Have you ever walked by a fancy mansion and wondered, “I wonder what that person did to land a house like that!” You can learn a lot about wealth by studying the financial habits of millionaires. No, you won’t immediately become a millionaire just by taking their advice to heart. But you can significantly improve your financial situation by following these 7 financial tips from millionaires—after all, these folks know a thing or two about money.
- Develop a Financial Plan
Here’s one of the most important pieces of advice you can take from millionaires: make a financial plan for yourself. The first thing you’ll need to do is budget: chart exactly how much money you make per month, and then figure out what your monthly expenses are (living expenses, debt, “fun budget,” etc.).
When you’ve figured out your budget, allocate some money to put toward savings and retirement—come up with a feasible savings goal to meet in 1 year, 5 years, and 10 years. You’ll appreciate the years of savings contributions when it comes time for you to make a major financial decision, like buying a house or retiring.
- Use a Tax Professional
Millionaires aren’t afraid to admit that taxes are complicated and best left to the professionals. Taxes have a huge effect on your income and finances, and that’s why a tax professional can be so invaluable. They’ll help you with anything tax-related, from getting your taxes filed on time, to filing back taxes, to maximizing your tax savings and defending you during IRS audits. They can truly boost your overall financial health year to year.
- Increase Your Revenue Streams
Millionaires know that it’s foolish to “put all your eggs in one basket.” They make sure that they’re gaining income from multiple streams of revenue in different industries (AKA, “diversifying your income”).
It’s not as hard to do as you might think! You probably have some skills you can use to make some extra cash aside from your day job. If you’re a good writer, try doing some freelance writing. If you’re a photographer, try selling some of your photos on stock photo websites. Create a great website and start your own business on the side, or run night classes and teach people a subject that you’re really good at.
- Live Below Your Means
No matter how much money you’re making, it’s always important to try and live below your means. That means that you spend less money than what you’re actually capable of spending. When you live below your means, you’ll be able to keep enough money in your pocket for savings and you’ll also be better off if you’re tossed into a bad financial situation—for example, if you lose your job or if you have a major unexpected expense, like a broken down vehicle.
You can still live comfortably when you’re living below your means! With some smart planning, you can live a luxury lifestyle on a budget and even take a budget-friendly luxury vacation. It’s also important to remember that living below your means doesn’t mean you shouldn’t spend any money. But rather than buying the most expensive brands, try and save money by buying used items or by seeking discounts where you can find them.
- Use Automatic Savings Contributions
Each payday, it’s tempting to go out and spend a ton of money drinking, clubbing, or shopping, and you wind up not having enough money left over to contribute to your savings account. Millionaires get in the habit of making automatic contributions to their savings account. They set up their online banking account so that each payday, a portion of their paycheck will automatically be distributed to their savings. Talk to your bank representative and ask about this feature.
- Look for Tax Deductions
Millionaires are always looking for tax deductions so they can pocket more money during tax time. One of the most common ways that millionaires earn tax deductions is by making donations to charitable causes, like donating to environmental organizations or disaster relief funds. You can also earn tax deductions based on your income and whether or not you have dependents.
- Use Cash
Last, but not least, millionaires make a habit out of using cash to pay for expenses rather than using credit. Millionaires know that credit can pile up easily and leave you in bad debt, so they use cash as frequently as they can. If you’re hampered by debt, try using cash to pay for your everyday expenses and you might find it easier to live below your means.
You’ve heard it from the money men and women themselves! Use these 7 financial habits to improve your wealth and your financial situation.