The last few years have been tough financially for many households. It is hard to even think about achieving millionaire status when you're unsure about how you'll pay your bills or worried about the rising cost of groceries or gas. Even so, it is possible for many of us to build wealth.
Moreover, you don't need to invent a time machine, earn megabucks, or inherit a fortune to do it. The trick is to cultivate a mindset that helps you spend less and invest more. These habits followed by self-made millionaires may help you do just that.
1. Spend consciously
There's a common misconception that millionaires spend money on fancy restaurants and fast cars. In truth, many self-made millionaires are frugal and watch where each cent goes. If you spend less than you earn and save or invest the difference, over time, you will be able to accumulate wealth. The bigger the gap, the more cash you can put toward your millionaire journey.
That means looking for ways to spend less and/or earn more. For example, a Ramsey Solutions' study into millionaire habits showed that 93% of millionaires use coupons all or some of the time. The study says they spend $200 less than the average American family on groceries. It shows that millionaires tend to avoid carrying a credit card balance so they don't pay interest.
Conscious spending is a great antidote to one of my biggest wealth-building obstacles. I've labeled it my "it's only" thinking. For example, I might think "It's only $10" when I pay extra for speedy delivery or forget to use the coupons as planned.
How to cultivate conscious spending in 2024
Conscious spending does not mean you can never have any fun. Instead, it's about being aware of where your money goes and spending on the things that are important to you.
Look at where your money went over the past week and think about what drove your decisions. Did you order takeout because you were tired at the end of a long day? Did you buy groceries that you didn't eat or something else on sale that you now realize you'll never use? How do you feel about those decisions?
Try not to judge yourself. The idea is to develop an understanding of why you spend money. If you can take that awareness into the choices you make moving forward, you can start to do things differently. That might be using coupons, maximizing credit card rewards, avoiding waste, or cutting back on spending that doesn't bring you joy.
2. Check in with your money
If the idea of making a budget or looking at your bank balance strikes fear into your heart, you are not alone. Sadly, no matter how good your intentions are, if you don't know where your money goes, it will be hard to achieve your goals.
In Tom Corley's rich habits survey, 96% of self-made millionaires balance their checkbooks every month. There are different ways you can keep tabs on your finances, so try to find ones that work for you. For example, I like to receive messages on my banking app every time money goes in or out of my current account. Other people may find that too much. You might prefer to schedule regular financial check-ins -- and set a calendar reminder so you don't forget.
How to track your spending in 2024
Here are some tricks that might make it easier to keep tabs on your money:
- Keep it simple: If you don't like detailed spreadsheets, don't make one. Try using a budgeting app instead. If you don't want to plan out where every cent of your income will go, consider a broader budgeting approach (such as the 50/30/20 rule).
- Make friends with your budget: The biggest change in my financial life happened when I stopped seeing money management as a chore. Switching my thinking meant I started to see it as a tool that would help me sleep better and enable me to do the things I wanted to do. I stopped procrastinating. I even started to enjoy it.
- Treat yourself: It doesn't have to be extravagant, but promise yourself a coffee at your favorite cafe or a long walk after you've paid your credit card or met your monthly savings goal.
3. Make regular investments
Almost all (95%) of the self-made millionaires Corley spoke to saved or invested 20% of their net income. If you don't feel able to invest 20% of your income, start with a smaller amount. You can always work upward once you're in the habit. If you can invest a portion of your income every month, over time that money will add up.
How to invest in 2024
Open an investment account and set up an automatic transfer so that the money goes out a few days after you receive your paycheck. If you don't want to research individual stocks, use index funds or exchange-traded funds to build a diversified portfolio of assets.
If your work offers a 401(k) plan, talk to your HR department to find out more about the scheme. Not only are 401(k)s a tax-advantaged way to save for retirement, some employers might also match your contributions. If a 401(k) isn't an option, look into individual retirement accounts (IRAs) instead. Any money you save on taxes is money you can use in your old age.
Key takeaway
The journey to becoming a millionaire is a marathon, not a sprint. As such, the habits that could make you a millionaire are around finding small ways to save money every day. That will give you more money to invest, which is a proven way to build wealth over time.
