There are people who know how to make money and multiply their fortune many times over. Others barely make ends meet and don’t even have emergency savings.
And it’s not just high wages. Many millionaires have managed to make a fortune with rather modest incomes.
How did they do it? Research in the field of financial planning has shown that it does not matter how much a person earns. What matters is how he treats money. It turned out that most people who have a multi-million dollar fortune followed only 4 important principles.
Spend less
Today’s millionaires have not always made a lot of money. They didn’t live in the biggest house, didn’t drive the latest cars, and didn’t wear fancy designer clothes. However, they all spent less than they earned, that is, they lived within their means.
Most people know how much they earn, but unfortunately, many of them don’t know how much they spend. If you ask them, they may be able to explain only 70% to 80% of these costs.
If you want to be successful, you must be able to consider how much and where you spend your money. Because once you know what you’re spending your money on, you can decide which spending items you can change, reduce, or eliminate entirely to meet your financial goals.
Get rid of debt
It doesn’t take a professional financial background to know that debt only makes rich the person who issues it. But, according to the opinion of financiers, it is possible to take a debt only in three cases. These are education, mortgages and own business.
These directions were chosen for a reason – all of them, after paying off the debt, give fruitful results.
- Education is one of the best investments a person can make for himself. Its results remain for life and pay off handsomely, provided that the person studied, and not just spent time within the walls of the university.
- A mortgage is another profitable investment if a person plans to live in the same city for more than five years. Instead of replenishing the pocket of a stranger every month, it is better to invest in your own housing if possible.
- Own business is a risk, which in most cases is justified. It’s important to make sure you do your research and don’t take on more material risk than you can afford to lose.
Save
Whether their goals were short term, such as an emergency fund, a car, or a down payment on a house; or longer term, such as retirement, the richest people spend money carefully and invest wisely.
Many of the millionaires keep their money in checking accounts at one financial institution and their savings at another. This is not because they have a lot of money, but in order to prevent the temptation to spend it here and now. Keeping savings separate from the money on your checkbook or plastic card makes it harder to spend than a lot of cash.
Remove emotions
Emotions are very complex, and while they serve us well in some cases, our emotions can also be harmful, especially when it comes to money. There are people who spend money out of boredom, out of anger or over-optimism.
Millionaires don’t let emotions drive their spending. In addition, when it comes to long-term savings, they don’t let emotions influence their investment decisions.
Warren Buffett said it best: “Be afraid when others are greedy and be greedy when others are afraid.”
Easier said than done, but in the end, fact-based financial decisions are usually better than decisions based on pure emotion.
