This may seem really basic, but with credit cards being so easily accessible, most people live beyond their means. Billionaire Warren Buffett is known for living an extremely frugal lifestyle, yet is one of the wealthiest men in the world. Things such as leasing cars, carrying credit card balances, and buying for brand recognition should be avoided. One simple way to test your spending to see if you’re living below your means is to only spend cash for one month. No credit cards of any kind allowed! At the end of the month, see how much money from your monthly income you have left over.

SPEND AND INVEST WITH LONG-TERM IN MIND

Many of our expenses are to satisfy the short-term. The coffee on the way to work. The new car lease signed in lieu of a repair on your old car. The new outfit for Saturday night’s party. These may solve short-term needs, but are not necessary in the long-term. The coffee on the way to work? Prep your coffee pot the night before and flip the switch when you wake up. You’ll have fresh coffee ready by the time you walk out the door. The new car lease? Consider doing the repair to your old car instead. If your car is paid off, you may need a $500 repair now, but that’s better than committing to a $200 payment per month for several years. The new outfit for Saturday’s party? Revisit your closet and ask a friend to help come up with new outfit combinations. Or, plan a clothing exchange with friends. Or, pop by your local thrift store and find a one-of-a-kind gem that is new to you for a fraction of the cost of new items.

Just as you watch your spending, you need to also invest for long-term. Billionaires like Warren Buffett have been very open about using the power of compound interest, and the sooner you begin investing, the better. With compound interest, that $5 coffee on the way to work 5 days a week translates to $18,800 in 10 years! If you’re not investing yet, talk to a financial professional on how to get started.

NEVER STOP LEARNING

The vast majority of the world’s wealthy cite reading and learning as a top priority. Continuing to read, both to expand your literary mind and to learn about finances, will pay off exponentially in the long run. Lifelong learning is a good habit to have regardless of your chosen profession, but it’s important to also learn about handling your finances. Tax laws change often, and tips or inspiration can appear at any moment. Carrying a small notebook to jot down tips or ideas when they come to you is a great idea! When you invest your money or make a change in your investments, you want to be fully informed about what exactly you’re doing. It’s YOUR money, after all!

DON’T MIND THE JONESES

This is more of a mentality shift, than a tactic. There will always be something bigger, better, newer, shinier. But you need to ask yourself whether it’s a want or a need. Don’t shop for brand recognition, but for quality and longevity. Don’t buy that new TV for the added bells and whistles if they’re bells and whistles that you just don’t need (and trust me, you don’t need them). Keep those blinders on to what others are doing, and focus on your needs only. It’s amazing how many people driving fancy cars or living in large homes don’t actually have any wealth! Keep those priorities straight and your eye on the prize.

SURROUND YOURSELF WISELY

It’s been said time and time again, but it rings true. You are the average of the five people you spend the most time with. If you want to elevate your wealth, seek out the wealthy. One way to think of it is that you want to surround yourself with people who inspire you. This can be because of their success in business, their impact on their community, or their financial wealth that creates a secure lifestyle for their children. This also applies to your spouse or significant other! While that involves many other factors, it’s worth keeping in mind that your significant other’s financial habits are known to highly impact your own. This means that if you’re frugal but marry an over-spender, keeping yourself on the frugal track will be significantly tougher.

MULTIPLE INCOME STREAMS

When you’re in a traditional employment with one employer and a regular paycheck, you’re actually at greater financial risk because you drop to $0 income if you lose that job. In other words, all your financial eggs are in one basket! To reduce your financial risk, it’s a smart idea to diversify your income into many income streams. This helps to also explain why so many of the world’s wealthiest people are self-employed. Diversifying your income means that if one client, or income stream, ends, you’re not at risk for a great financial loss! From a creative entrepreneur standpoint, this is also something to consider when approached by a large client for ongoing work. It may seem tempting, but be sure that you have other smaller clients to keep funds coming in the door.

Do you have “Golden Rules” for creating your financial freedom?
We’d love to hear it in the comments below!

xo
Natalia