We don’t usually count those who fly kites in lightning storms among the wise, but we can give Ben Franklin a pass. His notion that our net worth might be the sum total of our good and bad habits is as true in life as it is in finances.
As tax season passes and money habits are top of mind, let’s ask the question: What’s the ONE Thing for financial success?
In preparation for a recent event, we worked with our research team to ask and answer this very question. The list of fundamental principles is actually quite short. And which one is your ONE Thing depends on where you financially are today. If you think of them like dominoes, you could line them up 1-2-3.
- Live on less than you earn.
- Invest in assets that appreciate.
- Play the net worth game.
These are the habits that lay the foundation of wealth building. So where are you in domino fall?
Live on less than you earn.
You can never invest if you have no money at the end of the month. Figure out how to live within your means – a big step and the subject of several great books. Then set a percentage of your money aside in a separate account. It’s often easier to automatically have your company move money for you before cutting your paycheck, similar to a 401K plan. After a few months, you won’t really notice the amount hitting your pocket is smaller. You’ll just habituate your lifestyle to the new amount. Meanwhile, in a separate account, you’ve birthed an investment nest egg that is growing quietly in the background. When it gets big enough, you can invest!
Invest in assets that appreciate.
Following The Millionaire Real Estate Investor blueprint, always invest in what you know. Start an investment portfolio and diversify over time. For instance, if real estate was your area of expertise, start by buying a home. Move to an investment property next, and collect some stocks or funds along the way. With your portfolio started, you can then keep a careful eye on your net worth.
Play the net worth game.
Once you’ve established even a few good financial habits (see above), and eliminated some bad ones (carrying credit card debt, living above your means, etc.), you should notice your net worth growing. This is where the game begins. Each month, using a spreadsheet or other tools like Mint.com, sit down to calculate your net worth and ask the simple question: what’s the best way to make this grow?
Gary writes eloquently about this process in The Millionaire Real Estate Investor, and he credits it as a foundational wealth building habit that he keeps to this day. It’s true. Like so many habits – from pedometers to keeping a food journal – just logging your progress over time yields amazing insights and returns on your time (and money).
In a nutshell, if you adopt these financial habits, you’ll be counting your Benjamins in no time. What net worth tracking tools do you use and recommend?
Original Source: http://www.the1thing.com/applying-the-one-thing/three-financial-habits-essential-to-growing-your-net-worth