5 Money Habits of Millionaires
By Sanjeev Jain
Who doesn't want to be a millionaire? In fact, everybody wants to be one! However, not everyone actually works seriously enough to become a millionaire. Millions of people around the world dream of achieving financial freedom. Others hope to retire early. But, how many of these put the effort in to make these dreams a reality? On the other hand, some of them are actually serious about pursuing their dream, do work in this direction but fail because of lack of proper habits and strategies.
Self-made or successful millionaires understand the power of compound interest and therefore they not only start earning early in life but immediately start saving and investing too. They create multiple sources of income and this strategy helps them protect from difficult economic times. The multiple income streams also helps grow their net worth much faster.
Another habit of millionaires that may surprise you is that they do not splurge money on luxurious items, vacations and expensive items. On the contrary, they are very good at managing money very intelligently. Millionaires will always avoid buying luxury brands, cars and huge mansions. A perfect example is Mark Zuckerberg. Most of the time, you'll see him wearing simple casual clothes. Mark Zuckerberg shared that choosing the same clothes helped him save mental energy. Not only Mark, successful people like Barack Obama, Ratan Tata to Steve Jobs, they all have this habit of wearing the same (or multiples of the same) clothes like t-shirts, black pullovers, grey suits and jeans.
Almost all
the wealthiest self-made millionaires practice habits that help them grow and maintain their wealth. Here are the 5 habits that they have incorporated into their financial life that you can, too.
Avoid Debt
Debt can be a scary thing and financially successful people understand the pitfalls of debt. They, therefore, make sure to reduce and eliminate all debt. They pay full credit card bills each month (and on time to keep a good credit score). If you wish to build wealth, you cannot afford to waste money on paying interest on credit cards and even car loans.
Avoid Lifestyle Creep
Self-made millionaires typically buy used cars with cash and hold onto them as long as possible. If they need to finance the car, they try to pay it off as soon as they can and keep the car long after that loan is paid off. Before they buy a car, millionaires will get good health insurance and also build an emergency savings fund. Although financial experts generally suggest to keep aside three to six months’ worth of your living expenses as an emergency fund, the wealthy people save six to twelve months of their monthly expenses with an objective to build a solid financial foundation.
They Invest
Once they have built up an emergency fund, they chalk out an organized investment plan and invest. Millionaires are more interested in preserving capital than they are in growing it. Generally, they invest in equities and debt that are low risk with a high probability of reasonable income. They focus on long term benefits in order to get their capital back rather than doubling it or tripling it in the next 10 years. Experts suggest that a general rule of thumb, you should save at least roughly 20% of your income each month. So, if you are the one who wishes to become a millionaire in future, 20% is a good start for both your savings and your investments.
They Learn from their Money Mistakes
Like any other human being, millionaires make mistakes. However, they understand that the mistake does not define them or their ability to grow their wealth, they don't dwell on their money mistakes and move on. Millionaires make a habit of being well-informed about their money. Though they have at least a basic understanding of their earnings, what they own and how much their investments cost, yet they seek advice whenever they feel so!
They Utilize Tax Deductions
Millionaires have enormous ability to find deductions, find credits and save taxes. They are able to take aggressive tax deductions, often because of their awareness about tax savings in everything from retirement investments, to home mortgage interest, charitable contributions, college funding and health savings accounts.
If you aspire to become a millionaire, you should strictly stick to it. Discipline can build the financial future you desire!
About the author: Sanjeev Jain is a Senior Partner at Tata AIA Life Insurance
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the author. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you.