10 wealth creation habits you can begin now
Financially responsible and successful people don’t build their wealth by accident – or overnight. That’s because becoming rich takes serious willpower and long-term vision. You have to be able to keep your eye on the prize of financial freedom and develop good habits to win.
We asked the Henderson Matusch team for their top 10 wealth creation habits which you can start practicing now, to help you build wealth over the long term.
1. Start building wealth early
As the old saying goes, "the early bird catches the worm" – or in this case, gets to retire in style. The sooner you put your money to work, the more time it has to grow.
Think about this: by investing $10,000 and leaving it to grow for 40 years (with say an average annual return of 8%), your nest egg will be worth over $217,000. By waiting 10 years and investing $20,000 – twice as much – your nest egg will be $17,000 less, and you will have just over $200,000.
Whatever your situation, saving and investing now is better than waiting until tomorrow.
2. Take advantage of ‘out of sight, out of mind’
There’s no doubt all of us can be our own worst enemy when it comes to financial success. It’s easy to procrastinate and neglect what you need to do to achieve financial freedom – and then give into temptation and spend more than you should. It’s the perfect recipe for not achieving your financial goals.
One way to avoid this is to automate your savings – set up regular, recurring transfers from your salary to your savings, investment or super fund accounts. This way, you can avoid bad money habits, retrain yourself, and save what you would likely otherwise spend.
If you haven’t already, set aside 15 minutes on your calendar and set up an automated savings plan now. Not later, now. Your financially free self will thank you in the future!
3. Maximise your superannuation contributions
Like most Australians, you’re probably only investing the standard superannuation contribution and nothing more. Yet a small additional contribution is better than none.
If you’re concerned that additional contributions will squeeze your cash flow, remember that it’s easier to get in the habit of spending less if you don’t have that extra money to spend in the first place. You’ll find it’s much harder to scale back your budget year after year to accommodate increasing contributions when you think you’ll need it.
4. Maintain a zero credit card balance
Revolving, high-interest debt is one of the biggest threats to your financial freedom. It can seriously drag you down, costing you thousands in unnecessary fees and interest charges — and preventing you from saving more.
That’s why if you ever want to be rich, you’ll have to ditch the bad habit of carrying credit card balances and making only the minimum repayment each month.
Instead, you need to learn how to use credit wisely, rather than as a crutch, and commit to paying off your balances in full each month. As a smart credit card holder, you can know and practice the tricks to maximise your rewards, points, discounts and monthly cash flow without getting in over your head. Living within your means is key to financial freedom.
5. Live like you’re poor
Have you ever met someone who is unassuming and modest, only to be surprised later to learn that they are actually rolling in dough? We have!
An older client of ours seemed to be stuck in 1983 – he wore unfashionable brown suits and running shoes, drove a beat-up baby blue Volvo station wagon, and lived in the same modest house he’d bought 40 years ago.
It turns out though that this man was a successful entrepreneur and multimillionaire – and even richer because of his humble habits.
Millionaires are all around us. Many of them are probably not who you would think. They live below their means and save their money rather than spend it. Sure, it’s easy to live comfortably when you have millions, but remember, getting into the habit of spending less now will help you have a lot more later. The trick is adopting a “less is more” mentality and sticking with it, even when your income and net worth increase in the future.
6. Avoid spending temptation
The temptation to live large and beyond our means is all around us: on TV, in magazines, through our friends, family, and colleagues, or even “the Joneses.” It’s nearly impossible to escape the pressure to spend, spend, spend.
Yet overspending often leads to debt, no savings, long-term financial insecurity, and worry.
Force yourself to avoid negative financial influences as much as possible by going cold turkey. Avoid shopping malls, unsubscribe from retail emails, don’t sign up for new ones, and say “no” to invitations from friends that will cost you money.
Instead, replace these spending temptations with savings goals that motivate you.
7. Be goal-oriented
Goals inspire us, motivate us, and give us purpose. Many of us have long-term goals, such as paying off debt, buying a house, or retiring by a certain age. Yet our goals can be overshadowed by the daily stresses of life, and too often forgotten and neglected.
When your goals are just fleeting thoughts in your mind, they lose meaning and influence over your behaviour. This leads to bad financial habits – and your dream of becoming financially independent stays a dream.
To make your goals reality, stay focused by committing time to think, prioritise, and save an amount for each. Visualising your target goal can be a positive and powerful reminder. If you’re more tech oriented, there are several apps available to help track progress towards your goal.
8. Increase your financial literacy
Successful investors take the time to study key financial concepts, learn the do’s and don’ts, and stay abreast of current trends. They take advantage of opportunities to strengthen and expand their understanding, and expose themselves to financial information on a daily basis. By becoming a devoted student of money, you can master the science of financial freedom and wealth creation.
9. Diversify your portfolio
Successful investors know not to put all of their money eggs in one basket – or just two baskets for that matter. They spread their wealth across a variety of investments, from shares, managed funds and bonds, to real estate and collectables.
Be careful not to overwhelm yourself and only follow advice from credible sources, so that you don’t fall victim to progress paralysis, or unsuitable and potentially dangerous investments.
An easy way to achieve diversification is to invest in managed funds based on your risk tolerance.
With a diversified portfolio, you can potentially take advantage of multiple sources of growth and protect yourself from financial ruin if one of your investments bombs.
10. Spend money to make money
The best way to protect yourself and get a step up on your financial goals is to invest in help from a team of professionals. That means hiring a qualified and experienced financial adviser, accountant, and in complex cases, an estate lawyer.
Yes, working with professionals will cost you. But their objectivity, expertise, personalised guidance and ongoing monitoring can be well worth it (and relieve you of the huge burden of figuring it all out on your own).
Make sure that you interview several candidates so that you can find professionals you trust, feel comfortable with, and whose approach is a good fit for your situation.
And even when you do work with an adviser, make sure that you’re still involved and aware of where your money is going – and why.
Talk to Henderson Matusch for advice on building wealth
If you’d like expert advice and assistance with building wealth, talk to the friendly team of experts at Henderson Matusch. Simply call us on (07) 3229 3688 or fill out the simple contact form here.