We all want to be rich, right?
The phrase might be “mo’ money, mo’ problems” but anyone who’s been up to their eyeballs in debt or trying to scrape together enough money to pay rent can attest that “no money, mo’ problems” is true, too.
If you’re anything like me, you’re probably not aiming to knock Jeff Bezos off the number one spot on the world’s rich list. What constitutes “rich” is going to be different from one person to the next, but for the purposes of this article, let’s say that “rich” means financially comfortable, no need to stress about money, able to enjoy some of the finer things in life, and able to retire at a reasonable age without relying on the social security pension.
Sounds like a reasonable, achievable goal, right?
So now that we’ve got a baseline on what “rich” looks like, let’s talk about habits that will make you rich.
6 Simple Habits That Will Make You Rich
Always Pay Yourself First
I first heard of the concept of paying yourself first in the book Automatic Millionaire (a must-read for anyone who wants to retire early, as a millionaire.)
The concept is simple – every time your paycheck hits your account, set up an automatic transfer to your savings or investment account. The premise of doing this is that most people who are trying to save money will put aside whatever is left over AFTER they’ve bought and paid for everything else.
The reality is, that means that very little (if any) money actually ends up getting transferred into a savings account, because most people have the mindset of “make money, spend money.”
By paying yourself first via automatic transfer, you’re removing the temptation to spend the money because it’s gone before you even notice it’s there.
Funnily enough, I’ve been doing this for years before I was introduced to it as a “concept,” so I can attest to it’s effectiveness.
Plug Financial Leaks
Financial leaks are those small purchases you make during the month that you either a) don’t notice, or b) write off as “small and insignificant.”
The truth is, when there are dozens of these small financial leaks, they can really add up and make a huge dent in your bank balance.
To plug financial leaks, the first thing you’ll need to do is identify them. You can do this by printing out a copy of your bank statement and noting down every single charge that you didn’t budget for, purchase that you didn’t actually need or subscription that you don’t use.
I also recommend joining Personal Capital which will allow you to get an overview of your income and expenses and set savings and retirement goals.
This article provides examples of common financial leaks to look out for.
Have Multiple Streams of Income
Most millionaires have multiple streams of income and even if you’re not trying to reach millionaire status, it makes financial sense to have more than one income stream.
Having multiple income streams not only gives you the ability to save more, invest more and pay down debt faster, it also provides something of a safety net if you lose your main income source.
There are countless opportunities to make money outside of your regular income – this post is a must-read if you want to start making extra money on the side.
Live Below Your Means
Living below your means is one of the best habits to adopt if you want to be rich, but it’s something that a lot of people struggle with.
There’s a natural tendency to spend to (and even beyond) your means. That’s the reason why people might increase their income by 20k over 5 years but find themselves in exactly the same financial position they were in 5 years ago.
How can that be possible, when they’re earning 20k more?! The answer – they’ve increase their spending to match their income.
Living below your means means that your spending doesn’t match your income. Instead, your spending is below your income (preferable well below.)
If you get a $100/week pay increase, instead of spending an extra $100/week, increase your savings by $100/week.
If you’re currently making $50k/year and spending $50k/year, start spending $40k/year.
It’s as simple as that.
Forget the Joneses
Ugh, the Joneses. Anyone else can’t stand them?
The Joneses used to refer to your neighbors down the street who always seemed to be upgrading their house, or your friends who always drove brand-new cars and took fancy vacations… You had to keep up with them, right?
Today though, it’s even worse. No longer do you feel the pressure to keep up with the Joneses, you also feel the pressure to keep up with every single person on your Facebook friends list, every random “influencer” you follow on Instagram and every “celebrity” shilling the latest “must-have” product.
It’s enough to make you rack up thousand of dollars of credit card debt…
And the sad thing is, that’s exactly what millions of people do. They’re so consumed with keeping up with everyone else that they end up drowning in the debt.
If you truly want to become rich, you need to forget about the Joneses (and the Kardashians, and every other person you follow on social media.)
If someone is making you feel like you’re inadequate then you need to unfriend or unfollow them. If they’re a random “influencer” or celebrity you don’t even know, then there’s no harm in blocking them either, so you’re not tempted to check in on their feed every now and then.
I can tell you, this is one of the best things I’ve ever done. I used to follow quite a few influencers and celebrities on social media and gradually, I felt some feelings of inadequacy creeping in.
Here I was with my beloved 8-year-old Longchamp purse (the only purse I own) but it felt like everyone else had a Louis Vuitton Neverfull. I started to feel like I “needed” one, too. This is the despite the fact that, up until this point, I loved my old Longchamp purse and there was absolutely nothing wrong with it.
Fortunately, I nipped those feelings in the bud pretty fast. I unfollowed everyone who I didn’t know in real life and I still have my favorite purse (and an extra $1500 in my bank account, from not purchasing an overpriced piece of canvas.)
Invest Your Money
If you want to become rich, it’s important that you make your money work for you. This means you need to start investing (another piece of advice I learned from the Automatic Millionaire book – seriously, go buy yourself a copy!)
If you keep your money in a savings account, the inflation rate compared to the interest rate in a regular savings account means that you’ll actual end up losing money.
That’s obviously in direct contrast to what you want to do, which is why it’s a good idea to do some research to determine how best to invest your money so that it’s growing instead of decreasing.
Automatic Millionaire talks about this in-depth, including how to max out your 401k and options for self-employment, mutual funds and more. The author is a certified financial advisor, so I recommend grabbing a copy if you’d like more information on ways to invest your money.