While a six-figure inheritance or high-paying job can land you in the top 1% of earners, it’s the little things—your money habits—that often make the difference between a life of prosperity and one of constant financial stress.
Just ask LearnVest Planning Services CFP® David Blaylock, who doesn’t simply advise his clients on the merits of good money habits—he practices what he preaches.
For example, “I do a periodic review of all the subscriptions I have—the ones that hit my credit cards each month,” says Blaylock. “You’d be surprised at how many subscriptions we all have and how many go unused. You could create some significant savings each month just by looking at those things.”
Taking inventory of your recurring subscriptions and services is just one habit that can get you on the road to better fortune.
“If you look at the average amount of money you will earn over your lifetime, and figure out how many years you are working—most people earn more than a million dollars over their working life but very few people become millionaires,” says Nancy Butler, a Certified Financial Planner™. “How they manage what goes through their fingers usually makes the difference.”
So what are these easy changes that can help move you further along the road to prosperity? We asked two financial planners for their favorites.
1. Reverse Your Thinking
We know: After taxes are taken out and the bills are paid, your paycheck can seem a little anemic—which can make the idea of having to save for retirement too seem like a real stretch. But to build wealth, a change in mindset is required. Namely, instead of spending the rest of your take-home pay, you’d actually take another cut of your paycheck and put it toward your biggest financial goals.
“Most people spend some money, pay their bills and save what’s left,” says Butler. “And that’s backwards: You should be saving for your financial goals first, paying your bills and and then consider spending the money you have leftover.” Another trap is putting your good money habits off till “later,” when life will get easier. The thing is, somehow the minute your income increases, the demands on your money seem to as well.
Now, keep in mind, we’re not suggesting you sock all of your money away and live on rice cakes. As Blaylock puts it: “I’m not asking you to put $1,000 away a month, I’m asking you to put away $50, or a small amount that you can afford. We really can’t underestimate the power of starting small, because most of the time that momentum builds, and once we see progress, we tend to repeat behaviors.”
2. Look Where You Want to Go
Just as performance athletes imagine themselves making the shot over and over again—check out this study for how goal setting improves motivation in athletes—knowing what you want your money to do for you gives your goals a better chance of being reached.
To get going on saving for the future, financial experts often suggest having a five-year plan, where you create specific money goals you’d like to achieve in five years and what you need to achieve those goals. (That is the goal of LearnVest’s 5-Year Planner.) For example, saving six months of income for an emergency fund, or saving for a big event, like a down payment on a house.