How habits create a domino effect that helps you build wealth without trying.
Most of us want to get it right with money “someday.” We want to succeed, not worry about bills, and create a life we enjoy. A big part of accomplishing this is to build wealth. But as much as we want to, it’s hard to figure out how to do so. However, the habits that help you build wealth may be easier than you think. In fact, once they become natural, you may find yourself with more time and resources than ever.
Why Money Habits Matter
Everyone practices daily habits that make us more successful. Whether it’s running every day or journaling, repetition helps to anchor us, and we build something lasting over time. Good habits lead to good results, and money is no different.
Your habits become more automatic, the longer you keep up with them. This means that once you establish a behavior, it will eventually require less and less effort. Meaning, you can end up building wealth without putting a lot of time or effort into it. Sure, some initial work has to be done, but after that, things do get more manageable, and you end up with a healthy financial life.
Why it’s Important to Build Wealth
Money can involve a lot of wishing. We wish we had the money to take time off or give to a cause that we care about. But a lot of things we wish for can be obtained with time and discipline. With these two things, you can build wealth, which opens the doors for many great opportunities. I don’t believe that money makes us happy, but having some can definitely give us the freedom to pursue the things we care about. And the ability to choose how to invest time and effort is a vital part of enjoying life.
The Habit Domino Effect
James Clear famously discusses the domino effect of habits. He states how one change in your life will lead to other changes in related areas. This has much to do with money. For example, if I decide to save $100.00 a week, it won’t be long before I look at other things within my finances and try to improve those, as well. So, saving that money may also lead me to begin investing.
Habits matter, and so does building wealth. But how do you bring these two things together? Through beginning to practice good financial habits. If you implement the first, you’re likely to follow up with the second, and so on. Here’s how to begin:
Habit 1: Read Up and Research to Become Financially Literate
Learning is key, plus it helps you find out what to do next. It will do you no good to try to make money and change your life without first understanding some of finance’s finer aspects. You don’t have to know much of anything when you begin. But start out by finding a couple of reputable YouTube channels and scanning the daily financial news channels or articles.
Do this for even five minutes each day, and you’ve got a good head start on the way money works. Once you gain some knowledge, you’ll know how to proceed. If you’re starting from the beginning, focus on topics like budgeting, debt payoff, passive income, and 401k tactics.
You might want to keep updated on mutual funds and the stock market, real estate investing, and mortgages for the intermediate learner.
Another way to gain knowledge is to find someone to learn from. Many people are willing to share their expertise and financial experience. If you want to be very official, you can hire a financial planner, but a casual coffee with a friend works, as well. Pick a mentor that is a little further ahead than you in terms of investing and planning, and have a talk with them about how they got to where they’re at. It will help you immensely; getting advice never hurts.
Habit 2: Practice Powerful Budgeting
There’s a lot of ways to budget. Some people like to pay their bills and save the rest. Others want to establish a percentage of their paycheck that goes to each category. It’s up to you, but choose a method that stays the same and a way of keeping track, from pen and paper to an app.
The most important thing with budgeting is to remain consistent. Doing the right things consistently eventually yields great results. Just keep going and don’t give up. Even if you find that you’ve slipped up for one month, just correct course and keep doing your best. Sonn you’ll automatically save, pay bills, and spend responsibly.
Habit 3: Diversify your Savings
Once you develop a budget plan, you’ll also want to diversify where you put your savings. This means having more than a basic checking and savings account from the same bank. Although you don’t have to get crazy with this, it’s a good idea to keep various earmarked accounts for different things. Each bank is different, and you might find that some have better benefits, like higher interest amounts. You could also choose to open an account at a different bank than your regular one and label that account specifically for “House Savings” or “Travel.”
Habit 4: Begin Investing a Specific Amount Each Month
Once your budget is handled, you’re diversifying your savings and learning continually, you’re ready to start investing. This topic gets complicated fast, so do your research. Some people prefer the relative safety of mutual funds, or you may want to buy specific stocks, which can be riskier. The best option is to do a bit of both because diversity is the key to managing risk. Invest a particular amount each month or even each week. Do this for years upon years, and you’ll build wealth.
Habit 5: Diversify Income
Another way to build wealth is to diversify your income through multiple channels. All this means is that your money doesn’t all come from one paycheck from one company. Instead, you’ve increased your wealth to include multiple streams of income. For example, a salary from a full-time job, cash from a side hustle, or money from real estate. Be open to what’s out there. You might choose to become an investor or try out entrepreneurship. Find something you enjoy. And unless it is your full-time occupation, try to make it something that can be mostly passive or doesn’t require a lot of extra time. (Examples include blogging, running an Etsy store with digital products, selling a course, rental income, etc.)
There’s a lot of information about money out there. But if you’re a complete beginner, start with these five habits. They build on each other and will lead to even better wealth-building ideas in the future. Above all, keep learning, and you’re on your way to financial freedom.