Habits make us who we are. If you’re wealthy, you are wealthy because of some habits you have, and if you’re not rich, it is still specifically as a result of some habits, too. That implies, if you are really serious about amassing wealth, there are some habits that you have to dispose of at the moment, habits that aren’t helping you grow past the current financial state you find yourself, and then adopt other habits to get you where you want to be.
Five financial habits to inculcate that would make a big difference in your life and most especially, your finances would be revealed in this article. So, what exactly do these guys do that you should begin doing?
1. They understand cash flow – You have to be able to track how much goes in and out of your pocket. If you can’t, your financial life needs a recalibration. Successful entrepreneurs have an amazing ability to know how much they are spending and then can easily devote to their financial goals based on that fact. Basic ones you should know are Robert Kiyosaki’s financial statement. A simple balance sheet that has four boxes; Assets, Income, Liabilities, Expenses. You have to have a basic understanding of how money leaves and any of these boxes to be able to easily make adjustments where necessary.
2. They avoid debt – Debts have an uncanny way of draining an individual. Especially bad debts. Entrepreneurs know the difference, between a good one and bad one. Every loan you take has a certain percentage you have to repay, but people still take out loans to satisfy personal needs. That’s a wrong reason to take loans. If you are not investing your loans to make more profit than you’re supposed to repay, don’t take that loan, because that would be a bad debt.
Take out loans If and only if you plan on investing it into something else that would get you back your loan, interest, and also your own gain at the end. Entrepreneurs aren’t wasteful people, don’t be.
3. They spend way less than they earn – You may think that the richest people out there are the flashiest sets of people but that simply isn’t true. Don’t be in a bid to impress people with “stuff”, that you could break the bank just to achieve that “status”. One of the wisest bits of advice I’ve heard all my life came from a friend when he said, “Don’t compete with people by spending your salary, while your competitors are spending their profits. We are all on different lanes, stay on yours.
Contrary to public opinion, the richest people live way below their means and that’s what keeps them rich. A family in the US earns over $500,000 and manages to spend $2,500 a month on all that they need while re-investing into some other businesses. Tell me, why won’t that be really easy for the guardians of that home to retire when the time is right? But people with jobs would spend and leave no thoughts about tomorrow. Don’t be like them, please.
4. They pay themselves first – We spend on a whole lot settling bills and all that, and sometimes, the money is gone shortly after it arrives. Successful entrepreneurs understand this, and always save up a part of their income, or re-invest it elsewhere even before it does. It helps make savings easier.
5. They increase their incomes – This one is really important as entrepreneurs don’t settle for what they have, but also make it a top priority to multiply what they have. If you aren’t making money, but still cutting down expenses, and understanding your cash flow and all that, you are bound to crash at some point. Mostly, entrepreneurs make their money through passive income. They have money work for them rather than taking out a job and actively “working” for money.
I’ll advise you to go on forbes.com, Check out the “Billionaires” section and read up more. If you really want to be where the rich people are, you should make it a habit to know and do what the rich people do.