The post 11 Millionaire Habits You Need to Practice appeared first on Millennial Money.
When you think of a millionaire, you probably envision a lavish lifestyle filled with expensive houses and flashy cars.
While some rich folks might live that way, not all of them do. The truth is that most millionaires are excellent at managing money and living a frugal lifestyle.
If you want to improve your financial situation, there are some millionaire habits you should consider emulating.
Who knows? By adding these millionaire money management habits to your bag of tricks and committing to financial self-improvement, you might even achieve millionaire status yourself.
How to start acting like a millionaire
- Save money
- Stick to a budget
- Minimize taxes
- Buy real estate
- Diversify your sources of income
- Become your own boss
- Avoid wasteful spending
- Get rid of your car
- Keep learning
- Control your time
Becoming a millionaire is like growing a garden. It’s all about planting your money (investing it) and cultivating it so that it flourishes over time.
The path to building wealth and achieving financial freedom begins with making smart investments. For most people, the only way to reach millionaire status on an ordinary salary is to pump money into the stock market.
Look into building a diverse portfolio full of growth stocks, index funds, mutual funds, bonds, and exchange-traded funds (ETFs). Minimize fees wherever possible as well as taxes through tax-friendly retirement funds like individual retirement accounts (IRAs) and 401(k)s.
- Index Funds vs. ETFs
- How to Buy Mutual Funds
- Stocks vs. Bonds
- How to Open an IRA
- How Much to Contribute to a 401k
2. Save money
Rich people are also great at saving money.
This may seem like an odd thing to do when interest rates are so low across the board, but the fact is that saving money is critical for financial success.
Don’t save to collect interest—that’s essentially pointless because you can earn much higher returns in the market.
Instead, you should be saving to cover emergency expenses and to fund projects like launching a business, buying real estate, and paying for large-ticket items when you need them (like cars, lawnmowers, and home repairs) without having to take out loans.
Save as much as possible and put the money into high interest-bearing accounts to get as big a return as possible. Look into high-yield savings accounts (HYSAs) from online-only banks like Ally.
3. Stick to a budget
If you want to attain millionaire status, you’re going to have to stick to a budget. It’s that simple.
This may not seem like the most exciting idea in the world, but it’s reality.
Forming a budget requires coming face to face with the fact you have limited financial resources, and you need to protect your money. If you don’t stick to a budget, you could easily lose your wealth by falling into debt and overspending.
Fortunately, forming a budget is easy thanks to apps like You Need a Budget (YNAB) and Personal Capital. Another great platform is Mint by Intuit.
- Why You Need a Personal Budget
- Personal Capital vs Mint
- The 6 Best Budgeting Apps for 2021
- YNAB vs. Mint
4. Minimize taxes
Ask any millionaire about the key to financial success, and you’re bound to hear a similar refrain: It’s less about how much you make and more about how much you keep.
If you want to live like a millionaire, you have to minimize taxes.
Consult with a tax advisor and start looking for ways to cut back on what you have to pay to the government. A tax advisor who knows the tax code inside and out can give you advice on what you can do to start minimizing what you owe the government.
5. Buy real estate
Buying real estate is one of the best ways to minimize taxes in the long run and to improve your net worth in the process.
When you buy an investment property, you can claim many tax credits since a house is a depreciable asset. You can write off everything from marketing the property and paying for maintenance and repairs to utilities and mortgage interest.
There are a few different ways you can invest in real estate. You can buy a rental property and offer the place to tenants, or you can buy a house at a low rate and flip it for a net gain.
You can also invest in real estate investment trusts (REITs), which are shares of companies that own commercial properties. REITs offer a lower barrier to entry for people who want to get involved with real estate.
6. Diversify your sources of income
Monthly income is one of the most important assets to protect.
The only way to become a millionaire is to keep money flowing in on a regular basis. When the money stops, this can lead to a variety of negative consequences. You can fall behind on payments, slide into debt, and be forced to liquidate investments, among other bad outcomes.
As such, the best thing to do is to diversify your streams of income.
For some people, this may involve starting a side business or picking up a side hustle like walking dogs or managing social media. Some people go even further and get two or three side hustles, effectively doubling their salary in the process.
Other ways to diversify income include real estate (through passive income from tenants) and investment accounts. Eventually, you may get to a point where the money you collect starts to accrue large monthly payments on its own.
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- How to Make Money on the Side
7. Become your own boss (when the time is right)
There is nothing wrong with working for someone else at the beginning stages of your career. Getting a steady paycheck can set you up for financial success by giving you a foundation while you develop your skills.
Eventually, it’s a good idea to break free when you can. Start with a side hustle and eventually become a business owner so you can stop working for others and begin making yourself money.
There’s no rush to doing this. But it can open up a world of advantages including tax breaks, higher income, and more freedom.
8. Avoid wasteful spending
There’s nothing wrong with spending. It’s part of being a consumer. Even the savviest financial wizards still need to shell out a couple of bucks a month on basic necessities.
That said, there’s a difference between spending wisely and throwing money around left and right—which can be tempting as you start bringing in more income.
The trick is to live the same cost-conscious life as you start earning more so that you can put more money aside for growth. This requires discipline.
Take a fresh look at your budget and consider eliminating certain wasteful spending habits. You don’t have to go overboard and stop going to bars with your friends or taking occasional trips. Just be practical.
For example, cook at home instead of ordering out three times per week. And you probably only need one streaming service, not three.
9. Get rid of your car
Sorry, auto enthusiasts: A car is a money pit. If you own a car, you should strongly consider getting rid of it.
Sure, millionaires own cars. But if you want to get to that point, you need to be careful about your finances.
Owning a car can drain your bank account due to car payments, maintenance, insurance, gas, and parking fees. And draining your bank account can contribute to stress and make you miserable.
Look into public transportation options in your area, and consider using rideshare services like Uber and Lyft more to get from place to place. You can also carpool to get to work, walk, or get a bicycle. It may even be worth moving closer to your office or working from home to cut down on your commute.
Lose the idea that you need to have a car. Unless you live in an incredibly isolated rural area, the truth is you might not need one at all.
Throughout your life, you have been taught that you need a car. But financial independence is all about breaking bad habits and shredding tired ideas that are out of touch with reality.
10. Keep learning
Consider spending less time watching videos and playing games (unless you’re making money through Swagbucks or another cashback rewards program). It’s time to put that brain of yours to work.
Successful people are constantly reading self-help books and blogs, listening to podcasts, and discovering ways to grow.
Start putting The Motley Fool’s financial podcasts on your to-do list. You may also want to look into Vicki Robin’s “Your Money or Your Life” or “The Millionaire Next Door” by William Danko. Thomas C. Corley’s “Rich Habits: The Daily Success Habits of Wealthy Individuals” is another bestseller to check out on Amazon or at your local library.
11. Control your time
As an aspiring millionaire, your most precious asset isn’t money. It’s time.
You have decades ahead of you to accumulate money and collect compound interest and gains. Every day you waste is ultimately costing you money.
At the same time, you should be cognizant of how you spend your days. You only have 24 hours in a day, and you need to maximize your schedule if you want to become a millionaire.
Chances are you can squeeze more work into your workday, more learning, more investing, and more personal development into your daily routine.
If you take these steps and change your habits, abundance is sure to follow.
Frequently Asked Questions
Is debt bad?
Not all debt is bad. Some debt, like real estate mortgages, can be used to your advantage since it allows you to access low interest rates while generating potentially strong monthly returns.
If used successfully, debt can be a financial launchpad. You want to minimize bad debt like credit cards, which come with high interest. It can be impossible to get out of credit card debt once you’ve sunk into it. So, avoid credit card debt as much as possible.
If you use credit—as you should—pay down your monthly balances in full each month, and don’t let them carry over. Otherwise, your bank accounts can be drained before you know it.
Can anyone become a millionaire?
Anyone can become a millionaire with multiple sources of income, the right financial management strategy, and time at their disposal.
When you’re young and struggling, the idea of becoming a millionaire may seem impossible. And while it’s not easy, the fact is that it can be done.
Form a strategy, maintain discipline, work hard, let time take care of the rest, and you’ll greatly increase your chances of becoming a millionaire.
However, if you keep squandering time and clinging to practices that no longer serve you—like binge-watching Netflix every night instead of making money—quite frankly, you may never become a millionaire.
If you want to achieve financial abundance, you have to take ownership of your finances and make it a priority. That’s all there is to it.
Do I need a budget?
You absolutely need a budget, regardless of your financial situation. All this requires is looking at what you’re bringing in on a monthly basis and tracking where your dollars are flowing.
People often associate budgeting with living a reduced lifestyle. But the fact of the matter is that budgeting can open doors and give you more to work with.
Add it all up, and budgeting is one of the best personal financial decisions the average person can make.
Should I invest?
This is a question that only you and your financial advisor can answer. But the short answer is that it’s probably a good idea.
Investing can be risky, and it’s not for everyone. But it’s the only way to make substantial gains over time.
If you put all your money into savings accounts that produce little to no interest, you’re going to be disappointed down the line.
The Bottom Line
As they say, there’s no reason to reinvent the wheel.
Getting rich is not rocket science. All you have to do is look at what wealthy people before you did and copy their approach. For example, look at financial experts like Warren Buffett.
Develop good habits, set lofty personal finance goals, and you can definitely make a lot of money.
You may even make the cover of Forbes one day for your personal achievements!
When it boils down to it, you can do anything you set your mind to, including reaching your financial goals. So get to work, make a lot of money, and invest it wisely. With the right approach, you’ll build wealth over time and reach millionaire status before you know it.
The post 11 Millionaire Habits You Need to Practice appeared first on Millennial Money.