Money gives you opportunities and freedom, yet so many people think they don’t deserve wealth or can’t achieve their financial goals. By adopting a positive money mindset, you can transform your self-sabotaging attitudes. Some of the financial behaviors of successful people include setting goals and figuring out a specific plan to achieve financial goals. The first step is to visualize what you want. You turn wishes into motivation that leads to action. Before you can take action, it helps to know why money is so important and how you can get more of it.
Building wealth is about investing so you can enjoy the benefit of compounding. When you reinvest your earnings from dividends and interest, your money grows. Albert Einstein once called compounding the eighth wonder of the world.
Get rid of credit card debt
Money is energy. You can either give your money away to credit card companies by paying high interest or receive the energy of money by accumulating wealth with investments. Before you can benefit from the magic of compounding, you have to pay off debt. When it comes to methods of getting out of debt, there are many different strategies. Make it your goal to live on 70 percent of your income or less. Dedicate 20 percent for debt repayment and 10 percent for savings.
Open up a Roth IRA
If you have earned income and fall within the income eligibility guidelines, you can save money in a Roth IRA. After you pay off your debt, contribute to a 401(k) up to the company match. Another behavior of successful people is making contributions to a Roth IRA. Money in a Roth grows tax deferred just like it does in other retirement accounts. But because you use after-tax dollars to fund a Roth, you don’t owe any taxes on the money when you take it out in retirement. Another reason a Roth is sexy is the fact that you can take out any of your contributions without penalty. Just make sure you don’t touch the earnings or growth.
Buy stocks and ETFs
Until you are comfortable investing in stocks, buy ETFs or exchange-traded funds for your Roth IRA. ETFs are a variety of stocks so you won’t lose your initial investment if one company goes bankrupt. At the same time, you can trade an ETF in real-time. If you have a 401(k), you likely have a dozen or more options such as mutual funds and target-date funds or life-cycle funds from which to choose. Some employers offer their employees the chance to contribute to a Roth 401(k) in addition to a traditional 401(k). If you want to lower your taxable income each year, stick with the traditional option. Otherwise, funding a Roth 401(k) offers some of the same benefits as the Roth IRA.
Make a flexible budget
Some people give up on a budget because they take an all or nothing approach. With a flexible budget, you give yourself room to breath. You also allow for the unpredictable nature of life, allowing for opportunities. If you have a life partner, consider splitting the bills according to percentages. In other words, each person can pay the bills as an equal percentage of what they earn as opposed to equal dollar amounts. To make it easier, have money automatically deducted from your paycheck and put into a retirement account such as Roth IRA or 401(k). Married people who don’t earn income of their own may open a spousal Roth IRA to continue to build wealth.
The behaviors of successful people reflect the fact that money is empowering as long as you have some control over it. For more information about investing, please contact us.
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