Building wealth with your money can come down to establishing a few smart habits.
Thomas C. Corley writes in his book, Change Your Habits, Change Your Life: Strategies That Transformed 177 Average People into Self-Made Millionaires, "habits are the cause of wealth, poverty, happiness, sadness, stress, good relationships, bad relationships, good health, or bad health.” His book is a culmination of his research on hundreds of self-made millionaires.
Here are 10 simple money habits you can adopt today that will help make your life more lucrative.
1. Invest your 'spare change.'
Investing is one of the most effective ways to build wealth, and contrary to popular belief, you don't need a lot of money to get started.
In fact, thanks to micro-investing apps you can start by simply investing your "spare change." These apps will round up your purchases to the nearest dollar and automatically put any spare change to work.
The key takeaway: Start investing sooner rather than later to take full advantage of compound interest. The miracle of compounding can transform a relatively small but consistent amount of saving into major wealth.
2. Ditch the small, daily purchases, such as your morning coffee.
There is a term you may or may not have heard before, "The Latte Factor." The idea behind this term is that eliminating your $5 daily latte could help you save quite a bit of money over time.
Just as you can put your spare change to work, you can put this money to work. A $5 daily coffee amounts to about $35 a week, or $150 a month. If you invested $150 a month and earned 10% annual return, you'd wind up with $948,611 in 40 years.”
Start by determining your "latte factor," cut back on that expense, and direct the money towards an investment account. We all throw away too much of our hard-earned money on unnecessary 'little' expenditures without realizing how much they can add up to.
3. Come up with specific money goals.
The number one reason most people don't get what they want is that they don't know what they want. Rich people are totally clear that they want wealth.
To reach that level of clarity, I suggest writing down goals for your annual income and net worth. Like all goal setting, be realistic, but don't be afraid to challenge yourself. After all, the wealthiest people aren’t afraid to think big.
4. Save, don't spend, unexpected cash.
Pretend that extra money, such as a bonus, birthday check or any windfall, doesn't exist.
Get in the habit of putting any surprise cash, even if it's just that $20 bill you found in your coat pocket, to work. Apply it to student loans, debt, your emergency fund, or an investment account. It will add up. Plus, establishing this habit early on will help you avoid lifestyle inflation when you get more surprise cash in the form of a raise.
5. Tell yourself you deserve to be rich.
The wealthiest individuals believe that success is part of the natural order of existence. This single belief drives the great ones to behave in ways that virtually guarantee their success.
On the flip side, the average earner remains average because they “expect to.” "The masses think they aren't worthy of great wealth. Who am I, they ask themselves, to become a millionaire?"
Try asking yourself, "Why not me?" After all, that’s what the millionaires and billionaires do.
6. Spend 30 minutes a day reading.
Rich people tend to be readers. They continue to teach and invest in themselves long after formal education is over. Walk into a wealthy person's home and one of the first things you'll see is an extensive library of books they've used to educate themselves on how to become more successful.”
If it works for the millionaires and billionaires, it could work for you.
7. Set your alarm clock earlier.
In addition to reading, wealthy people tend to wake up early. Self-made billionaires Richard Branson and Jack Dorsey start their days at 5:00 a.m., and they're far from the only successful people to get up before the sun.
In a five-year study of hundreds of self-made millionaire’s author Thomas C. Corley found that nearly 50 percent of them woke up at least three hours before their workday actually began.
I can't guarantee that joining the early bird club will make you rich, but it can't hurt, and it will almost certainly make you more productive.
8. Surround yourself with successful, high earners.
Who you hang out with matters more than you may think. In fact, your net worth tends to mirror that of your closest friends.
Successful people generally agree that exposure to people who are more successful have the potential to expand your thinking and catapult your income.” In other words, we become like the people we associate with, and that's why winners are attracted to winners.
Get comfortable in this atmosphere and watch these types of people because you will begin to notice they're no different from you.
9. Track your spending.
You can't build wealth if more money is leaving your wallet than coming in. To ensure you’re earning more than you’re spending, track your daily expenses.
There are a handful of apps that will do this for you. You can also use a spreadsheet on your computer or simply record your everyday purchases in a notebook or on your phone.
Perhaps you'll find another "latte factor" that you can cut back on.
10. Prioritize high-interest debt.
It's important to understand that all debt is not created equal. An effective strategy is to rank all of your debt in order of interest rate, from highest to lowest. Then, prioritize the debt with the highest interest rate, while still paying the minimum on all of your debts, in order to pay less over the lifespan of your loans.
There is an alternate option, too: Rank your debt in order of size and start with the smallest. It's a strategy I have used and taught for years. The idea is that each time you pay off one form of debt, you build momentum, which helps you tackle the next biggest, and so on.
The important thing is that you get out of the red as quickly as possible. After all, it's hard to start building wealth if you're not debt free.