In 2016, the American company GOBankingRates conducted a study where it turned out that 2/3 of the US residents have less than $ 1,000 savings, and another 35% do not have savings accounts at all. In Russia, the situation looks more depressing. A 2015 Sberbank study showed that less than 1% of our citizens control half of all bank deposits, and 85% of the total increase in deposits depends on 3% of Russians. In fact, only the wealthy population of Russia is engaged in investing money and it seems that low incomes are blocking the path to financial instruments and capital growth.
But you can achieve what you want and increase your own profit. If you heed the advice on how the rich get richer and manage money.
1. They pay themselves first
People who consider saving as important as paying utility bills monthly are closer to wealth. To build savings on an ongoing basis, first “pay yourself.” Set aside a fixed percentage of any income regularly. Start with a small amount of 1% of earnings and gradually increase it to 10-20%.
Treat this as you would other compulsory and important accounts. Make such a transfer automatic in your banking application.
2. They avoid an inflationary lifestyle.
People are tempted to spend more when they get a paycheck or a bonus. Increasing income makes a person feel like he has earned a surge in spending and can afford the expensive thing. Needs do not disappear, but become grander. Wealthy people need to avoid this lifestyle during periods of income growth and invest in themselves.
Instead of spending money on another pair of sports sneakers, increase your deposit to a savings account, buy stocks in the company, or invest in education.
3. They are modest
In the era of the digital world, people want to get everything at once. Some use loans to quickly buy a dream, thereby condemning themselves to debt red tape. In the US, on average, a family has $ 16,000 in debt. And the same study by Sberbank showed that the number of mortgage loans for the year in Russia is about 3 million, while consumer lending generally covers 40 million people.
Successful people live modestly, despite having enough income to buy many luxury goods. The famous investor and one of the richest people on the planet, Warren Buffett, still lives in the house he bought for only $ 31,500 almost 60 years ago. Take an example from him. Adhere to a modest lifestyle. Thus, income will grow and help to achieve financial goals faster..
4. They set specific goals.
Costs that do not exceed revenues are the key to staying financially afloat. Successful people adhere to this rule. They determine the goal and draw up a financial plan to achieve it. This automatically reduces unnecessary costs..
When you decide to make a major purchase, review your budget. Find out the exact amount of income and basic expenses. So, you can “cut off” the unnecessary and allocate more funds to the goal. To speed up the process, try to increase earnings. See what skills are in demand on freelance exchanges, for example, kwork. Perhaps your abilities can really be used remotely. Check out the passive earning methods that we wrote about. here.
5. They regularly recheck expenses
Wealthy people regularly review all expenses. Keeping track of them and making timely changes when more economical options are available, they save more money and leave the budget relevant. So the rich get richer.
Do not pay expenses out of habit, control the situation:
• Check the rate on the phone. Check out the new offers from your operator, maybe they will be more profitable.
• Call the bank and find out whether it is possible to reduce the interest rate on a loan.
• Get a public transport ticket that you use daily. It will be cheaper than buying tickets every time..
• View promotions and discounts. Follow offers on cashback services.
6. They allocate funds to the emergency fund
An emergency fund is a key component in the arsenal of a successful person. It alleviates the financial burden of contingencies and helps reduce stress..
Unlike the amount you save for a specific purchase, the emergency fund is used exclusively for events such as medical and domestic problems, job loss and economic crises. People with extraordinary savings avoid debt and “close” problems much faster than those who are not ready to put off such a question..
7. They make money work for themselves
The rich get richer because they make money work for themselves. Hard work increases income, but if you miss a working day, you will lose part of your monthly income. This is due to the fact that you work for money.
To ensure that income does not depend on the time spent on it, use the classic tools of the stock market and investment opportunities. Stay on top of financial events and learn the books, that investors read. Consider buying stocks, bonds or ETF.
We wrote more about these and other ways of investing money. here.
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Why do we often see the rich getting richer while the poor struggle to make ends meet? Is it solely due to hard work and intelligence, or are there other factors at play? Are there systemic inequalities that contribute to this cycle of wealth accumulation? I am curious to understand the dynamics behind this phenomenon and how it affects society as a whole.