Saturday, July 25, 2009

10 Habits to Create Wealth

This is a great post done by Christian PF. These are the 10 habits.

1. Make it your daily mission to find your true financial purpose.
Know exactly what you want to achieve financially. Is it financial independence, zero debt or a new home? Set goals, know what you are saving for, why you are saving and what meaning the end results would have.

2. Make new choices daily.
To create wealth requires a change of habit. More attention must be paid to each dollar; every dollar must be seen as valuable. It is not that you are being extremely frugal, but it is a mindset that must be created that embeds in your consciousness the value of money. Now the choices you make will automatically be influenced. For example, you will choose to make lunch at home to take to work instead of spending $10 a day dining out.

3. Associate with positive, like-minded individuals.
Minimize your exposure to negative people. It is amazing the effect they can have on you. Connect more with people who are positive and motivating. These people can make you believe that anything is achievable, and this is an important step in creating wealth; first believing that you can.

4. Educate yourself daily.
Attempt to learn more about finances. It may sound overwhelming or challenging, but it is really not. Any topic that you are not familiar with may seem intimidating. So all that is really needed is familiarity. Familiarize yourself with topics of personal finance and investing so that you will be knowledgeable about it. It does take time and effort. Subscribe to a personal finance or investing blog that you like and read it daily. Every little bit of knowledge helps. Trust me.

5. Practice self-control.
Do not act on impulse. With this new mindset in #2, every decision to purchase is evaluated based on need and priority. Yes, there are times where you treat yourself, but even those times are evaluated, because financial independence, by your own definition, is what your main priority is. So you develop the ability to defer gratification as independence is more important than getting the latest gadget that is released.

6. Hire a team of advisors.
The knowledge that you can get from these advisors is priceless. Right now, I am self-educated and do a lot of reading myself, but I do understand the importance of experience that a tax planner, or accountant may bring.

7. Develop the habit of analyzing your expected return on each investment you make.
For every investment you make, consider what your return is. Profit is highly dependent on the purchase price not the sale price. Pay a low enough price for an asset, and the high return would be automatic. The best investment you can make is in yourself, so dedicate a lot of time to self-improvement and self-development; the return on this investment will usually be ten-fold.

8. Don’t try to look wealthy, look to become wealthy.
This is an obvious point that is overlooked. I thank ChristianPF for mentioning this. Focus on your assets and not your liabilities. Assets create value for you. Liabilities, on the other hand, take value from you; that is, they require you to make payments. Liabilities are also items that you buy that do not add any value, but lose value over time as well. However, know that they can serve beneficial purposes; keep that in mind. For example, books bought to educate yourself on personal finance lose value over time, but do give you a lot of knowledge. Minimize your payments you make and increase the payments coming to you.

9. Give generously to others. Share your time, money, and assets.
Most wealthy individuals understand the importance of giving. Giving can be done in different capacities; giving of knowledge, time, money or resources. The realization that one has the capacity to help others achieve what they want is a great advance of consciousness. Dr. Wayne Dyer said that the best way to achieve what one wants in life is to give it to others. I totally agree with this. By giving it away to others, you would realize that you had it all along. I wrote a recent article on the importance of giving. It is one of my favorites. Check it out. Wealth and Charitable Donations

10. Most important, Always stay true to your principles.
Warren Buffett said that if something seems too good to be true, then it usually is. Always stick to what you understand and do not chase after get rich quick schemes. Once you stick to what you understand, you will be clear as to what the risks are and the surprises will be minimum. This becomes so very important when you start investing.

Inspired by a great post from ChristianPF.


1 comment:

frankilus said...

11. Write your own personal finance blog. I actually thought of this as an addition to the list. This has actually helped me understand it a lot more, which helped me create the wealth mindset needed to lead me to financial independence.

12. Get a mentor. It is important to have a mentor that has already achieved what you are aiming for. Chances are that this person has already been through everything you are thinking of or personally experiencing, so the advice he or she could provide will be crucial to your success and financial development. I do have a few personal finance mentors, many of which write blogs that I subscribe to.