Financial independence is something that many of us aim for but few ever really achieve. However, all of us can take steps in the right direction. Following in the footsteps of those who have managed to take control of their money – and use it to create the life they want – is a great way to start. That’s why observing the habits of financially successful people provides such powerful motivation to begin doing things differently.
10 habits of financially successful people
Live within your means. If you’re able to live within your means then you’re already half way to financial success, which is why this is the top habit to master. All that is required is to spend less than you earn. It sounds simple but can be overly complicated by factors such as impulse purchasing or not keeping track of your finances. Key to this is learning how to delay gratification when it comes to spending – i.e. wait until there is money in the bank rather than relying on credit. Learning how to budget so that your money goes further is also essential.
Put aside something for the future. Around 15 million people in the UK have no pension savings and face a bleak future in terms of poverty in retirement. It’s crucial to start paying into a pension as early as possible so that you can build up the savings you need to enjoy later life.
Be smart about regular spending. Financially successful people are not often financially loyal. They are much more likely to move their interests around to benefit from the best deals, whether that’s on broadband or interest rates.
Always be a saver. No matter how small your income, make sure that you’re always putting some aside in savings. The mistake that many people make is to decide to start saving at some point in the future – i.e. when they are earning more. Don’t wait for a future point in time to start creating a financial buffer – even if you’re only able to save a small amount now, it will instantly start to give you options.
Get out of debt. For many people today, debt is a reality from an early age. However, it will also drain your resources unless it is interest free. If debt is essential then get the best possible deal on personal loans or credit cards and then aim to pay this off as quickly as possible to avoid the damage that high interest rates can do to your finances. Here’s our guide for managing debt.
Learn to make money in different ways. Relying on one income source is the financial equivalent of putting all your eggs into one basket. Financially successful people diversify their income sources, creating as many as possible. If one income source is compromised there are still others to support ongoing financial health.
Don’t be a cash cow for anyone else. That could be a partner or relative who regularly relies on you for extra cash but never pays you back. It could be that friend who always orders twice as much as you at dinner and then insists on splitting the bill in half. Maybe it’s a colleague at work who always lets you pay for the coffee. All spending adds up, even the smallest amounts. If you’re regularly covering someone else’s share then it’s going to be difficult to be successful where your finances are concerned, so start saying no.
Create a rainy day fund as soon as you can. Even those in the most apparently secure jobs can find themselves one day without employment. It makes sense to have a rainy day fund to provide you with a safety net in case the worst happens in future. If you’re self-employed or working part time then this becomes even more important. The initial goal should be a month’s worth of living expenses. After that, build up what you have until your rainy day fund could potentially see you through to six months or a year.
Start investing extra cash. Investing is the fastest way to generate returns on the cash that you have available and there are lots of different ways to do it. Investing is a great next step after you have created a rainy day fund and set some cash aside for the future e.g. in a pension. Just remember that the higher the return, the riskier the investment is likely to be.
Set financial goals. Financially successful people know that it’s important to have objectives where cash is concerned. This will not only motivate you to do more with your money but also force you to think practically about the steps involved in reaching the goals that you want to achieve.
These are just some of the habits of financially successful people that can serve as positive guidance for those (like most of us) who still have a lot to learn.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley