7 Money Habits Every Millionaire Has in Common
Small habits have been proven to do big things for millionaires and everyday people alike.
When it comes to money, there are some specific things that every millionaire seems to have in common and they’re surely helping to make them richer everyday.
You might not have the same net worth (yet) as these millionaires, but you do have the same capability to pick up the habits that help generate that kind of wealth. You can start developing these 7 money habits today and you’ll be one step closer to joining the million dollar club.
1. They split income between multiple streams
The old saying “don’t put all your eggs in the same basket” holds true for most things, especially sources of income, and millionaires know it. This habit is common among not just millionaires but most intelligent investors and successful people in general for a few important reasons.
First of all, splitting income between different streams is an effective tactic to protect your wealth from risk. Most millionaires haven’t gotten to their status by avoiding risk, however, splitting up the sources of income is one of the best ways to protect an appropriate portion of your wealth while you use another portion for growth purposes that might involve more risk.
Not only does this habit protect some baseline of money, it means that you have the opportunity to fail small without losing much. Millionaires know the importance of using their money to seize opportunity, and when you have the ability to take risks without losing a significant portion of your wealth it makes it easier for millionaires to do just that.
2. They pay themselves first
This has been called the “golden rule of finance”, and for good reason. Millionaires need to have all aspects of their business in order or their sure to start losing money pretty fast. Just like you and me, paying yourself first is something that millionaires do when working out the budgets for their businesses.
When it’s time to grow your business and when you’re already massively rich, this personal paycheck tends to be smaller to reflect priorities at the time. Don’t be fooled when you see things like Mark Zuckerberg paying himself a $1.00 salary, every wealthy person has paid themselves first as a habit at some point.
Paying yourself first is an intelligent finance principle and millionaire money habit that everyone should be doing if they can afford it.
3. They avoid debt
Debt has it’s place in millionaire’s lives and that place is typically on their balance sheet listed as an asset. The point here is that millionaires don’t typically borrow, they lend. By using debt as an instrument to earn a return, millionaires often earn solid rates of return over time.
Millionaires understand that being in debt places you in a very restricted position and will often borrow only for large projects that have a rate of return that will outweigh the cost of borrowing, weather that return comes over the long or short run.
4. They reinvest their returns
Millionaires are playing the long game with their returns. This is why you seldom see them, especially when they’re still growing their wealth, cashing in the returns that their investments generate.
Putting your returns back into the business, investment, or other wealth producing asset, is one of the smartest habits that you should develop to unlock your true earning potential. You’re increasing your future returns by harnessing the power of compound interest if you’re investing in interest earning vehicles and you’re increasing the rate of improvement and growth if you’re earning your money from a business.
Reinvesting the returns your investments generate rather than cashing out is a habit that all millionaires take full advantage of, and you should too.
5. They maintain focus even when they fail
When you’ve managed to amass the type of wealth that people like Warren Buffett has (even back when he was “just” a millionaire) you’re sure to have made some financial mistakes along the way. It takes serious self-discipline to stay focused when you end up in a failing financial position.
Sticking with the example of Warren Buffett here, when he bought his company back in 1965 it was a failing textile mill that he thought he would be able to pick up for a cheap price and bring back to life with some organizational changes. Buffett himself has admitted this was a mistake and the industry was in fact dying out in the US.
While Berkshire Hathaway essentially became a money pit for Buffett, the investor kept his cool and eventually turned this failure into a massive success and kept the name and used it for his investment partnership.
Buffett, like all wealthy individuals, understood the importance of staying the course and maintaining focus despite a financial mistake. Being able to do that helps keep things calm and allows for long-term, strategic moves to be made while learning from failure at the same time.
6. They are always learning
This habit not only applies to money, but to an overall attitude on what it takes to be successful in general. Getting educated on a subject is obviously important, but the differentiator that all millionaires have in common is their commitment to lifelong learning.
Millionaires and highly successful people prioritize their personal education and as self starters they make time to learn new things about their industry, interests, and, ultimately, themselves.
The habit of staying on top of new financial opportunities, investment vehicles, and markets is recognized as one of the most clear-cut ways to maintain, grow, and manage wealth among millionaires.
7. They look for ways to make their money work for them
One of my favorite millionaires is Kevin O’Leary. I think the persona he puts on for NBC’s Shark Tank is absolutely hilarious and he makes it obvious that this last habit is something he takes seriously.
“Here’s how I think of my money – as soldiers – I send them out to war everyday. I want them to take prisoners and come home, so I have more of them.” – Kevin O’Leary, Shark Tank.
Besides being a memorable quote, what O’Leary said is something that millionaires are well aware of. When you have your money working for you, it can build a massive collection of wealth without the need to actively invest your energy into the process.
No matter if we’re talking about sharks or billionaire Buffets, all wealthy people make it a habit to seize the chance to allow their money to work for them.