9 Good Money Habits You Can Start Today to Build Real Wealth
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Controlling your money is key to living a financially effective life. Learning good money habits is the first step to taking control over your money and living the kind of life you want.
There’s one small problem. We often think it’s difficult to learn and practice good financial habits. We think you need to be an expert, that you need a lot of money or that it’s just too difficult to learn.
I used to think the same thing. I held myself back because I thought it wasn’t possible to be good with money. Then, I had my light bulb moment and saw that so much of financial success comes down to your behavior and that learning to manage money isn’t that difficult.
In fact, if you look at many self-made millionaires, they aren’t rich because they were born into money. Nor is it because they know how to work the system.
In many cases, they’ve reached an elite financial status because they learned how to master a handful of good money habits. Below, you’ll find nine financial habits that just might make you a millionaire.
1. Automate Your Finances
If you don’t have your finances on auto-pilot, you need to change that right now. I don’t know about you, but life is busy. Things come up, or you’re busy at work and then it happens – you forget something. When it comes to money, forgetting is the last thing you want to do.
Automating your finances is the easiest and most effective way to begin to build wealth. Automating guarantees your money will go where it needs to be and when it needs to be there. In fact, many don’t even need to live by a budget if they automate their finances.
We automate nearly every area of our financial lives, including:
- Putting money in our savings account every few weeks
- Putting money into our Solo 401(k) each month
- Making our mortgage payment each month
- Paying all of our bills each month
The first thing you should automate is paying yourself first – which means you transfer money into savings on a set period. You don’t “feel” the money moving out of your account and you don’t need to do anything, outside the initial setup, to save money on a regular basis.
CIT Bank is a great option if you’re not already paying yourself first. They pay 1.85 percent on their money market accounts (currently 15x the national average) and have a minimum opening balance requirement of just $100. Their money market account has the same FDIC protection as savings accounts, plus check writing privileges.
There may be other financial areas of your life you can automate – and you should take advantage of every opportunity. Not only does it guarantee you won’t forget a payment or skip saving money one month, but it also frees up time to focus on other, more fun, things in your life.
2. Kill High-Interest Debt
I hate debt. Debt, especially high-interest debt, does one thing – it restricts you from growing wealth. Instead of putting money in your brokerage accounts, or 401(k) it goes to the creditor who is making money off your hard work.
Killing high-interest debt is the best money habit you can begin. The quicker you pay it off, the less interest you must pay to creditors and the more money you free up to grow and invest in the near future.
There are many ways to pay off debt – here’s a list of nine ways to pay off debt faster. Pick one or two ways, and you’ll be surprised at how quickly you can build momentum.
Additionally, if you have credit card debt, it’s vital to list out what you owe and the rates on each card. If you’re paying 15 percent, or higher on those cards, you may have an opportunity to lower those rates by consolidating the debt.
Companies like Avant or Payoff (if your credit score is as low as 640) can help you slash those rates by half or more. If you’d rather not consolidate your debt into a loan, you can use a balance transfer card to kill your debt.
Click here to compare cards that offer 0% APR for up to 18 months. The trick is to pay off the transferred balance within the allotted timeframe so you can be free of debt and not have to pay extra interest.
What if you don’t have debt but need to build your credit? Your credit score has a direct impact on what you pay on loans, plus impacts other situations. If you’re not a fan of using credit cards but still want to rebuild your credit, you may want to pursue a credit builder loan from a bank.
You can read our Credit Strong review for one such option. Credit Strong is a division of Austin Capital Bank, and is one of the lowest fee options available. By making regular monthly payments your efforts get reported to each of the credit reporting agencies and help boost your credit.
3. Track Your Spending
Breaking the paycheck-to-paycheck cycle is a key money habit to building wealth. Tracking your money is the best way to break that cycle and make positive growth.
When you track your spending, you see where each dollar you have goes. In short, your spending reveals your priorities. This simple practice provides valuable knowledge you can use to make significant change.
The beauty is that tracking your spending isn’t difficult. You can use a pad of paper and a pen, or something more advanced.
We recommend Tiller as they use Google Sheets to automatically connect to your bank accounts so they can combine all of your transactions in one place. This allows you to view all your spending and find opportunity for savings. Tiller is free to use for the first month and $5 per month after that.
Regardless of the method you use, tracking your spending for a month helps identify areas you can cut back on so you can use that money to save and invest instead of spending it.
4. Read, Read and Read Some More
If you look at many self-made millionaires you’ll see one interesting thing – they love to read. Warren Buffett, for example, is known to spend at least 75 percent of his day reading.
Now, I’m not saying you should devote that much time to reading each day. Even if you read 30 minutes per day, it will have a big impact on growing your wealth as it helps you learn about different areas of money and business.
Go to the library or check out the top personal finance books on Amazon, find one you like and start reading. You’ll be surprised at how much you’ll learn and can use to better manage your money.
I would even take it a step further. Surround yourself with friends who like to read and are committed to similar financial goals. You’d be surprised at the impact that will have on your finances.
5. Invest Small Amounts
Investing is the most effective way to build wealth. However, many think you need a lot of money to start investing in the stock market. That is not the case; you can invest in the stock market with little money and do quite well at it.
In reality, it’s not the amount you start investing with, but the time your money has to work for you that matters. I used to think investing $25 or $50 wouldn’t make a difference. It does, so please don’t give into that lie.
There are many ways to invest with little money. The best is through your 401(k) plan. If you don’t have access to a 401(k), or want to invest more, below are some of the top options to invest with little money:
- Acorns – no minimum deposit required
- Ally Invest – $0 minimum balance requirement
- Betterment – $0 minimum balance requirement
- M1 Finance – $0 minimum balance requirement and no fees to trade
- Stash Invest – $5 minimum balance requirement
- Stockpile – $0 minimum balance requirement
Pick one that works best for you and start investing that money!
6. Set Your Alarm Clock 15 Minutes Earlier
I spoke about sleeping in with regards to bad money habits a few months back. I love to sleep in, but it means one important thing – I’m much less productive. That extra awake time gives you opportunity to do a variety of things, which are all meant to help you personally or professionally.
Waking up early doesn’t guarantee you’ll build wealth. But, it does give you more opportunity to do just that. Many self-made millionaires are infamous for waking up early – at 5:30 A.M. or earlier so there’s something to be said about the practice.
Waking up early may seem impossible. I get that. Start small, set your alarm clock for 15 minutes early and build from there to find your sweet spot.
7. Save Amounts You Choose Not to Spend
We’ve spoken before about the 48-hour rule of spending in the past. It’s quite simple to practice. Let’s say you’re at the store and you find something you want, but have not budgeted to purchase.
You go home and wait 48 hours. If you find that you can live without the item, you move on without purchasing it. If you do find you need it, then you determine how and when to buy it.
That’s great, but I like to take it an additional step. Assuming you find you don’t need the item, you can put that money in a savings or brokerage account instead. I think of it as flipping spending on its head.
You may not be able to do this with all amounts, and that’s fine. You can determine a specific amount, like $10 or $20 and accomplish the same effect.
I like to put it in a money market, like CIT Bank, as they pay 1.85 percent and just require a minimum balance of $100.
8. Make Your Goals Specific and Measurable
The main reason many don’t reach their goals is that they don’t know what they’re working towards. Not having a specific and measurable goal is like trying to stab something in the dark – it’s not going to happen.
One of the best money habits is to actually write down your goals. Record what you want to earn, what you want to save or what you want to pay off. Then, set a simple plan of what you’re going to do to reach the goal.
Make the goal realistic, but also challenge yourself some. Finding the balance between the two helps give you the motivation to work without the feeling you’ll never be able to reach the goal.
9. Save that Surprise Money
Who doesn’t like found money? It can be a raise, a $100 bill in a birthday card or a bonus at work. Spending that found money can be even more fun because it allows you to get something you may not normally buy for yourself.
There isn’t anything necessarily wrong with that, but as with the example of saving money you don’t spend above, this spins spending on its head. Instead of spending that found money, use it to better yourself financially – pay off debt, invest it or put it in your savings account.
You can even split the money in half and save half and spend the other half on something you want. The key here is to view that found money like all money – as a tool to put to work for you, not as something that gets spent mindlessly.
There are many other good money habits, but starting a few or more of these will not only help you become financially stable, but will also help you build real wealth.
What are some other good money habits you like to practice? What do you do with found money? What, in your opinion, is one of the more overlooked ways to build wealth?
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.
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