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9 Money Habits That Will Put You On The Path To Wealth

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While a six-figure inheritance or high-paying job can land you in the top 1 percent of

earners, it's the little things -- your money habits -- that often make the difference

between a life of prosperity and one of constant financial stress.

Just ask LearnVest Planning Services CFP David Blaylock, who doesn't simply advise

his clients on the merits of good money habits -- he practices what he preaches.

For example, "I do a periodic review of all the subscriptions I have -- the ones that hit

my credit cards each month," says Blaylock. "You'd be surprised at how many

subscriptions we all have and how many go unused. You could create some significant

savings each month just by looking at those things."

Taking inventory of your recurring subscriptions and services is just one habit that can

get you on the road to better fortune.

"If you look at the average amount of money you will earn over your lifetime, and figure

out how many years you are working -- most people earn more than a million dollars

over their working life but very few people become millionaires," says Nancy Butler, a

Certified Financial Planner. "How they manage what goes through their fingers

usually makes the difference."

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So what are these easy changes that can help move you further along the road to

prosperity? We asked two financial planners for their favorites.

1. Reverse Your Thinking

We know: After taxes are taken out and the bills are paid, your paycheck can seem

a little anemic -- which can make the idea of having to save for retirement too

seem like a real stretch. But to build wealth, a change in mindset is required.

Namely, instead of spending the rest of your take-home pay, you'd actually take

another cut of your paycheck and put it toward your biggest financial goals.

"Most people spend some money, pay their bills and save what's left," says Butler. "And

that's backwards: You should be saving for your financial goals first, paying your bills

and and then consider spending the money you have leftover." Another trap is putting

your good money habits off till "later," when life will get easier. The thing is, somehow

the minute your income increases, the demands on your money seem to as well.

Now, keep in mind, we're not suggesting you sock all of your money away and live onrice cakes. As Blaylock puts it: "I'm not asking you to put $1,000 away a month, I'm

asking you to put away $50, or a small amount that you can afford. We really can't

underestimate the power of starting small, because most of the time that momentum

builds, and once we see progress, we tend to repeat behaviors."

2. Look Where You Want to Go

Just as performance athletes imagine themselves making the shot over and over again --

check out this study for how goal-setting improves motivation in athletes -- knowing

what you want your money to do for you gives your goals a better chance of being

reached.

To get going on saving for the future, financial experts often suggest having a five-yearplan, where you create specific money goals you'd like to achieve in five years and what

you need to achieve those goals. (That is the goal of LearnVest's 5-Year Planner.) For

example, saving six months of income for an emergency fund, or saving for a big event,

like a down payment on a house.

"Anytime we have a specific goal in mind, that helps us to save," says Blaylock.

"Whether that goal is emergency savings, or saving for a trip, or saving for college, it

doesn't matter."

3. Adopt Your Own Private Mind Tricks

What if not spending $1,000 on a designer purse or new must-have gadget were as

easy as following a rule that dictates you can't spend more than $300 on

something that isn't essential to your life? The good news is you can create

financial rules just like that for yourself; in fact, doing so can be a great habit to get

into.

Also known as "heuristics," these rule-of-thumb strategies we create for ourselves -- such

as not spending more than $15 on an item of baby clothing, or more than $50 on a pair

of shoes -- can help simplify the many choices we make in a day. Behavioral economistsbelieve that adopting good heuristics can help one develop good money habits (see this

piece for more on how and why they work).

If creating a great heuristic seems like an overwhelming task, Blaylock suggests starting

with something simple, such as eating out only twice a week, or "not getting a cart at

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Target," a heuristic that helped one of his colleagues save money.

4. Live Like a "Secret" Rich Person

For some, the image of a millionaire conjures visions of sprawling mansions and

shiny Bentleys. But most millionaires don't live large like that -- rather, they tend

to live well below their "means" and do more saving than spending. In other

words, they're not flashing their money, according to Dr. T homas J. Stanley, co-

author of "The Millionaire Next Door: The Surprising Secrets of America's

Wealthy." Stanley's book, which details more than two decades worth of survey s

and personal interviews with millionaires, reveals that much of the wealth in

America is more often the result of hard work, diligent savings and living below

your means.

Las Vegas-based David Sapper, who owns a successful used car business, and his real-

estate broker wife make a combined income of $500,000 per year. Yet they live like

"secret" rich people, only spending $2,500 per month on all bills and extracurricular

expenses like eating out, unlike many of their peers. By putting 90 percent of his income

into savings and investments, Sapper says he'll be able to retire early.

His advice? "Find the point that you get what you need and you're happy and

comfortable, and just stay there," says Sapper. "I had an 'aha!' moment when I was

watching MTV, and LL Cool J was saying, 'I lease a Honda Accord for $399 a month,'

while other rappers are going broke."

5. Tackle Retirement Now

If you're in your twenties or thirties, retirement can seem eons away -- and saving

for it might not seem like a priority. It's easy to understand: In between paying to

attend weddings (which average something like $600 per guest), saving for a down

payment on a home, and using anything leftover to put toward "necessities" like

vacation, how are you supposed to save anything for retirement?

Unfortunately the later you start saving, the more you'll have to save. But the sooneryou sock money away, the more time it has to compound and grow.

If, for example, you're 30 and putting $50 a month into a retirement account with a 7

percent rate of return, that $50 a month would turn into $56,000 in 30 years, says

Blaylock. Should you wait to age 40, you would need to contribute $110 per month to

get to that same goal. This is because your money has less time to grow which

minimizes the impact of compound interest. (For more on compound interest and why

losing time on retirement can hurt you, check out "The Secret of Retirement Savings:

You Can't Make up for Lost Time.")

6. Know What's Coming in, and What's Going Out

Most of us have good intentions when it comes to saving money. But if you don't

know what's coming into your bank account and what's going out, chances are

you don't know how much you can devote to your goals. And most people

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generally don't track their income and spending, says Blaylock. "It really is

shocking to me that clients I work with don't always review their pay stub," he

says.

You can track your expenses for free with an app like LearnVest's that helps you budget,

set goals and save. Remember: Knowledge is the first step to lasting change.

"If I don't know how much you spend on eating out, how can I expect you to change

that?" says Blaylock. "You kind of have to become the chief financial officer of your

household."

7. Getting Out of Debt

Everyone has debt at some point in their life. But if you have bad debt -- not

student loans and mortgages, but credit card debt, where you're paying high

monthly interest rates -- nixing it and getting out of the habit of being a debtor --

should be priority number one. "I want somebody to develop a plan to have them

out of that debt in 36 months or less," says Blaylock. "It's hindering you from

making progress on your other goals."

At the same time, emergencies happen -- and a $600 car repair can hit anytime. That's

why Blaylock advises putting half the money you could put into paying down debt into

an emergency savings account. So, for example, instead of paying $600 toward credit

card debt, consider putting $300 toward emergency savings and $300 toward credit card

payments. While this means it will take longer to get out of credit card debt, you'll have

money stored up for an emergency.

"Credit card debt is a result of the 'uh-oh' moments," says Blaylock. "We still don't have

any savings built up because we put it all toward our credit card. So while you're also

working to pay your credit card down, you should consider putting an equal amount to

an emergency savings account. I often tell clients that their emergency savings are their

insurance policy against falling into credit card debt ever again."

After you get out of debt, Butler suggests only having one credit card, and come to an

agreement with yourself (or your significant other) that it will only be used during an

emergency. "Let's say the car broke down and you can't fix it -- that's an emergency,"

says Butler. "Something's on sale, and I know I'm going to need it in six months -- that's

not an emergency."

8. Increasing Your Earnings

There are two ways to increase your net worth: Spend less or save more money.

"And spending less is only part of it -- you have to save, and when appropriate

invest, the rest," says Natalie Taylor, a CFP with LearnVest Planning Services.

"Earning more often doesn't lead to higher net worth because lifestyle expenses

grow along with it."

But if you grow your income, and set some of those earnings aside, you can grow your

bottom line. Aside from getting a raise or winning the lottery, there are a few ways to get

more money flowing in.

One suggestion: Diversify your income streams by working a second, part-time job doing



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something you love. As far as earning more, there are a few things one can do. "For

those who cannot cut their expenses enough, I love the idea of working part-time," says

Blaylock. "I have a great friend who is an attorney. She has a big travel habit that she is

unwilling to pull back on. So, she works at a flower shop on Saturdays during wedding

season. It's a win for everyone: The flower shop has a dependable employee, and my

friend loves flowers so she does not think of it as work."

Another idea: Look for investment opportunities -- perhaps with the help of a financial

planner -- or other ways to get income to come to you. "I think retirement income

should come from multiple sources such as rental income, part-time income and

retirement assets," says Blaylock.

9. Consider Consulting an Expert

There are times in life when consulting an expert pays you back in spades. Even if

you're doing everything you can to start good money habits, using a

qualifiedfinancial planner can help keep you on track -- and help you see the big

picture.

"Often times most of us are too emotionally involved in our finances to make really good

decisions," says Blaylock. "So what you're looking for when you're getting a professional

is accountability and an outside view of what you're doing. I look at your finances very

objectively, where you can't because you're that person."

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