The idea of getting rich quick is pretty appealing but unless you inherit a big windfall or nail the winning lotto numbers, it’s not a very realistic goal.
When creating long-lasting wealth is a priority, you have to be prepared to dig in and do the work. Developing some savvy financial skills can lay the groundwork for a richer life where your money is concerned.
If you’ve been working on building wealth and you’re ready to step up your efforts, here are five personal finance habits that can help you reach your target that much faster.
1. Pay Yourself First
This is one of the most basic rules of building wealth and if you truly want to be rich, this should be your mantra. When you pay yourself first you’re making the commitment to saving and by taking that money off the top before your other bills are paid, it becomes a lot easier to resist the temptation to just spend it.
If you’re not in the habit of paying yourself first, automating your savings is the answer. For example, if you’re trying to build a six-month emergency fund, you can schedule a recurring automatic transfer from your checking to your savings account every payday.
You can also set up automatic transfers to an IRA or to a taxable investment account. If you’re saving in a 401(k) or a Health Savings Account through your employer, these contributions should be coming out of your check already. Getting used to saving automatically may take time but once you do, you’ll wonder why you didn’t adopt this habit sooner.
2. Keep Tabs on Your Spending
A budget is a crucial personal finance tool for anyone who’s interested in getting rich and if you don’t have one, you could be draining your potential wealth without even realizing it.
In the most basic sense, a budget is a balance sheet of sorts that tells you how much you’ve got coming in each month and how much is going out. To make a budget, you add up all of your expenses and subtract it from your income. If you’re making more than you’re spending, you’re already moving in the right direction towards building wealth.
If you’re finishing every month in the red, on the other hand, you can kiss your dreams of being rich goodbye until you get your spending under control. The best way to do that is by tracking every dollar you spend. If you don’t have time to write it all down, syncing up your checking or credit card accounts to a budgeting app like Mint eliminates the hassle.