realize immediately that you’re overspending on unnecessary items or what you can get cheaper elsewhere. When you begin to save more, instead of letting your money sit idle, let it work for you by investing it properly.Also read: How to make your money work for you.Little savings here and a good investment there will eventually yield results that will surprise you. In the words of P.T. Barnum, “A penny here, and a dollar there, placed at interest, goes on accumulating, and in this way the desired result is attained. It requires some training, perhaps, to accomplish this economy, but when once used to it, you will find there is more satisfaction in rational saving than in irrational spending.”
- Stay out of debt: Wealthy people don’t borrow money or use credit cards if they can’t pay them off. They make sure they live well within their means and don’t spend large sums – except in investments that will eventually generate more money for them. If you don’t have it, don’t spend it period! Wealthy people would rather go without than spend money they don’t have and so should you.