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Money Habits That Separate the Rich from the Poor
Follow these tips to make sure in the right group!
Cashflow Chronicles
May 12, 2023
Happy Friday!
We send an email every time this week to help you build wealth in Canada.
Covered in today's edition: we're diving into the money habits of the rich vs the money habits of the not-so-rich, including:
How To Budget And Take Control Of Your Money
How To Plan For Long-Term Financial Success
How to Use Debt Effectively And Avoid Bad Debt
13 Money Habits To Check Right Now and 4 Recommended Personal Finance Resources
By following the right habits, you’ll have a better chance of building wealth over time. Let’s go!
Read Time: 3 minutes 4 seconds
(Note, we are not financial advisors, this is intended as educational content 👍)
Maximizing Personal Finances
Money Habits That Separate the Rich from the Poor
We all dream of being rich, right? But it's our habits that make all the difference.
Studies show that poorer people share similar habits and make the same mistakes.
It's possible to transition from poor to rich by following sound finance principles.
And the opposite is also true! Make sure you're getting richer and not poorer with this guide.
Budgeting 101: Take Control of Your Money
The rich set a budget and stick to it, which helps them manage their money.
In contrast, people who don’t look after their finances often aren't aware of their incomings and outgoings, leading to overspending.
The rich control lifestyle inflation and spend mindfully, ensuring they save and invest more.
The not-so-rich tend to spend more as they earn more, leaving little room for saving and investing.
The rich set aside money for unexpected expenses, providing a safety net.
Want to start controlling your spending? Download my Free Budgeting Tool here.
Key Takeaway: Track Monthly Income and Expenses
Planting the Seeds for Financial Success
Wealthier individuals focus on saving and automate it, ensuring they always put money aside before spending.
The poor, however, save what's left after spending, which is often not enough to build a solid financial foundation.
The rich contribute to retirement funds, so they have financial security later in life even if it means sacrificing a little today 🌱
Key Takeaway: Put Away Savings Before Spending.
Controlling Debt for Financial Growth
The rich focus on paying off high-interest debt quickly to reduce the total amount they owe.
The poor tend to make minimum payments and delay paying off in full, letting their debt pile up and costing them more in the long run.
The wealthy understand that buying things outright if possible, like a car, is better than leasing or taking out a loan.
They only use debt, such as business loan or mortgages, to invest in assets that generate income or increase in value over time. (More on how to do this coming in future editions!)
The poor may not check their debt-to-income ratio or take out high-interest loans, which can create a cycle of financial stress.
The well-off review their loans and refinance to take advantage of lower interest rates, saving thousands of dollars.
Key Takeaway: Understand The Difference Between Good and Bad Debt (More on this topic coming in future editions!)
Action Plan
12 money habits to check today and 4 Recommend Education Resources
Make sure you check these to build health personal finance habits:
Create and follow a monthly budget to track and manage expenses. Download the Free Budgeting Tool here.
Focus on and automate savings to build a financial cushion.
Pay off high-interest debt to reduce the debt burden.
Explore and develop many sources of income to reduce reliance on a single job.
Research assets that grow over time, such as stocks, bonds, or real estate. 📕
Check lifestyle expenses and resist the temptation to spend on impulse buys
Set up an emergency fund - aim for 3x of your monthly expenses
Define yearly financial goals. 🎯
Network with successful individuals to create opportunities
Seek professional financial advice and education to make informed decisions and avoid costly mistakes.
See if you can refinance any of your existing debts onto lower interest rates
Understand which debt types are suitable and which are bad.
There you have it – the 12 money habits that separate the rich from the poor, and that you should check today!
Practise good habits and avoid bad ones to change your financial future for the better and thrive in Canada.
Here are four recommended resources to learn more about personal finance.
Books
The Psychology Of Money by Morgan Housel
The Richest Man in Babylon by George S Clason
Podcast
Build Wealth Canada by Kornel Szrejber. Check it out.
Personal Finance Youtube Channel - @Nicha - Check it out.
See you next week!
Alain @ Cashflow Chronicles
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