These are fifteen habits to build wealth for singles. These habits affect different areas of your life. If you start to implement them, you can build wealth over time.
15 Habits To Build Wealth For Singles
Live Below Your Means
First, live below your means. This will allow you to save more money. You must know what it costs to live each month for your necessities. There is nothing wrong with driving a used car, renting a smaller apartment than you can afford, or living with your parents if it is a step to help you toward financial freedom.
Track Your Expenses
Second, track your expenses and follow a budget. When you know where your money goes, you are less likely to waste your money on things you do not need.
A 2019 survey found that Americans spend at least $18,000 yearly on non-essential costs. It has also been found that Americans spend over $300 a month on impulse purchases. So many Americans spend on non-essential items and impulse purchases because they must follow a budget and track their expenses.
You can also follow simple methods like the using the envelope method. You use different envelopes to break your expenses into categories: groceries, utilities, entertainment, et cetera.
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Third, be aware of lifestyle inflation. While inflation continues to be a problem and is likely not going away anytime soon, lifestyle inflation is another problem. You do not need to keep up with the Kardashians, the Joneses, or your neighbors. You may have a neighbor that looks like he has his life together.
He may have a nice house in a great neighborhood while driving an expensive car, but he may be in debt to pay for it. While his lifestyle looks nice, he cannot afford his lifestyle. Many people do this to make themselves look better to their friends.
You do not need a fancy house or fancy cars to live. That is just the lifestyle glamorized by movies and social media influencers.
Being Cheap Versus Frugal
Fourth, understand the difference between being cheap versus being frugal. There is a vital difference between being cheap and being frugal. When you are cheap, you eliminate things from your life that could help to improve your productivity, efficiency, and quality of life. Frugality is simply cutting out the things that you do not need from your life.
When you are frugal, your spending and budgeting habits help you reach your financial goals. You also want to consider the long-term life of your purchases. This can help you decide if it may be worth investing more money to buy from a brand or product with a reputation for lasting longer.
It is up to you to figure out what things are worth investing more. There are certain areas of life where you may decide to upgrade while you are OK with buying a less expensive product or service in another area.
Fifth, avoid debt. The financial system is a debt-based model, which means it wants to get as many people into debt as possible to keep the system going. Many of the common ways that the system gets people into debt are:
- Student loans by going to college.
- Credit cards.
- Car loans.
- Buy now, pay later, where someone pays for something in parts.
The problem is that depending on where you may live, you need to know the basic costs of living each year. Your essential costs are food, energy, and housing.
These are seven steps to get out of debt if you have debt.
Don’t Max Out Your Credit Cards
Sixth, don’t max out your credit cards. Credit cards are convenient. Yet, the high-interest rates quickly add up, which can make you into debt if you do not pay your credit card off each month. It is in the credit card company’s interest that you continue to borrow rather than pay in cash. The primary way that credit card companies make money is by charging interest and having many different types of credit card fees. This is why credit card companies want you to sign up for a new credit card or will raise your maximum amount each year.
Credit card companies also entice you to use their service by saying you get airline miles, discounts, and other conveniences. It could be beneficial if you use the things already that the companies use to sign up for their card and pay your credit card off each month. Otherwise, credit cards are a way to make you spend money you don’t have and spend more than you allocate each month with your budget.
Seventh, focus on self-learning. Self-education is the most important thing that anyone can do. However, this is looked down upon in a society that encourages people to attend college. The foundation of the education system is obedience and respect for authority.
Self-learning is what most millionaires and people who started their businesses did. Instead of going through college, most dropped out of college or never attended college. They found another way by discovering what they enjoyed learning about, then found a problem that needed a solution.
There are many ways to learn today that will be less than the cost of attending college. You can read a book. You can read an article on a website. You can watch videos or listen to a podcast on a topic you find interesting.
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Create Multiple Income Streams
Eighth, work to create multiple income streams. You can find ways to create multiple income streams. The traditional way has been to invest in the stock market. However, you can build income streams today using the Internet in many ways.
The reason why it is critical to build multiple income streams is so that you can become financially resilient. Some ways that you can make income streams include:
- You could self-publish and write a book.
- You could write a workbook or journal.
- You could start a newsletter on Substack.
- You could start a YouTube Channel.
- You could create merchandise to sell for your business or something you want.
- You could sell jewelry or other crafts on Etsy.
- You could create a digital course to sell.
The bottom line is that there are plenty of ways to make new income streams to help you become more financially resilient. Some of these even are passive income streams. You can then direct the extra money you make to invest into starting a business, reinvesting into another product, or investing in the stock market or real estate.
Understand Your Taxes
Ninth, understand your taxes. You want to understand your taxes to find ways to save more of your money legally. This will mean that you will determine where your dollar goes rather than the government deciding where your tax dollars will be spent.
The IRS takes away a third of your earned income each year. That means the first four months of every year is money the government takes from you. None of the money you make during those four months goes into your pocket.
Death and taxes may be the only sure things in life, but you can take steps to keep more of your money:
- You can see if your company provides a 401(k). This can help to reduce your taxable income by the total amount you invest into your employer’s 401(k).
- Tax loss harvesting – If you made some investments that have gone south and don’t think you will be able to profit from them, you could sell. This will help offset the other gains you made in the stock market and reduce the taxes you must pay.
- If you want to start a business, consider incorporating it as an LLC, S- Corporation, or a C-Corporatio It will depend upon the business venture and if you will have a business partner(s). Each of them has different business structures. As a business owner, you can find ways to reduce your liabilities while protecting yourself legally.
These are perfectly legal ways to save more of your money that can help you build wealth. You must have a good accountant, especially if you are a business owner.
Tenth, learn about the types of retirement accounts. Different types of retirement accounts are another common strategy you can use to invest in your future. You can utilize these accounts to reduce and defer your tax liabilities. These are five common types of retirement accounts:
- Individual Retirement Account (IRA) – An IRA is a tax-favored account that allows you to invest in stocks, mutual funds, ETFs, bonds, and other investments. You can contribute up to $6,000. If you are 50 or older, you can contribute up to $7,000.
- Roth IRA – You can invest up to $6,500 a year, and the amount you invest in that account is tax-free at 59.5. Contributions to a Roth IRA are made from after-tax dollars, and any profit from a Roth IRA will never be taxed again.
- Traditional 401(k) – You can contribute a maximum of $22,500 a year into a 401k. You will not be taxed on the money you contribute to a 401(k) until you reach the age of 59.5. You are deferring taxes with each contribution each year which helps you to save money long term.
- Self-directed IRA (SDIRA) – A self-directed IRA allows you to invest in a private company or real estate. You can get a higher rate of return along with greater diversification with a self-directed IRA. You must also have a custodian with a self-directed IRA. While you can get a higher return with a self-directed IRA, you have more risks.
- Health Savings Account – A health savings account can help cover medical expenses. Any contributions, withdrawals, and appreciation are tax-free with a health savings account. You will want to make sure that you are eligible before you apply. The maximum you are allowed to contribute to an HSA is $3,650.
Between these five retirement account options, you are potentially removing tax liability on upwards of $32,850 a year. That money can is then saved and compounded over time as you put money into the account for when you reach 59.5. The result is a large sum of money to help you during retirement.
Move To A Less Expensive State Or Country
Eleventh, you could also move to a less expensive state or country. This relates to point number two. You could live in a costly city or move to a less expensive state.
You can save on income taxes by moving to a more tax-friendly state. You can also save on property taxes. Some of the top tax-friendly states are:
- North Dakota
- South Dakotas
You could also decide to move to another country. I discuss why it is good to have a Plan B in my post on the Five Flags Theory. The simple answer is that you can have a second residency outside of your home country, have a second passport, and reduce your cost of living. This could also be used to triage the dollar while it remains the world’s reserve currency to enjoy a higher standard of living abroad that you may be unable to enjoy in the United States.
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Plan For The Worst
Twelfth, plan for the worst. You can plan for the worst by being prepared as possible. While many people do not enjoy paying for insurance, it can help cover themselves for an unplanned disaster.
Regular tracking and planning help to mitigate disasters. You can apply risk mitigation to different areas:
- You can see a doctor regularly and have your insurance cover part of it.
- Another option for a traditional doctor is a naturopath. A naturopath will work to find natural solutions to resolve your health issues so that you can eventually stop popping your prescription pills.
- You can continue to make yourself more valuable to your employer by studying for certifications, arriving on time, and showing your employer that you want to move up in the company and industry.
- If you have reached the top of your field, you could move to a different area or consider starting your own business.
- You can ensure your car is in peak condition by servicing it regularly.
- You can ensure that your car is adequately insured, and you can have AAA insurance in case your car breaks down for some reason.
- You can get house insurance to cover your house. It will usually cover the estimated value of the items and the value of your home. You can also obtain flood insurance if you live in an area where you experience floods.
- You can find an insurance agent and talk to them to get a plan that meets your specific needs.
- You can have an emergency fund to cover a year’s worth of expenses. I like to call an FU fund so you can still cover your expenses for a year in case an emergency happens or you need to find a new job.
You can schedule a time to have these done each year so that they are automated. You can set them on your calendar and forget about them. You will receive an alert on your phone, email, or computer reminding you of your appointment.
Value Your Health
Thirteenth, value your health. Like self-education, your health plays a critical role in maintaining wealth. There is a saying that your health is your wealth. Some ways to pay better attention to your health include following a diet, drinking enough water daily, and exercising. You can use a water filter to filter out chemicals and toxins in the water, and you could use something like a Burkey water filter.
You could switch from regular fruits, vegetables, and meats to organic or locally grown foods. This will decrease your exposure to chemicals in the food you buy at the grocery store.
You could resolve specific health problems, and it could be as simple as losing weight and regularly going for walks or the gym. A regular doctor won’t discuss these options, but alternative medical professionals can help you to find ways to resolve your health issues naturally. This could end up helping you to save money so that you are on fewer prescriptions and could help to decrease your health insurance costs.
Fourteenth, set goals. You want to set goals for yourself. Your goals will depend on your interests and what you want your future to look like. SMART goals are an excellent way to develop a goal you want to reach. SMART stands for:
You want to create a specific goal that you can achieve over a set period of time. This will allow you to determine if you are successful or not. You can then have different types of goals:
- Short-term goals
- Medium-term goals
- Long-term goals
Plan For Your Future
Finally, plan for your future. If you don’t have a plan, you will be part of someone else’s agenda. It is that simple. You must have a plan, and you must have goals. Some things may delay when you can achieve a goal, but it does not prevent you from finishing what you set out to achieve.
You can start right now to make a plan to improve your financial future. It could be coming up with a strategy to leave the job you hate. It could be working to make a second or third-income stream. You may decide that you want to start your own business.
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These habits can help singles build wealth. It takes time to build wealth. Most people want to get rich quickly without realizing that it took most millionaires and billionaires time to build up their net worth to where it is today. It took them time and resources to create a business, or businesses, that produced products or services that people wanted that made them wealthy.