Many of us strive to reach a point where we are financially well off. For some, that means accumulating a million. For others, it simply means having more than enough money to cover living expenses as well as having a big cushion ready for emergencies. Regardless of how you define "wealthy," you should avoid certain habits that will complicate your efforts. Here are a few to avoid in particular.
1. Don't follow a financial plan
Many assume they don't need a financial plan or don't want to bother with it. But if you're not keeping track of your spending, you're missing out on important savings opportunities. Keeping track of your spending helps you determine where you're wasting money. So if you don't have a plan yet, create one.
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2. Living from hand to mouth
It is estimated that 75% of working adults live from hand to mouth. But this is a sure way to never accumulate wealth. Maxing out your paycheck every time not only makes it impossible to save, but also increases your risk of falling into debt when unexpected expenses pop up. So it's better to go through your budget carefully, find ways to lower your costs and bank the difference. In general, you should put aside about 15% to 20% of your income. So if you don't have any savings right now, you should drastically rethink your spending and make some serious lifestyle changes.
3. Making impulse purchases
If you've been a victim of impulse buying in the past, you're in good company. An estimated 84% of Americans shop on a whim. The problem, however, is that impulse purchases are inherently unnecessary, and the more money you waste on them, the less you have left to put in savings. In the future, if you feel the urge to buy something unplanned, force yourself to wait 24 hours so you can think about this purchase. Chances are, you'll realize you can do without it.
4. Too much debt
The more debt you take on, the more you'll end up paying for it in interest – that's just how loans and financing work. The more debt you have, the harder it is to keep up with your payments. If you really want to become wealthy, do your best to keep your debt as low as possible – even the "good" debt, like your mortgage. Also be extra careful with credit cards. It's OK to buy stuff you know you can pay for. But the moment you start building up debt, the interest will quickly get on top of you.
5. Choose only secure equipment
Many fear the stock market and therefore stay away from it. But if you invest your money too safely, you'll only slow down your returns, killing your chances of getting rich one day. Although stocks have historically proven more volatile than bonds (and they're certainly riskier than keeping your money in cash), they've also made some investors rich who have stayed in the market long enough to ride out the fluctuations. In other words, if you're willing to invest for the long haul, you'll come out ahead.
Imagine putting away $500 a month over a 30-year period. If you keep this money in a call account and get an average of 1% interest per year, you will end up with about 209.000 US dollars. If you invest in bonds at an average of 3% per annum, you will receive approximately 285.000 US dollars. But if you invest your money in stocks and earn an average annual return of 8%, which is just below the market average, your savings will amount to 567.Raise $ 000. There's a big difference after all.
Whether your goal is to be rich or simply financially secure, the habits you maintain during your working years will determine whether or not you achieve your goals. Stay away from the above mistakes, and with any luck, you'll one day reach your financial goals – maybe even to the point where you could be considered "rich".
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