We’ve all heard the term “get rich quick.” In most cases, this is more of a dream than a reality. Shortcuts to accumulating wealth rarely pay off, unless you won the recent Powerball Jackpot. A strong financial foundation has to be paved and maintained. While there may not be easy shortcuts to financial confidence, here are five financial habits that can lead toward greater wealth.
1. Live Below Your Means
If you want to build your wealth quickly, you need to spend significantly less than you earn. While this may seem like obvious advice, for most Americans it’s an effort they are preaching but not practicing. A shocking 55% of Americans are actually living within their means according to a 2015 Pew Charitable Trust poll. Living frugally means spending your money on needs, not wants. Take a detailed look at the money you have coming in and what is going out. What are you spending your money on and which costs can you reduce or completely eliminate? Start cutting back on unnecessary expenses and monitor your spending every week. Eventually, spending less will become second nature.
Create a budget and stick to it. A budget helps you establish parameters for operating your household, understand if your goals are achievable in your desired timeframe, and may contribute to reducing stress in the event of an unexpected incident, such as the loss of a job or an injury.
2. Set Big Goals (and Small Milestones)
Don’t be afraid to dream big financially. Consider how much you want to have saved five years from now. What if you could save $100,000 in the next five years? Having a big goal in mind can inspire you to stay on track. To avoid getting frustrated along the way, celebrate small milestones, such as reaching $5,000, $10,000, $25,000, and so on. Reevaluate your goal every year to ensure you’re on track and make adjustments as needed.
3. Save Early and Often
One of the biggest benefits of saving early and regularly is the power of compound interest. If given the choice, most people would choose to spend less money on achieving their goals so that they have more money to pursue their passions in life. Compound interest helps the money you put away grow faster due to interest building upon itself. You can make your money work smarter rather than harder to pursue your goals.
If you procrastinate and delay saving, you not only lose out on your money working for you, but you also make it harder on yourself. You’ll also have less time on your side, so you will have to save more money and may have to increase your tolerance for risk in order to achieve your goals.
4. Be Money Conscious
Avoid settling when it comes to bills and service payments. As you work toward your financial goals, find opportunities to speed up your savings. Are there any loans you can pay off faster or refinance? Can you forgo cable television or find a less expensive Internet provider? Are you using your gym membership enough to justify the price, or can you instead take advantage of the great outdoors?
Once or twice a year, review your subscriptions, memberships, and recurring bills. You may find subscriptions to magazines you no longer read or memberships to services you don’t need. You’d be surprised just how much you can save every month by cutting down on recurring services. Being money conscious doesn’t mean being stingy. It means you are aware of how hard you work for your money, are conscious of what things cost, and mindful of how your actions today will impact your future financial situation.
5. Avoid Debt Like the Plague
An important step in building your wealth is reducing your debt. Many of us face some form of debt, whether it’s student loans, car payments, or a mortgage. Make a list of all of your debts, including loans and credit cards. Include the interest rates and balance for each loan. As you look at your list of all of your debts, compare the interest rates and balances. If you have a loan with a significantly higher interest rate than the others, you may want to work on paying off that one faster than the others. Or, if you're feeling overwhelmed by debt, try paying off the loan with the smallest balance first, no matter the interest rate, to gain some momentum. Along with paying off debt, avoid accumulating additional debt. Stick to a minimum number of credit cards and, as shared earlier, spend on your needs, not wants.
6. Work with a Financial Advisor
In fitness, having a workout partner can double your performance. Having a partner holds you accountable and inspires you to push harder, even when the going gets tough. It’s easy to slack on adhering to your budget or slip up on following your goals when you don’t have someone holding you accountable. This is where a good financial advisor comes into play.
An advisor not only helps you stay on track, but also can provide knowledgeable advice, tips, and answers to your greatest financial questions, including:
Should I start investing or pay down debts?
How much risk should I take?
How much should I be contributing to my company’s 401(k) plan?
Do I need to be on a budget?
An advisor can help you determine how to establish a strategy based on your specific needs and circumstances. Find a financial advisor you trust to help you stay on track and provide advice when you need it.
Get Started Now
While it takes patience and time, you can you can work toward your goals by following a few helpful financial habits. At Key Wealth Partners, we desire to help you achieve financial confidence. As the trusted partner in your financial journey, we are dedicated to your financial success above all. If you are looking for a partner to help you implement habits that will improve your finances, feel free to contact me today at (717) 283-4186 or email firstname.lastname@example.org to schedule a “Get Acquainted” meeting.
David Niggel, CFP®, ChFC®, AIF® is the founder and president of Key Wealth Partners, LLC, an independent wealth management firm serving individuals, families, and business owners. Along with over a decade of financial services experience, he has advanced knowledge and training in providing holistic financial planning with fiduciary and ethical care, holding the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Accredited Investment Fiduciary® certifications. With hands-on entrepreneurial experience, he has the unique ability to help clients meet both their individual and business goals. Based in Lancaster, he serves clients through the York, Harrisburg, Hershey, and Central, Pennsylvania areas. Learn more by visiting www.keywealthpartners.com or connecting with David on LinkedIn.