6 Habits that Can Make You Rich for Life
The rich are different. They have a different mindset from the average Joe. This is the ultimate differentiator a lot of people miss when they admire the wealthy from afar. The basic habits that can make you rich can be learnt by anyone. The engine that produces wealth is actually the money mindset. This is not a biological trait. So certainly, anyone can acquire this mindset with systematic and dedicated self growth.
To get rich and stay wealthy, you’ll need these habits that can make you rich. Allow persistent action to follow self development. This should be done on a consistent basis without losing touch with the end goal in mind. Just follow daily processes. If you’ve been searching for what habits make you a millionaire, here are six to brood over.
1. Investing Systematically into Assets
Without investing your money to generate some sort of returns, where else would the wealth come from? One of the most important habits that can make you rich is investing. The asset(s) you invest in is your money tree. A money tree is therefore a specific asset, or an asset class that the rich use.
This is the engine for building cash flow. Your money engine should have a few compartments. The three (3) basic ones are Active Income, Portfolio Income, and Passive Income. The first works to pay for your living expenses, but the second and third should be reinvested to scale your net worth.
Three Types of Income Sources
- Active Income – Income earned from a full-time job (wages, salaries, bonuses, etc.) or from a vocation, a side-hustle, or something that requires an exchange of your time for money.
- Portfolio Income – Income from investments like Stocks, Bonds, Money Market instruments, Exchange Traded Funds (ETFs), Real Estate, etc.
- Passive Income – Income from an asset that was created once; but continues to bear fruits. Such as royalties from book sales, affiliate commissions, renting out low maintenance properties.
Your active or earned income is your standard job that pays you taxable income. While this pays for everything you need in life, a percentage of that should be contributed into a financial asset – like stocks. These are the typical savings habits that can make you rich over time. You will increase your portfolio income for onward compounding. While your passive income basket will also grow in both quantity and returns alongside the others.
Sage Tip: Dollar Cost Averaging: The Indispensable Tool For Investment Success
2. Employ the Power of Debt as a Leverage
The core secret of growing finances lies in the concept of leverage. Debt for instance, is a neutral financial tool. In the hands of the poor, it becomes a burden that requires paying interest to others. But on the other hand, if you have a wealthy mindset, leverage is one of the habits that can make you rich. The affluent see debt as pure leverage to empower their existing capital.
Wondering what habits make you a millionaire? Leverage can; but could also be a dangerous tool. Warren Buffett had always said, smart people don’t need leverage, and the dumb have no business touching it. – paraphrasing the Oracle of Omaha. As much as there is great upside potential, there also exist great risks to your capital or investment principal.
Different Examples of Leverage
- Investment Leverage – Using a margin in stock investing, and trading in derivatives like stock options.
- Real Estate Leverage – Buying and renting real estate property with very little money down; while utilizing the bank’s financial support.
- Statutory Acquisitions – Buying businesses with OPM (Other People’s Money)
Leverage is certainly one of the habits that can make you rich. A risky tool to employ to develop wealth. Hedge Funds often use a strategic hedge to cushion their positions. They cover their backs with strategies or other assets that have an inverse correlation to their original investments. So that both the upside and downside make them money.
3. Adapting to Constant Change
The ability to adapt and even find your feet once again after failure is what separates the rich from others. It is having the subtle humility to switch gears and try something else. Admitting that you were wrong is key. This drives the learning process faster because failure is transmuted into growth, and then optimized at each occurrence. These mindset hacks are the very habits that can make you rich.
Adaptation is key and it is the enlightened approach to admitting your wrongs. Be willing to pull down plans and start over. If something isn’t working out, you can go around it and see all the possibilities and scenarios. You have the power to change course. This is that power which makes millionaires.
The best ways the rich use to speed up growth is to fail. Failing forward – as they say, is the resolve to bounce back every time you’re hit. This is part of the money game and among the central habits that can make you rich. The secret is to avoid thinking that setbacks are permanent. There is always a way. So the wealthy find it, or create it themselves.
4. Always Monitor Your Money
Keeping an eagle eye on their finances on a daily basis is what the rich do. This should not be seen as an obsessive behavior but rather due diligence. They either do this themselves or they have advisors and planners who do this on their behalf. Monitoring downside risks and upside opportunities are habits that can make you rich. You will move decisively at the right change of events.
The rich have an organized system that tracks their streams of income. They are also ever aware of their expenses. They keep track and categorize them using budgets. As basic as labeling them for distinction. Debt levels are also a vital thing to consider. And according to the book: The Millionaire Next Door, the wealthy work on their personal finances an average of 3 hours per week.
Examples of essential periodic financial activities
- Portfolio Re-balancing – This entails the normalizing of investment assets back to their original initial weights of asset allocation.
- Debt Repayment Plan – This method arranges a road map for your debts and loans to be settled taking the factors of interest rate levels, and debt size into consideration.
- Dollar Cost Averaging (DCA) – This acquisition strategy enables you buy assets consistently at a fixed dollar price, irrespective of the market conditions. More units are purchased in down markets and less in up markets. Your overall cost is averaged out.
These are the habits that can make you rich. This is exactly what the rich do to keep their money game on point. All loose ends are tied by this personal finance management routine. Another way is to outsource to a money manager or financial planner. This will free your hands to take on other important stuff. While all this is good, the key is to apply automation wherever possible – to reduce human intervention.
5. Multiple Streams of Cash
The rich have multiple income sources. Sometimes up to seven (7) or more. But unfortunately, the poor may end up having seven (7) separate debt payments due at the end of each month instead. This gives us the impression that the mindsets and reversed. There is an inverted correlation there. Having multiple streams of income are among the habits that can make you rich through compounding. This is a hack the rich employ to their advantage.
For clarity sake, the rich usually start with just one stream. Then gradually they build up the rest later. Starting with half and dozen at the same time is counter-productive. You may not have enough water for watering multiple seeds. The idea of having a laser focus on one asset or business is a superpower.
Types and Categories of Income Assets
- A Business: Finds customers through marketing and sales (or other means) and solves a problem for them.
- Real Estate: A fixed asset at a prime (or other) location that earns rental income from tenants, and capital gains from an outright sale.
- Financial Assets: They are paper assets like stocks (and other securities) that produce dividends, interests, premiums, and also capital gains upon selling at a profit.
You just discovered the habits that can make you rich. You can own several assets that produce multiple streams of income. The best assets are not the ones that have the highest yields. Rather, they are those within your own circle of competence. The better you understand your money tree, the more resilient your portfolio will be.
6. Financial Goal Habits That Can Make You Rich
A definite financial plan is a wealth tool that shows you the way. You may not have noticed, but all plans and goals that are written down – even continue to work on your subconscious while you sleep. The rich have assets that work for them while they sleep. Because there is a money blue print that instructs them from their subconscious mind.
This is one big scientific hack. The very secret habits that can make you rich are uncovered. Your written goals should have annual projections and long-term milestones. Consequently, they will be broken down into quarterly, monthly, weekly, and daily goals. Each day must be accounted for. You can track your working hours and productivity using a pomodoro timer. Tasks are broken up and accountability measures are also put in place to foster compliance.
A Few Parting Words about rich habits
In summary, wealth exists behind a firm and protected steel wall. This of course is not a physical structure but a mental equivalent. A poor money mindset is basically a barrier of entry into the prosperity club. Arm yourself with this philosophy and develop the exact quality of thinking and behavior that rich people have. Associate with them through a peer group or mastermind group. Breaking bread with unsuccessful naysayers is counterproductive unfortunately.
You will enter into the game of money making. These are the habits that can make you rich if you commit to the path. Attaining financial independence is possible. Doing this while you’re relatively younger in your prime is your choice.
Comment below with some more ideas that are currently working for you in the practical sense. Do you have suggestions to add to the six (6) above?
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