This post was most recently updated on July 9th, 2018
Money habits will help you earn your first million dollars.Conventional wisdom dictates that to save money and minimize your spending habit; you need to squirrel away as much as possible while drastically reducing your spending, period. While there is some merits to that strategy, the smarter way to grow your wealth is to cultivate careful spending habits and simultaneously being a greater giver. What do you think? This sounds crazy? I don’t know about you, but it sounds like billions of dollars to me. Anyways, here are four spending habits to help you save your first million dollars. How to save Money and minimize your spending
Categorize your expenses and monitor your spending
One easy way to keep your finger on the pulse of your spending habits is to break down your expenses into categories. Garret Gunderson, CEO of wealth factory.com suggests a framework consisting of four expense categories: destructive, productive, protective and lifestyles.
Destructive expenses refer to “overdraft fees, using credit to consume, spending on vices, or product or services you don’t use or don’t add value to your life”. According to Gunderson, these are financial sinkholes that do not offer any benefit to you.
Productive expenses are those that will make you money, like hiring an ideal employee or being an early investor in a company or product that goes viral. These expenditures are also one that can improve your overall well being like education, nutritious food and fitness classes.
Protective expenses like health, life and auto insurance, are associated with preserving yourself and your family.
Lifestyles expenses are comprised of the fun things in life like vacation, the latest technology and new clothes.
By categorizing your expenses you will see how to cut destructive expenses, splurge on productive and protective expenses, and spend on conservatively on lifestyle expenses. If you make the right choice in setting limits on your spending, your productive expenses will pay for themselves and then some. Make sure to monitor your spending carefully and soon good habits will emerge.
Avoid emotional spending
We all have those days when we feel down in the dumps, and we rationalized that we will surely feel better after buying a new pairs of shoes and some gourmet chocolates. However, Kevin Leary Financial group urges, ‘don’t go shopping to change your mood. It might make you feel better in the short term, but I promise: the long term fulfillment of growing your money far out-weighs the temporary satisfaction of retail therapy”
Instead try to regulate your emotions by talking with friend and family, exercising, watching a documentary, or reading or for a more harm-reductionist approach, try planning small, regular outing for yourself using your lifestyle expense budgets. For example, plan to get a fancy massage at the spa or indulge in a lavish meal once a month instead of every time you feel stressed. Developing good coping strategies will eliminate bad spending habit and help you save money quickly.
Neil McCarthy,a research chemist made his first million dollars solely by investing in the stock market in the 1990s. Paul Glandorf, a pipe fitter and construction worker, took investing seriously as a retiree and is now sitting on a huge pile of money.The lesson here is clear: know how the stock market works.
Finally, be consistent in your tithing and free will donation.This is the greatest secret to making wealth.
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P. Dickson is Inspired to inspire others with the good things of life. He wants to see people enjoy life, manage stress, prosper and be good. Life is simple so enjoy.