7 Habits of the Future Wealthy

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Published by Robert W. Huntley, CFP®, CHFC

When I meet financially successful people I notice common traits. There are many examples. However, it usually begins with laying a solid foundation.

The following 7 steps in our experience are clear signs that you’ll be one of the financial winners in life. If these things are true about you, or, you’re working towards them, then congratulations. One day you’ll look back and be glad you did.

1) **Home Purchase** – Restrict yourself to buying only what you can afford on a 15-year mortgage. There are several great reasons to do this. First, you’ll usually get a lower interest rate than you will on a 30-year loan. Second, you’ll build equity in the home much faster because the loan is amortizing much faster. Third, it is an imposed discipline to keep you from over extending on the purchase price because your payment is higher so you will tend to be more conservative in what you end up buying.

2) **Company Match** – Take advantage of any company match available for your retirement plans. If they match 50% of the first 6% you save then make sure and put at least 6% in. Whatever you must contribute to maximize the company match, do it. That’s free money! Your goal should be to save at least 10% of your gross income your entire life. The initial portion of that monthly savings should take advantage of the company match when it’s available.

3) **ROTH Contributions** – If you’re younger than 40 put everything you can into either your ROTH IRA’s and/or your ROTH 401(k) at work. If you’re making too much income to be eligible for a ROTH IRA, then consider ways you might contribute through the back door by using IRA conversions each year. Accumulating wealth inside a ROTH based plan is smart because the money can later be withdrawn tax free and not be subject to required minimum distributions at age 70 1/2. *

4) **Consumer Credit** – Only use credit cards if you absolutely, every time, pay the entire balance off monthly. I know many people who run everything through a credit card to get the points and minimize monthly bills. That’s fine if you have the discipline to pay it off every month. But if you don’t have the discipline, then the first time you can’t pay off the total monthly balance, cut the cards up and cancel the account. Too many young people end up paying 18% compounding interest on their last meal at the local burger joint.

5) **Never Buy New Cars** – Until you can pay cash. Work aggressively to be able to pay cash for your car. Wealthy people don’t put lots of money in depreciating assets, and, that’s exactly what a car is, a depreciating asset. While it isn’t easy to pay cash for a good car, it’s possible if you’re committed to using money wisely. For example, you can purchase a “loaner” or “demo” with less than 10,000 miles on it with a factory warranty and save at least 10-15% off the new price. Or you can save even more when you purchase a “certified” used car from many dealers and get a better than factory warranty thrown in as part of the purchase price. Start off modestly and set aside the monthly payment all your friends are making. The next car buying cycle you have the value of your trade in plus the cash you’ve set aside from those monthly payments. Imagine strolling onto the car lot knowing you’re a cash buyer! Now that’s swag.

6) **Own Appreciating Assets** – Get excited about shopping but only for stuff that goes UP in value, not DOWN in value. We have a saying in our office “Owners get rich, Loaners get poor.” People who accumulate wealth over their lifetime have several common traits. Saving is important for sure. But when it comes to investing, you need to buy quality assets that tend to increase in value over time faster than the cost of inflation. That tends to fall into the following categories: publicly or privately traded stock. real estate. rare metals. collectibles including art, numismatics, and other odd ball holdings that are valuable mainly because they are rare.

7) **Keep Your Priorities Straight** – Remember that what really matters in life is creating “True Wealth”. Think about those things in life that money cannot buy and death cannot take away. All the money in the world is useless if you forfeit your family, your health and even your soul. Life is about relationships, figuring out who you are and why you’re on the planet. Ultimately, it’s about knowing and serving God’s interests above all else. In all decisions, big and small, look to the real owner for guidance and approval.  In truth, we’re all just managers of someone else’s stuff. You manage a certain amount of time, talent and treasure for maybe 50-60 years before handing it all off to the next person in line. Understanding this is the key to a life well lived and a legacy of lasting values to go along with the likely assets you manage to accumulate.

All large buildings begin with a lot of attention to laying a good foundation. That is also true in wealth accumulation.  Keep these things in mind during your building process.

 

 

*This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified advisor.

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