Some of the richest people in the world did not start off that way. Many of the most wealthy and successful people have lived in their cars, been homeless, lived on food stamps or been on welfare of some kind. Generally what makes the difference between people who get rich and those that live in chronic poverty are good financial habits. Yes, you could buy a lottery ticket every week and hope for lightning to strike, but without good financial disciplines, you are not likely to keep your wealth for long, even if you were to stumble into it. If you want to get rich and stay rich, here are 6 easy steps to get there.
1. Keep a record of everything you spend
The very first step to managing your money is figuring out exactly where it is all going every month. You may be shocked to discover you spend almost $300 a month on fancy coffee drinks and nearly $500 a month on meals. Before you can make cutbacks, you need to figure out where your money is going so you know where to cut.
2. Set a budget and stick with it
Once you see where all your money is going, you can make more educated decisions about what you really need and what you can live without. While you don’t want to cut out everything enjoyable, you have to balance your every expense with your desire for financial freedom.
3. Pay down debt
Every day that you carry debt is a day you pay more for things than they are actually worth, thanks to the interest. The less debt you have, the less you pay in interest. Paying down debt may also involve trading in your new or luxury car for a less expensive one or even selling an expensive home and moving to a more modest one.
4. Use cash for purchases
Not only can you often get much better deals on things when you pay in cash, but you will also spend less on the whole. Studies have shown that using plastic creates a disconnect in our brain between what we are buying and what it costs. When you actually have to fork over cash, it makes the true cost of what you are buying all that much more real.
5. Save for large purchases rather than buying them on credit
Once again, cash is king. When you buy things on credit, the price climbs astronomically because of the interest rate. Even the lure of 0% financing can cause you to buy things you don’t actually need.
6. Spend less than you earn
Unfortunately, credit cards make it possible for people to actually spend more than they earn – at least for a time. Eventually, however, all that spending will catch up with you. While it may be painful to cut the cable, take your lunch to work every day and only buy a new cell phone every other year, wealth involves having excess. You will never have excess if you spend every dime you make.