I got an email from Motley Fool Wealth Management today that does a great job of reviewing the habits that allow everyday people to build wealth.
Here are Five Money Habits to seriously consider.
- Save a LOT of money.
- Focus on raising your income.
- Avoid lifestyle inflation.
- Invest for the long term.
- Invest in yourself.
Let’s take a closer look at each of these.
To save money, consider using the “50/30/20 budget rule”. Allocate 50% of your income for essentials, 30% for wants, and 20% for savings. If you can set up automatic transfers for your savings and investing, that’s great.
While Karilyn and I have not hit a 20% threshold for savings, we’ve consistently put over 10% into savings and investing for a fairly long time.
You need to have enough money coming in to be able to save much. That’s why it’s important to raise your income over time. In addition to earning money from your day job, it’s possible to make “dividend income from stocks”, “rental income from real estate”, “royalty income from selling rights”, “capital gains from selling appreciated assets”, and more. While developing multiple income streams is not easy, it’s an effective way to build wealth.
Avoiding lifestyle inflation has been a real issue for Karilyn and me. We make good money. And the more we make, the more we spend! I would really like to learn this lesson before I’m ready to retire. We’ve talked about downsizing at some point to decrease our spending.
Investing for the long term is a great habit. Throughout my career, I’ve put a lot of money into 401k’s and IRA’s. While it takes a long time to see this money grow, it’s amazing to see what can happen over the years.
Finally, investing in yourself is my favorite of these rules. Never stop learning! When you invest in yourself, your life gets better.
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