Want the finance tips millionaires actually use? Here are the simple habits that build wealth.
Are you looking for some seasoned and sage financial advice? I've tested these myself, and they align with common wealth-building habits. These tips are simple and can save you money and pave your path to ultimate financial success.
In this post, I will tell you the best personal finance tips you can use to make your financial dreams a reality. Use these finance tips, and you'll earn more while spending less on things that kill your wealth.
This post is all about finance tips.
1. Prioritize Passive Income
The first, and in my opinion most important, finance tip is to prioritize passive income. Warren Buffett himself has spoken often about the importance of making money while you watch Twilight movie Marathons sleep.
Millionaires know that your most valuable resource isn't your money, it's your time. That's precisely why the wealthy know that the nitty gritty of budgeting only goes so far, and passive income is where the real wealth is made. The more money you can make without having to trade your time, effort, and energy, the richer you will be.
In this post, I reviewed the 8 best sources of passive income for beginners. The best source of passive income, and my personal favorite, is starting a blog. Not only is it a phenomenal creative outlet that requires no special skills or talent, but it is a one-of-a-kind passive income generating machine. There are literally tons of multi-million-dollar bloggers.
If you're curious, here are 6 steps I used to start mine
When you prioritize building passive income streams, you free up your time to continue to build your income. It then becomes like a snowball, as you continue to build passive income streams, you have more and more time to build more passive income streams.
2. Avoid Debt Like the Plague
Ah, you could've guessed from my website name! Debt is dumb, and there's a reason millionaires avoid it.
Interest is the price you pay for your own impatience. And patience builds wealth. Debt drains your mental, physical, and spiritual energy, not just your bank account. If you can't afford it, it means: you. can't. afford. it. Millionaires don't focus on what they'll pay monthly, they focus on what they'll pay.
Not only does debt cause serious added stress, you lose money when you go into debt. Now this might be the opposite of what social media will have you believe, but it's true. When you view going into debt as an option to "pay for" things, you spend more than you would if you knew you had to pay in cash. You buy nicer cars, you spend more on vacations. Credit card companies work very hard to make going into debt as painless as possible but boy is it painful to climb out. Not only do you spend more, but you lose more money through interest.
Make consumer debt enemy #1! If you have any debt right now, use these foolproof methods to pay it off and fast! It's exactly what I did to pay off over $150k in student loan debt in under 2 years.
3. Prioritize Retirement
After paying off your consumer debt, the next personal finance tip to follow is to prioritize retirement. Retirement isn't an age, it's a number. Most people do not appropriately prioritize retirement, and it's one of the most costly financial mistakes you can make.
A great starting point for your retirement savings is to save 15% of your gross income towards retirement. A general rule of thumb is that 401(k) match beats Roth IRA beats 401(k) beats a brokerage account. Start with 15% and work from there. You might want to contribute more if you want to retire early, or if you want a more luxurious retirement.
And keep in mind that your 15% retirement contributions will grow as your income grows with raises and promotions, so this is just the starting point.
Don't let today's expenses eclipse retirement contributions, or you might be looking at spending your golden years working overtime as a Walmart greeter just to pay your bills.
4. Take Advantage of Compound Interest
Compound interest is lovingly called the 8th wonder of the world - and with good reason! Compound interest is a hidden secret of the very wealthy.
Historically, broad U.S. stock markets have averaged ~7–10% before inflation over long periods, with many up and down years. Let's say you invest $100 for simplicity's sake. Quickly, how much will you make in interest each year? If you answered $10, you'd be wrong. And this is where compounding comes into play. Yes, you will make $10 in interest the first year. But the second year, you are making 10% of $110, not $100. And this continues on year after year. Compounding results in exponential growth of your wealth. Your money can roughly double every 7-10 years, and this doesn't include any additional contributions.
If you want to build wealth, taking advantage of compound interest is one of the best finance tips out there. It will allow you to build passive income that grows at an exponential rate. (And this is precisely what you're doing when you contribute towards a retirement account!)
5. Automate Your Savings
One of the best personal finance tips is to automate your savings. Don't rely on self-discipline month after month. Instead, set up automatic transfers to savings and investment accounts that reflect your future goals.
Say you want to go on a $1,000 cruise next summer. Your entire family is going, and you really want to be there for family bonding and, of course, the buffet. If the cruise is 5 months away, you'll need to save $200 a month. Your bank should allow you to automate a transfer of $200 once a month to your savings account. Then, come summertime, the money will be there waiting for you.
The alternative is to manually contribute $200 a month towards your savings account. You'll have to 1. remember and 2. actually do it. When you automate savings, it removes any opportunity for you to change your mind or forget, thus greatly increasing the chances that you will hit your goals. You won't be able to decide to spend that $200 on Amazon Prime Day if it's already moved to your savings account!
If you want to become wealthy, value your time above your money. Take advantage of programs that allow you to automate habits that build wealth and help you reach your financial goals. This way, you'll cut down on the time spent logging into accounts and transferring money, and open up time to spend doing things you enjoy.
6. Use a Budgeting App
Wealthy people become wealthy by knowing exactly where their hard-earned money is going each month! And the best way to do this is by using a budgeting app.
I use EveryDollar, and it is incredibly helpful. Before, I was using an Excel sheet and manually tracking my budget. Although this worked well for me, I was able to offload a lot of the work I was doing by subscribing to a budgeting app. Now, my app does the hard work for me. I simply sort purchases and conduct a quick monthly review of my spending habits. With EveryDollar, I'm also able to share an account with my husband which makes combining finances a breeze.
To harp yet again on a point I've already made, your time is your money! Not only does using a budgeting app free up precious time, but it allows you to tell your money exactly what to do, where to go, and when.
I always say, don't spend your life's savings on Thai takeout accidentally. With a budgeting app, it can't be anything but intentional.
7. Unsubscribe from Marketing E-mails
Last, but not least, make it a point to cut down on impulse spending. One of the best ways to do this is to avoid temptation AKA marketing e-mails!
Is your inbox overflowing with BOGO offers and soon-to-expire 15% off coupons? These "savings" opportunities are likely costing you thousands of dollars! These corporations spend millions of dollars to figure out exactly how to word their e-mails so you'll feel pressured to spend and spend quickly! They create urgency by offering limited time incentives or mark-downs. They're not being generous, it's a marketing ploy!
Don't try to rely on willpower to resist the temptation of another 24-hour shoe sale delivered straight to your inbox, simply avoid the temptation altogether. It's much easier to stick to a diet when you don't keep ice cream in the house. Take 15 minutes to go through one-by-one and unsubscribe from any marketing listservs you're currently a part of. Your wallet will thank you! And so will your overflowing closet...
What is your debt free date? Let me know @ShesFinanciallyFree1 !
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