How to manage money like rich peoples do
Want to know how to manage your money as rich people do? It’s simple, really!
Rich people focus on building healthy habits around spending and saving their money so they can save more and spend less.
If you want to learn how to manage your money as rich people do, use these 10 tips to get started on the right track today!
- Think Every Purchase As An Investment
- Know Where Your Money Is Going
- Stick To A Budget
- Don’t Buy Junk You Don’t Need
- Ask For A Raise
- Save 10% Off Every Check
- Leverage Free Resources First
- Balance Out Extra Spending With Savings
- Live Within Your Means
- Automate Expenses
1) Think of Every Purchase as an Investment
It may seem confusing, but one of the best ways to save more is to think of every purchase as an investment.
Be sure you have your expenses broken down into fixed and variable costs.
Your cell phone bill or TV subscription are fixed costs.
When you take on variable costs, like lunches out with friends or some new shoes, try calculating how long it will take you to break even after your purchase by using tools.
In other words, decide if that pizza delivery would be worth, not negligible than the spent on the pizza, then cut back elsewhere so you can make room for it in your budget.
2) Know Where Your Money Is Going
Tracking where your money goes is at least half of budgeting, which in turn is an integral part of financial planning.
It’s not only important for setting and achieving goals but also gives you a strong idea of what you can really afford.
Whether it’s paying off debt or building an emergency fund so that you have targets to hit along your journey to financial stability.
Without them, it will be much harder to manage your money like rich people do. Learn Where Wealthy People Invest Their Money.
3) Stick to a Budget
Budgeting is a way of life for most rich people, not something they do sporadically or when in crisis.
If you’re looking to get your finances in order, try building a budget that helps you manage your income and expenses.
To start, try tracking how much money you spend on groceries over one month and see if that gives you an idea of what’s eating away at your income.
Spend less than what comes in and make sure everything else pays for itself. And don’t forget about getting a handle on debt saving up enough to pay off any loans and avoiding new debt wherever possible.
4) Don’t Buy Junk You Don’t Need
While we all enjoy getting something for free, there’s almost always an opportunity cost associated with free items.
In other words, while you don’t have to pay anything upfront, you’re giving up something of value in exchange for your time.
Instead of chasing free things, focus on making sound financial decisions. For example, buying a cheaper yet effective version of an item can actually save you money and improve your bottom line long-term.
Before purchasing anything, ask yourself,
- Will I use it?
- Will it help me reach my goals?
If not save your money!
5) Ask For a Raise
I’m not going to pretend like I know what it’s like to be on minimum wage, but I do know that asking for more money can be scary.
The idea of negotiating your salary is daunting, especially when you don’t have years of experience under your belt and don’t have some grand safety net of savings in place.
But if you can take a leap of faith and ask for more money in a respectful way, it may help boost your career (and make your bank account feel just that much fuller).
6) Save 10% off Every Check
Imagine what you could do with an extra 10% of your paycheck each month. It’s never too early or too late to start managing your money like a rich person.
Start by following one simple rule, save 10% of every check, whether you get paid once or twice per month.
If you earn $1,000 each month, set aside $100 for savings immediately after getting paid no matter what you spend during the rest of that month.
In one year, that’s $1,200 in total and if you’re able to save another 10% next year and every year after that. You’ll be saving more income each year in no time at all!
7) Leverage Free Resources First
It’s important that you think of your finances like those of a venture capitalist.
The VC doesn’t spend all his time and money trying out hot new startups. He hires people who do that for him.
The same goes for managing your money. In fact, most of us probably have more access to free financial information than any rich person ever did.
Sign up for email alerts from large financial institutions, read blogs on investment management and personal finance, and subscribe to podcasts from people who know what they’re talking about.
Whether you start small or go big with your learning plan, embrace free resources first and then start working with paid advisors as necessary.
8) Balance out Extra Spending with Savings
Remember that old saying about ants putting away rice for a rainy day?
It’s still true, but now it means something different.
These days, if you want to accumulate wealth over time, you need to save at least 15% of your income each month.
- What should you do with that extra cash?
Put it in your emergency fund. That’s an account where you keep three to six months’ worth of expenses on hand for when life throws one of its curveballs.
- How much do you need in your emergency fund?
Figure out how much your monthly bills come out to and then multiply that number by two.
9) Live Within Your Means
If you can’t live on what you make, then you’re living beyond your means. Stop it! Instead, figure out how much money you have and can comfortably spend each month.
Then make sure that’s what shows up in your checking account at least until the debt is under control and your emergency fund is fully funded.
This isn’t just about how much income you bring in. It’s also about being smart with your expenses.
If you can’t live within that amount of cash every month, spend less or earn more. You know what needs to happen if either case applies, do it.
10) Automate Expenses
Managing your money on autopilot is an easy way to boost your cash flow without having to make any drastic changes.
You can automate everything from bills and savings goals, to payments toward investments, student loans or credit cards.
Consider it as checking off an item on your daily or weekly To-Do list that you’ll actually look forward to crossing off.
Automating these sorts of tasks will have a big impact over time and may surprise you by how much money goes into savings when you aren’t thinking about it at all.
No matter how much you make, manage money and saving more and doing so in a way that’s less painful than chasing down every cent is worth looking into.