Jocelyn Black Hodes of Marketwatch.com lists 10 ways where the behavior of wealthy individuals differ from most. When looking at these methods, they are something that we can all do. It just takes discipline, focus, and perseverance.
Step 1: Start early. While it is ideal to start early in life, you can start at any time. The quicker you begin the process, the better off you will be at retirement.
Step 2: Automate. Go to your financial institution and ensure that a specific portion of your check (ideally 10 percent or more) goes to savings. First, build up your emergency savings where you have a minimum of one monthly paycheck, if not two or three months. Then, it is recommended that you align yourself with a certified financial planner and direct a portion of your future savings toward prudent investment products based on your financial goals.
Step 3: Maximize your contributions. Seek your benefits specialist at your job to determine whether your employer makes any contributions. If so, you will want to deduct from your check whatever they are willing to match, which could be up to 5 percent.
Step 4: Never carry credit card balances. This means an end to impulse buying. When going to the mall or an electronics store, never buy an item that you initially like. Instead, make a mental note of it, then go back and plan within your budget whether it can be reasonably purchased at a later date. If you carry a credit card debt and you have established an emergency savings fund, then redirect your savings to draw down your credit card debt. Make sure to focus on eliminating balances with the highest interest rate, rather than the lowest balance.
Step 5: Live like you’re poor. Rather than ‘live within your means’, make sure to live BENEATH your means. Keep your eyes on the prize and keep a visual image of your financial goals where you are constantly reminded of what you are hoping to accomplish.
Step 6: Avoid temptation. The worst thing to do is try and emulate your neighbors. Resist trying to match their car, high-definition TV, or immaculate wardrobe. Recognize that it is where you end up and not where you start. You do not want to reach retirement age with the realization that you must continue working. Instead, think about how thankful you will be about the sacrifices you made early in life, so that you can live comfortably in your twilight years.
Step 7: Be goal-oriented. Rather than think paycheck to paycheck, think year to year and even decade to decade. If you are single and just started working, then you should be thinking about saving for a home. If you have young kids, realize that college tuition continues to rise, so set up goals for establishing a college savings fund. Otherwise, your financial goals should center on retirement and not worrying about the daily necessities of life.
Step 8: Get educated. We need to stop making excuses about not understanding money. Check out MyMoney.gov which was created by Congress and the Federal Financial Literacy and Education Commission. Learn the basics and then regularly read news from the web, such as Marketwatch, CNNMoney, and Yahoo Finance.
Step 9: Diversify your portfolio. When developing your investment portfolio, emphasize time horizon and risk allocation. Regardless of your age, you need to choose investment products based on the timing of your investment goals. If your goal must be met within five years, then choose more bonds and money market accounts where they will have a lower return, but less risk. If your goal reaches beyond ten years, then choose more stocks where the return is higher, but also the risk. With stocks, make sure that you also diversify within industry because some do well even when the economy is tanking, such as consumer staples, such as Family Dollar, Walmart, and Proctor and Gamble.
Step 10: Spend money to make money. As you accumulate more wealth, it is wise to start hiring professionals with expertise in investment and tax planning. They will provide you an edge in getting the most bang from your buck.
Rather than allow circumstances dictate your ability to generate wealth, take control of your finances by being disciplined in money matters.