The clock is really ticking now on 2020.

As we hurtle towards 2021, we are seeing a lot of people thinking about building new financial habits for the future.

Here below are some good money habits that we have observed among our clients who have good and healthy relationships with money… 
The Habits of Wealth
“May your choices reflect your hopes, not your fears.” -Nelson Mandela

One thing what we’ve seen in working with clients all across the financial spectrum is that good financial habits begin small.  We can start a new habit at any time.  And it takes time to develop and build up.

As we’ve watched clients go from one end of the income scale to another, over the years, here are five habits we’ve seen carried by all of them who moved *up* that scale (and those who started there — without these habits — well … they went the other direction).

1. A future orientation
 

The wealthy usually carry a willingness to live beneath their means for as long as it takes to reach their financial goals. While their peers are showing a tendency toward embracing the good life at the first sign of prosperity, the would-be wealthy take a pass on all of that.

While others are saving 6-10% of their annual incomes — or 0% — people who want to be wealthy often save 20, 30, 40 or even 50% or more of their incomes.

Imagine how much money you’d have saved in 10 years if you saved half of your income during that time? The fact that no one ever sees this happen is one of the reasons that people believe that the wealthy somehow “come into money.”

2. Careful spending
 

The self-made wealthy learn early in life that you never pay full price. The combination of this habit with delayed gratification is a powerful force when it comes to growing wealth. Not only do you spend as little money as possible, but you buy at a discount when you do.

While most people are buying the most expensive house they can afford, the rich-in-progress buy beneath their means, and buy the cheapest house in the neighborhood to boot. They first ask themselves, “How much house can we truly afford right now?” 

The same is true of buying cars: If one wants to be rich someday, he buys a conservative car — and buys it used.

3. Avoiding debt whenever possible
 

Debt represents a reduction of future cash flow and the wealthy will avoid it. By paying cash on the barrel, there are no strings attached to what you buy that might compromise your ability to continue saving money at a high rate.

Notice how the drive to save large amounts of money causes frugal spending habits, which then enable the ability to make purchases without using debt; the three habits combine to form a pattern that brings the aspiring rich to the point of great wealth earlier than an outsider might expect.

4. Low risks and high yields
 

If you want to be rich, the first rule of investing is to not lose money! If you have a small amount of money to invest you might be tempted to put it all into high-risk growth stocks in the hope that a big run-up in value will make you rich. 

But if you have — or hope to have — a large portfolio to invest, you might not take that kind of risk. Your investments will be in assets that are unlikely to collapse in price, reasonably likely to grow in value over time, and able to provide a steady cash flow while you wait for them to grow.

For those who are starting out, a perfect investment asset might be an undervalued (and therefore very likely to grow) blue chip stock (not likely to collapse) with a history of above-average dividend yields (steady cash flow). Or a good index fund. You don’t need your investments to make you rich — you’re already on your way there, and just want to further grow your wealth, steadily and predictably. (Of course, the specific strategy will vary from person to person, and at different stages of life, so this isn’t necessarily intended to be personalized investment advice for you.)

5. Ruthless ability to say “no”
 

Our wealthiest clients have the ability to center on the most profitable ventures and to let go of nearly everything else. They often do this by delegating non-profitable activities to others, if not making those activities somehow go away altogether.

This is easier to do when you have money to pay others to handle them for you, or when your finances are relatively uncomplicated. If, for example, the rich person has a business, he might pay someone to handle specific aspects of the operation that are necessary but produce little or no revenue. That frees him to concentrate all of his efforts on generating more income for his business. As a result, his business and his income grow much more quickly, making him wealthier still.

One thing we’ve seen in my clients with means: Becoming wealthy is really a lifestyle as much as anything else. Once you adopt it — by living beneath your means, staying out of debt, and saving large amounts of money constantly, you have capital to invest (conservatively) and to pay others with, in order to free you up to make even more money. It’s not so hard to see why the wealth of the self-made rich seems to spring out one day as if there’s a winning lottery ticket in the mix.

But that’s simply not the case, and our self-made wealthy clients know this.

Hope these thoughts help you and we look forward to serving you again sometime soon.

Stay safe and healthy,

Pronto Income Tax Team

www.Pronto4Tax.com