Financial Adviser: 5 Simple Money Habits Everyone Can Follow…




One of the most common reasons why people don’t become rich is because they have habits that prevent them from becoming financially independent.


For example, some people may think that it is impossible for them to earn more because they don’t have the capability and resources to get a better job or go into business.


Or they may feel that they are not yet ready to give up the lifestyle that they’ve already gotten used to. There are people who get easily uncomfortable whenever they think of making hard changes in their priorities.  


There is a saying that before you can become a millionaire, you must learn how to think like one.


When you don’t have the right attitude towards handling money, as a result of your traditional beliefs or personal values, you will always find it difficult to build a sustainable financial security.


To become rich, you must begin with the right mindset to grow. You must learn how to motivate yourself and overcome your fear.  



You must develop a solid financial plan that will guide you into the future and you must believe that you can follow through and carry this out.


Becoming a millionaire is not about having the money to invest. It is about having the right mindset. When you practice the discipline of becoming rich, the hard work and ideas can easily follow.


Here are five simple money habits everyone can follow to become a millionaire:


1. Develop the habit to save consistently

Setting your financial goal is the first step to getting yourself financially organized. Once you have identified your goal, you need to decide how much money you can save on a regular basis from your monthly income.


Let’s say you decide to keep 10 percent of your regular income as savings. Every month, when you receive your income, you need to transfer it automatically to a separate savings account.


You must do this consistently to build your savings account. When you are more comfortable with your spending, you can decide to increase your savings rate to 15 or 20 percent in the future.


If you get a raise in your monthly income, you must avoid the temptation of increasing your spending budget.


If, however, you think that your current income is not enough to achieve your goals, you must look for other ways to boost your current cash flows.


Perhaps you can look for part-time work on weekends. Or you may consider some good business ideas and start a small venture with your friends.




2. Develop the habit to control your expenses

When you are determined to save, you will be more conscious about how you spend your money.


One way to control your spending is by way of budgeting. A budget is a useful tool to guide and help you spend according to your financial priorities.  


When you review your expenses and compare this with your budget, you can easily identify and evaluate the causes for any differences. 


By regularly identifying how you overspent or underspent, you can reflect and evaluate how your personal values affect the way you make regular financial decisions.


Having a budget doesn’t have to be complicated. Develop a simple budget that can help you focus on achieving your savings goal. You may not be able to comply with your budget completely but it will at least help you keep your spending in check.



2. Develop the habit of paying off credit card debts in full

Credit cards are a great source of free credit when used properly. It offers a convenient substitute to carrying large amounts of cash when you go shopping.


The key is to avoid tolerating how credit card companies make money from you from their interest charges. When you pay the suggested minimum payment, you already agree to pay interest to them at an unreasonably high rate.


For example, there is a particular credit card company that charges an interest rate of 3.25 percent per month. Do you know that this translates to 39 percent a year?


If you follow this by paying the minimum, the difference will be simply added to your balance. The longer it takes, the bigger your debt balance will become as your unpaid interest accumulates over the months.



In fact, for as long as the minimum payment is lower than your interest, it will take you forever to settle your debt fully.



3. Develop the habit of making your money work

While it is good to have the discipline to save, keeping all your money in the bank is not enough.


You need to grow your savings by investing it. There are many ways to invest your savings.


Depending on your risk appetite, you can invest your savings in different assets by coming up with right combination that will give you the highest return possible at the risk that you are most comfortable with.


If you are the conservative type of an investor, you can choose to invest in fixed income securities that pay regular interest or the riskier, preferred shares that pay higher dividend rates. The return on these investments ranges from six to eight percent per annum.


If you want more risk for higher returns, you can also buy some stocks for long-term capital gains. In the past 10 years, Philippine stocks have generated excess returns of over 15 percent over fixed income securities.


Buy promising stocks that have the potential of at least doubling their share price over the long term. Choose stocks that have great earnings growth prospects.


You can also invest in real estate for passive rental income. For example, the annual rental income from condominium property can give you average yield after commission and expenses at seven to eight percent.


Lastly, if you are willing to assume more risks, you can invest your money in business startup. But be aware that you can lose all your investment in business as more than 90 percent of startups historically fail in the first few years.




5. Develop the habit of learning and become more competent

Your personal growth is your personal responsibility.


Become more competent to increase your earning capacity. For example, you can develop your own personal development pathway.


You can enroll in seminars on marketing practices during the first quarter of the year. Then in the following quarters, you can schedule to attend courses on finance or general management.


Anything that will enable you to learn useful things and improve your skills can help you become more productive in the future.


If you feel that you don’t have enough knowledge and understanding about making financial decisions, you also need to educate yourself.


Read books on investment and personal finance. Do not hesitate to invest in training and seminars on financial planning. The returns on continuous investment in personal finance education will more than compensate you for the cost of your money mistakes.


Many people would rather sit down and wait for opportunities to come to them than go out and look for it. If you want to grow financially, you must find ways to increase your opportunities to make money.






Henry Ong, RFP, is president of Business Sense Financial Advisors. Email Henry for business advice [email protected] or follow him on Twitter @henryong888 

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