Warren Buffett: The CEO of Berkshire Hathaway is one of the wealthiest people on the planet. With a net worth of 106 billion USD, he made his fortune through stock-market investing.
To put this into perspective, the world’s population is 8 billion.
At 11, He bought his first stock and real estate at the tender age of fourteen. Let's hear from the billionaire how we can break our bad money habits and make a fortune for ourselves.
1. You Don’t Keep a Budget
If I may ask you: What was your spending last month? How about six months ago? And the month before that?
Payday is one of our best days. We finally get the reward for a month’s worth of hard work.
However, the joy is short-lived, with the paycheck vanishing as quickly as it came.
Leaving you wondering where all the money went.
Sounds familiar?
You need a budget. A budget is an intentional spending plan; and by making a budget, you assign every dollar a task to accomplish.
Therefore, you’ll be able to take control of your spending habits by telling your money where to go instead of wondering where it went.
2. You Have No Emergency Fund
49% of Americans cannot afford a $400 emergency.
This keeps them chasing the next crisis payment, thus trapping them in a vicious debt cycle.
You need to have at least three months’ worth of expenses in your emergency fund to truly experience peace of mind and be able to dare create wealth.
This enables you to invest without the urge to pull out your invested capital to settle an emergency.
An emergency fund is like a rubber on a shoe. Cushioning you against living a life of putting out crisis fires.
3. You’re Trapped in Debt
Getting into debt is super easy in the present day. The emergence of predatory credit card companies and corporates, selling you a dream you can’t afford, worsens the dire situation.
They keep you trapped as they milk every dime out of your pockets.
Their interest rates are exorbitant and too high, canceling out any returns you might have on your investment.
The sad reality is they’re in business and keeping you in debt is how they stay in business.
Breaking free of the enslaving chains of debt is a step in the right direction.
Set up a debt repayment plan and stick to it as you steer your life in the right direction.
4. You’re Keeping Up With The Joneses
Lifestyle creep is tempting, especially in the digital age of Instagram and Facebook.
We’re posting our achievements and leaving our failures and shortcomings behind the scenes.
Don’t let this mounting pressure break you to the point of taking unsound financial decisions.
Just because your neighbor moved to a larger house doesn’t mean you have to move up, and certainly you don’t need a new gadget because it’s the latest release. You’re smarter than this.
5. You Lack a Financial Plan
What is your game plan? For your favorite sports team to win, they need a good game plan and put the ball in the net most time.
Your financial life is no exception.
You need a saving and investing plan in place so that you can know when you’re letting it go.
Don’t drift in life aimlessly. Know whether you’re winning or losing.
6. You Don’t Track Your Expenses
How much did you pay for your regular expenses last year?
Most people let it slide and wonder where all their money went.
They are in constant financial trouble despite earning a decent income. It is not the lack of determination selling them out, but their inability to take charge of their financial life.
Make use of free resources available on Play Store to help you keep track of your expenses.
By knowing where your money is going, you’ll be able to redirect and assign to it a better role that will make you richer.
Reviewing your bank statement is an excellent place to begin.
7. You Don’t Differentiate Needs vs Wants
In the Richest Man in Babylon Classic, what you call your necessary expenses will continue to grow until you put a stop to it.
Therefore, you need to distinguish your survival needs from your wants.
Food, clothing, shelter, utilities, and transport can form the basis of your classification.
Then, adjust the rest of your expenditure according to your needs at a particular set time.
Create room for a little fun in your life to appeal to the thirteen-year-old deep inside of you and take occasional breaks to evaluate your progress.
8. You Do Not Have A Gameplan.
We go through cycles and predictable phases in life. To get better with money, you need to map out your expected expenditures and how you are going to meet them.
For example, your wedding or college education.
How much do you want it to cost? Are you going to ride it through with student loans on your back or will you pay cash?
Brainstorming will help you figure out how you’d like your life to end up like; hence, devising a concrete plan is a crucial element of our daily lives.
Build a sinking fund to help you achieve your paced life goals.
9. You Pay Yourself Last
You pay everyone else but yourself. The greengrocer, the landlord, the food store, and before you realize it, you’ve no money left.
A part of your earnings is yours to keep. 30% of your income is an ideal amount to pay yourself.
Use this amount to build your emergency fund and aggressively invest in wealth-building vehicles like the stock market to speed up your financial growth.
10. You’re Waiting Too Long To Invest
The best time to invest was 10 years ago, the next best time to invest is now. However, many people choose to stay on the sidelines with the hope of things getting better for them to get started.
In life, things get better by plan, not by wishful thinking.
The amount you get started with doesn’t matter. Having the right plan and execution is all that matters.
Set up your investment accounts and watch compounding do its magic with every regular investment you make.
11. Focusing on saving only
There is a limit to how much you can cut back and be able to live a fairly comfortable life.
However, there is no limit to how much you can earn.
Therefore, learn one more skill to revolutionize your earning potential.
As your earnings increase, the better the quality of your life gets. Skillshare is an easy-to-navigate platform where you can get started on your betterment journey.
12. You Pay too much in taxes
Governments offer tax incentives to businesses and corporates. Hence, familiarizing yourself with tax laws will come in handy.
You’re probably not making millions at the moment, however, getting to know the tax advantages of acquiring assets under your business name instead of yours will help you pay less in taxes and save you tons of money.
13. You’re Living Paycheck to Paycheck
You only live once, or so they say.
Disregarding how much a hundred dollars a month invested over 20 years could become: Most people get trapped in the vicious cycle of making money, spending it all, and pondering where it all went.
Set up a payday routine and consciously allocate your finances to worthy courses.
Don’t forget to pay yourself first, as that is your freedom fund. Saving and investing are the holy grail of wealth creation.
In Summary,
1. Create a budget and track your expenses.
2. Have an emergency fund.
3. Plan out your upcoming enormous expenses by creating a sinking fund.
4. Increase your earning capacity and avoid lifestyle creep.
5. Pay yourself first, save, and develop an investing philosophy.
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