Have you ever heard of the phrase “The rich get richer and the poor get poorer”? I am talking about the self-made millionaires, not the famous actors and athletes who lose all of their money the moment they fall out of the spotlight. The rich spend money in a very different way. Their purchases have purpose or potential to make even more money. They don’t buy fancy cars or extravagant homes unless they can claim them as business expenses or use them to make more money. They constantly invest and only buy what they need. Here are 7 millionaire habits that could change your life:
1. Budget
Use a free personal finance app like NerdWallet, Mint, or Personal Capital. These apps allow you to track your net worth, debt, income, cash flow, and credit score. You may be surprised to find out that you have been spending $100 per month on Starbucks or almost $2000 per year on subscription and streaming services like Nest, Netflix, Hulu, Amazon Prime, Google Drive, and Apple TV.
If you know your loan and credit debt and how much interest you are being charged, and if you know where your money is going, you will probably forgo that cup of Starbucks coffee or re-evaluate what subscriptions are most valuable to you. Check out my Full Throttle & F.I.R.E. budgeting spreadsheets or subscribe to our monthly newsletter to get a free copy of my envelope budgeting spreadsheet.
2. Track Your Net Worth
Along with budgeting, you should track your net worth. This takes your total assets and subtracts your total liabilities to get your net worth. Download my Net Worth Tracker here. Tracking your net worth will help you with the next habit.
3. Create Financial Goals Each Year
At the start of each year, I work on my New Years financial resolutions. I assign a target for my net worth growth by looking at how much debt I want to pay off and how much money I want to earn by the end of the year. This also includes what investment or bank accounts I want to open and consolidate.
4. Invest, Don’t Save
The rich don’t hold cash. Their savings accounts typically hold 3-6 months of emergency funds. All of their cash goes into something that makes them money. It can be a collector car, a watch, precious metals, jewelry, the stock market, real estate, and business investments.
5. Borrow With Intention To Make Money
Those self-made millionaires usually hold lots of mortgage debt, life insurance debt, or home equity line of credit debt. This is typically known as good debt in the finance world. This low interest debt is used to invest and earn a higher return than the cost of the loan. For example, you can request a mortgage with an extra $20,000 in cash @ 4.5% so you can invest that $20,000 in the stock market at a return of 8%. Your net earnings would be 8% – 4.5% = 3.5%. You can also use Velocity Banking to pay off your amortized mortgage using a home equity line of credit so you can save hundreds of thousands in interest payments over the life of the loan. Subscribe to learn more about Velocity Banking. I talk about it often and I am using it to pay off my home in under 7 years. I have 4 years left.
6. Financial Education
The rich are smart about making money. If they are not, they have a really good financial advisor and tax accountant. They are well educated in personal finance. They know how to make money and how to save on taxes. The more you read about personal finance, the more money-making opportunities you would find.
7. Time Management
There is a good chance you won’t find rich people cutting their own grass. That is because it takes time and time is money. Anything that can be outsourced will be outsourced so they can focus on earning more money.
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