Personal Finance

The 7 Simple Habits of Financially Successful People

Expertise: Real Estate Investing Basics, Real Estate News & Commentary, Personal Development, Flipping Houses, Landlording & Rental Properties, Personal Finance
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money-habits

Financial education is non-existent in American schools. I remember learning how to write a check and balance a checkbook in Home Ec, but there were no courses about mortgages, budgeting, taxes, or living within my means. Not at school, anyway.

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My parents taught me about being frugal. There weren’t any overt lessons, just leading by example in their daily lives. They didn’t do anything extravagant—no big vacations, no fancy clothes, no new cars. In fact, my dad drove the same car throughout my entire childhood. He bought it brand new two years before I was born. I learned to drive on this vehicle, and it had something like 200,000 miles on it when it finally died.

With so little financial education readily available, it’s no surprise that few people know how to manage their finances. So how do some people kill it, while others struggle?

Here are 7 habits of financially successful people.

The 7 Simple Habits of Financially Successful People

1. They check their statements every month.

Unless you’re completely off the grid, you get statements from your various accounts every month. Whether available online or actual paper statements, you have access to a monthly accounting of what’s going on in your finances. How often do you check them?

My husband starts each day with a quick peek at the statements. Bank, credit cards, stock investments, etc. He tracks everything going into and out of each account, every single day. While this may seem excessive, he feels uncomfortable when he doesn’t do it.

He discovered our credit card number was stolen a few years ago when a weird charge showed up. We were able to shut down that card quickly, before it turned into a big problem.

Keeping tabs on your accounts doesn’t have to be a daily thing. Weekly or even monthly is fine—but many people just don’t even bother to ever check it.

When was the last time you checked your monthly statements?

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2. They plan their estate.

Nobody likes to think about dying. Planning your estate can be a depressing task, which makes it extremely easy to put off. Repeatedly. Like, forever.

But without a will, you have no control over what happens to your things. Your house, your car, even custody of your children all becomes subject to the intestacy laws of your state, which may not bear any resemblance to your wishes.

Don’t let this happen to you. Make a will so that your assets go where you want them to go. Even a handwritten holographic will will preserve your intentions.

Include custody directions if you have children or animals. The best course of action is to have a conversation with the person you are giving custody to — you don’t want it to come as a surprise to them.

Be as specific as you want in your will. You earned this wealth. You helped it grow. Direct your heirs on how to handle your possessions, so your legacy can continue.

3. They create (and stick to) a budget.

Financially savvy people have a plan for their money. Dave Ramsey calls it “giving every dollar a name.” You make a plan for how you are going to spend your money each month, rather than just hoping you’ll have enough to pay all the bills.

Related: 6 Easy-to-Acquire Habits That Will Help You Build Wealth

But say the word “budget,” and people freak out — it sounds like a restriction. Look at your budget as a tool. You don’t have to give up everything simply because you make one. Instead, you are creating a blueprint for how you want to spend your money.

4. They live below their means.

Spending every dime that comes into your pocket is one of the best paths to financial ruin. Having no cushion doesn’t allow you to roll with the punches that may come along. Lose your job or have an unexpected bill, and it could take you months or even years to recover.

Living below your means allows you to save and invest the difference between what you earn and what you spend. If life throws you a curve ball, you won’t get knocked off your feet.

Living below your means doesn’t mean that you are giving up everything fun. By using a budget to plan your spending, you can include money for entertainment, clothing, or even just a miscellaneous category to spend as you see fit.

But instead of spending $500 one month and $700 the next, you plan and stick to your budget, which allows you to save and invest.

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5. They pay themselves first.

Paying yourself first means to set aside money to invest or save—BEFORE you spend any other money. All too often, people spend spend spend, then save or invest whatever is left over. If you have no budget, have no idea how you spend your money, and have a fly-by-the-seat-of-your-pants mentality, your leftovers are meager—if anything.

When you are creating that budget, create a line for investing. Make that the first thing you put money into every week or every month. Funnel any unexpected money—like a bonus or a refund—into this category, too.

6. They invest.

Financially intelligent people invest for their future. But say the word “invest,” and people panic.

You don’t have to be able to pick stocks like a pro to invest. In fact, investing heavily in individual stocks is a recipe for disaster.

Having a diversified portfolio is one of the best ways to spread out your risk. Index funds—a collection of funds designed to mimic a specific index—give you broad market exposure. An index fund is a passively managed fund, so the fees are significantly lower than traditional, actively managed mutual funds.

Real estate is another way to diversify your portfolio, and having a passive source of income through rental properties or even REITs (real estate investment trusts) is a great hedge against the ups and downs of the stock market.

Bonds also provide a low-risk investment option, but their return is also lower than what you can find through other investment vehicles.

7. They are money conscious.

I went out to dinner with friends one night. We went for sushi, but I don’t like the idea of eating raw fish. There are a lot of options at a sushi restaurant, and I ended up with cucumber and avocado sushi, which is significantly less expensive than the fancy dragon rolls and rainbow rolls that my dinner companions were eating.

At the end of the night, we split the bill evenly. I didn’t eat nearly the same amount of food, but enjoyed my time with my friends and was OK with splitting the bill evenly amongst all of us. It wasn’t going to break me financially, and it wasn’t something I did frequently.

It wasn’t something I did frequently, but it WAS something they did frequently.

At the time, I was married with no children. Both my husband and I worked and lived frugally, far below our means. But my friends were all single, living alone, and making far less than my husband and me.

They felt they “deserved” these meals out and went out at least once a week to equally lavish restaurants, spending similar amounts on their meal. Every. Single. Week.

They had no concept of their spending. They felt no compulsion to save any amount. They didn’t invest. They weren’t conscious of their spending.

Related: 3 Habits of Incredibly Lucky People (For Better Fortune in Business & Life!)

So I didn’t talk to them about it.

Who wants to listen to someone lecturing them about money? They didn’t care about their finances, and me hopping up on a soapbox to try to sway them to my side wasn’t going to have the desired effect.

Being money conscious doesn’t mean you never spend any money. It doesn’t even mean you never spend frivolously. It means you are conscious of your spending, conscious of what things cost, and conscious of how your actions affect your future.

Being financially successful doesn’t mean you give up fun. It means you have a financial plan and you stick to it. You make saving for your future a priority, and you structure your life to reach your goals.

If you aren’t currently financially savvy, start with one of these steps. Then add another when you feel ready. Your very first step, the most difficult thing to grasp, is that you need to make a change.

[Editor’s Note: We are republishing this article to help out our newer members.]

What habits would you add to this list? How do you keep your finances on track?

Leave your comments below!

Mindy Jensen has been buying and selling homes for more than 20 years. She buys houses, moves in, makes them beautiful, sells them, and starts the process all over again. She is a licensed real est...
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    Laura O'Donnell
    Replied over 4 years ago
    Great article, Mindy! Being a recent college graduate, I applaud you for sharing these useful tips – I’ll definitely be using them 🙂 One thing that I’ve heard of some people doing as well, is investing in budgeting software, like True Sky, or using budgeting apps, like Mint, to get their finances on track. That’s something I’ll be trying out, as well as the tips you’ve provided here. Again, thanks for providing great content!
    Mindy Jensen BiggerPockets Community Manager from Longmont, CO
    Replied over 4 years ago
    Thanks for reading, Laura. You have such an advantage with your age. Budgeting is huge! I’m not familiar with True Sky, but I’ll check them out.
    Peter Mckernan Residential Real Estate Agent from Irvine, CA
    Replied over 4 years ago
    Hey Mindy, Great article! Commenting on two of your articles in one day, I am trying to catch up! All those habits are amazing and help people grow to wealth that a lot of people dream about.
    Jay Bhatt from Tarrytown, New York
    Replied over 3 years ago
    Mindy, Great article. It is definitely a good reminder. I am still in process of inculcating habits and routine. We all can use this suggestions and incorporate in our daily life. Thank you.
    Larry Weingarten from Monterey, California
    Replied over 3 years ago
    Hello Mindy, You touched a nerve with this financial literacy thing! One thing I have done for years is simply to ask myself before buying nearly anything, “Is this cost effective?”. There are plenty of feel good things to buy and if that’s the goal, there are often cheaper ways to feel good. Things that make you feel good and don’t cost anything can help you to feel really good! ~~~ But, that simple question has made it easy to live below my means. Yours, Larry
    Jorge Vega
    Replied over 3 years ago
    Solid tips! Thanks Mindy!
    Ambruce Carter from Boston, Massachusetts
    Replied over 3 years ago
    Great article Mindy.
    James Barnhart Rental Property Investor from Deland, FL
    Replied about 2 years ago
    Thanks for writing this excellent article. My wife and I agree completely with you. My daily driver is a 1996 Ford Ranger that I bought 5 years ago. It drives great and has cold A/C. I did splurge and bought a hot rod several years ago. My wife drives the NEW car. It is a 2003 Toyota Highlander LE and it is a wonderful SUV. We could replace them with much newer ones, but we are don’t see why we would want to right now. We buy good groceries and love to eat very nice meals, mostly at home. I guess that’s our biggest expense. After so many years of savings and developing many sources of income, we can do a lot of things, if we want to. And, our kids are seeing the benefits of saving now, also.
    James Barnhart Rental Property Investor from Deland, FL
    Replied about 2 years ago
    Thanks for writing this excellent article. My wife and I agree completely with you. My daily driver is a 1996 Ford Ranger that I bought 5 years ago. It drives great and has cold A/C. I did splurge and bought a hot rod several years ago. My wife drives the NEW car. It is a 2003 Toyota Highlander LE and it is a wonderful SUV. We could replace them with much newer ones, but we are don’t see why we would want to right now. We buy good groceries and love to eat very nice meals, mostly at home. I guess that’s our biggest expense. After so many years of savings and developing many sources of income, we can do a lot of things, if we want to. And, our kids are seeing the benefits of saving now, also.
    Bayo Adebowale Rental Property Investor from HOUSTON, TX
    Replied almost 2 years ago
    Thank you so much for this. All your suggestions are valid and very helpful especially in this current culture where most people cannot delay gratification even for a few seconds. My wife and I greatly appreciate you for this. I will like to add a few suggestions as well. I believe as much as we save, invest for the future and build a family legacy, we must also strive to enjoy the “good things” of life. I grew up loving my father for working so hard, made a lot of money, invested aggressively in real estate, lived frugally, helped thousands of people, added value to lives but died young from cardiac arrest ( as the report explained). Although this was disheartening, I learned very important lessons. I suggest the following: 1. Your health matter. Your body must be a priority. Take adequate and proper care of yourself 2. Celebrate your wins ( and early too): My father finally built a 10-bed mansion, he did not sleep in it for a day, as he died before the completion. Give yourself treats. As much as you invest and plan for the future, spend money on yourself as well. Drive good, wear nice clothes, travel to explore the world. Do all these after you have saved. Create a budget and also leave room to explore the beautiful things of life. You are here today, tomorrow is not promised. 3. You can start where you are. Learn from the financial mistakes of your past, and make a conscious decision to forge a new financial path. 4. Be proactive, determined and focused. If you need to change your friends please do, especially if your goals and theirs do not align. Associate yourself with people who are going to a similar destination of financial success & freedom as you. Thank you once again, Mindy. We all appreciate you for this piece.
    Richard Anderson Professional from Batavia, IL
    Replied over 1 year ago
    Great article, but one thing I think should be pointed out. Not every state will accept a Holographic Will. And a lot of states require two witnesses to attest to a will. Often the witnesses must both be in the room at the same time while they are signing. It is best to check your state laws before just hand writing a will. Of course, hiring an attorney who specializes in estate planning is often the best way to go.