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7 Money Habits of Self Made Milllionaires that you Should Follow

April 21, 2023

Table of Contents

    Table of Contents

      You may have heard this saying: Rome wasn't built in a day. It took years of planning and construction. Becoming a rich in India is kind of similar and every self made millionaire have certain habits, they develop and follow to succeed

      The same works with building wealth. Learning how to use money smartly is an art.

      You might have heard of Warren Buffett, the investment virtuoso; Nikhil Kamath, the founder of Zerodha; Ritesh Agarwal, the founder & CEO of Oyo Rooms; and Falguni Nayyar, the founder and chairwoman of Nykaa. Do you know what's common in them?

      They are all 'self-made' millionaires and billionaires. Meaning, they didn't inherit their wealth; they built it all themselves. 

      So, you see, you do not have to come from a wealthy family to become rich. You need a strong willingness to do whatever it takes and financial literacy. It is nothing but the ability to make informed financial decisions to manage one's resources and income. You can create your wealth all on your own. 

      These self-made millionaires and billionaires have one habit in common: they save and invest their money strategically and relentlessly. 

      We analysed some of these inspiring people and created a list of 7 financial habits that you can easily incorporate into your lifestyle to build wealth and achieve financial freedom.

      They Avoid Debt At All Costs

      This is an obvious one. Debts pull you back from achieving financial success. Avoiding debt is a habit everyone should master. However, it is not so easy. 

      Today, most millennials tend to get a credit card or take a loan to purchase a vehicle soon after starting their career. It's not ideal.

      Credit cards charge high interest if you don't pay in full and carry a balance. The same applies to loans. Most millionaires avoid or eliminate all kinds of loans, except for housing mortgages, mostly for their tax benefits (we'll come to it soon).

      Do not lose money on interest and commission fees if you want to build wealth. To do that, you should know how to financially plan your money (we'll come to it in the later part of this article.) 

      They Know Money Management

      Budgeting is the first stepping stone to building wealth. Money management is not rocket science. But it is a crucial step because you won't be able to save unless you learn to manage your money.

      As soon as your salary gets credited, categorize your spending under sections like utilities, housing, transportation, insurance, food, and investments. Save at least 20% of your monthly earnings. The more, the better. 

      It's important to start saving early in your twenties. If you're looking for simple money management tips, check out our blog. Trust us; you'll thank your twenty-year-old self in your 30s, 40s, and 50s.

      They Have Emergency Fund

      During the early days of your career, you may not have planned for savings. After all, you have just finished working hard to land your dream job and an attractive salary! You deserve to spend it on yourself.

      True, but only partially.

      You never know when your car breaks down, you get a long medical bill to pay or prolonged rainy days.

      Having a reserve of cash readily available for those emergencies is a blessing. Thus, you won't have to struggle to get a loan or a high-interest credit card to make ends meet.

      That's when emergency funds come in handy. According to financial experts, an emergency fund should be 6-9 months' worth of your living expenses. This is the stepping stone to building your financial health.

      They Have Passive Income Source

      Stop living from payslip to payslip. Every self-made millionaire has more than one income source. Many of them earn passive income from their rental properties.

      It's highly unlikely for average people like us to have multiple properties. But you can certainly start on a smaller scale.

      Do you have a spare bedroom? Rent it out.

      Or you can start a side-hustle. Today, the gig economy has revolutionised the job market globally. Many millennials are quitting their day jobs to work with multiple people at once at their own pace and time.

      If you have a skill that you can use to earn additional money, you can easily start your side-hustle to generate passive income.

      They Invest Religiously

      The first rule of investing is to learn to live without 20% of your salary because that is the amount you must save for your savings plan, emergency fund, retirement fund, and investments.

      The most notable habit of every self-made millionaire or billionaire is that they take their savings and investments seriously. And they did it from a very early age. 

      Create and diversify your investment portfolio. It means spreading your spending toward investment into multiple asset classes such as equity, debt, or cash. You can save in equity, bonds, stock, or bank deposits.

      Make sure you take an informed decision before you invest. Do not make rookie mistakes by running behind high-interest, high-risk funds.

      If you want to learn money management for millennials, click here.

      They Do Not Make Unnecessary Expenses

      It's only natural to compare your life with others.

      But before you spend your money on a whim, look back at your budget and see, if you can afford it? And if you can, do you really need it or do you want it?

      Try to prioritise needs over wants.

      Ask yourself if you really need to upgrade your phone to Apple when your Android is working just fine.

      Do you really need a car? Or do you want to buy one because your close cousin or friend has bought one?

      Instead of eating out every day, why don't you learn to cook? You'll see how much money you can save!

      Cutting down on unnecessary expenses is the key to unlocking wealth.

      Take Advantage of Tax Deductions

      If you are a salaried employee, you might be well aware of the amount of money you lose on income tax! Try to minimise the amount of taxes you pay by using every tax-saving opportunity you are offered. 

      From taking housing loans, making tax-saving investments, contributing to charities, school fees, etc., participate in every program that can help you save your hard-earned money from paying taxes.

      If you are a novice in this area, you can consult a tax professional.

      Things You Should Consider While Making Your Financial Plan

      Financial planning is personal. What applies to self-made millionaires may not apply to you. 

      So, your financial plan should be S.M.A.R.T – Specific, Measurable, Achievable, Relevant, and Time-bound.

      There are three key things you must consider while creating your financial plan:

      1. Set Realistic Financial Goals

      Setting your goals is essential. It helps you make the right decisions for your future. But make sure your goals are realistic. 

      Discuss it with your financial adviser or one of your elders, who have sound knowledge of fiscal planning. 

      You can also sit with your spouse to define your goals together. Review this list at the end of every year and see which goals you were able to achieve. 

      If you write down your dreams, it becomes a goal. All you need to do is make the right decision.

      2. Start Investing Early

      You do not want to start a significant investment right before your retirement.

      For millennials, spending is a bigger priority than saving. 

      But imagine, if you save ₹5,000 every month in a mutual fund at 12% interest at the age of 25 for 30 years, you will make ₹1,58,49,569 before you even retire.

      But if you wait until your salary is higher and start investing late (say at 35 years of age), you will make only ₹79,88,175.

      You'll lose ₹75,61,394 just for delaying ten years.

      Now, do you understand the importance of starting early?

      3. How Risk Tolerant Are You?

      You can take risks with your investments and money when you are younger.

      But do not start investing because you are tempted. Making informed decisions is extremely important. 

      Generally, stock markets and mutual funds offer high returns. But they are equally volatile. The COVID-19 pandemic has certainly proved it.

      If you are unafraid of taking risks and are capable of making sound financial decisions, such investments can be extremely rewarding. You can reap huge returns if you are careful.

      But if you like to play safe games yet are interested in investing, bank term deposits, bonds, and other government schemes give good returns.

      Key Takeaway

      Making millions is no cakewalk. It takes immense hard work, perseverance, and a touch of luck. While capturing opportunities to repay debts, save, and invest can help you avoid potential pitfalls, practising these seven financial habits can make a big difference in building your wealth. Follow these positive habits to manage millennial finances better early on.