Let's face it: One of the best ways to achieve success is to study and emulate those who have already achieved similar goals. The goal of saving money is no different. People with wealth know how to save, and here are five money saving habits to steal from the wealthy. Go ahead, take them.
Perhaps the most important habit is to focus on the future. Decisions that we make with our money today almost always affect us months and years down the line. For example, if we buy too much house with a huge mortgage, we might feel stuck in our jobs without the flexibility to move around and try new things. Expensive cars increase our debt and make it more difficult to build our nest egg for years after the purchase. If we want to sell the car for a less expensive option (which is good in principle), we still are forced to eat the depreciation that started the instant we drove the car off the lot. How are your money habits affecting your future freedom and flexibility?
One of the best deals in the business is pre-tax contributions into 401k retirement accounts offered through your employer. These contributions lower your taxable income, which reduce your tax burden. Many companies will match a certain percentage of your salary (commonly between 3 and 5%). This is free money, but employers will only match your contributions. If you don't contribute, neither will they. If your employer offers a 401k, contribute as much as you can. If they match, be sure to at least contribute that amount to take advantage of the free money that your company is giving you for retirement.
Source: The Verge
Rather than trusting themselves to manually save money from their paycheck, most wealthy people have setup automated transfers once a month that take some cash from a checking or direct-deposit account and put it directly into savings. This makes saving cash automatic, consistent and super easy. Automated transfers remove the temptation to spend that money instead of save it, requiring no intervention after the recurring transfer has been setup through a bank. Set it up once and forget it. Month after month, your nest egg will grow before your very eyes, and you won't have to do a thing to make it happen other than earn a paycheck.
One-off expenses can easily add up to something much more substantial if left unchecked. For example, spending a couple bucks on a magazine subscription does not seem like a big deal. But do that 10 times and you're north of $20 / month for magazines that most of us forget to even read. Or tacking on movie or sports channels to our cable service. Or adding an extra telephone line to our wireless package. In other words, automatic monthly subscription fees very often go unnoticed, even if we stop using those services. They are easy to forget about and sit for months draining precious resources (cash!) out of your bank account. Be aware of the little things.
Source: Saving Diary
Most people consider saving whatever money is left over after paying their monthly expenses. Wealthy people, however, reverse this formula. Using the "Pay yourself first" strategy, wealthy people fully fund their savings account, investments and other financial goals first. Then, they use whatever is left over to fund their general living expenses. They prioritize saving over spending. How much should you save? Strive for 50% of your income. If you are just beginning to think more earnestly about saving money, establish easy goals and incrementally work your way up. For example, instead of striving for 50% right off the bat, first save 15%. Then, increase that to 30%, then again to 50%. Small steps make achieving your financial goals much easier to manage.
Use these five money saving habits from wealthy people to take control of your finances. You might be surprised at how quickly your net worth will grow!