9 Financial Habits Of Successful People

Discover the secrets to financial success as we delve into the nine key habits frequently practiced by prosperous individuals. From continuous learning and strategic investment to smart spending and insurance protection, this article offers invaluable insights to empower you on your journey towards financial freedom.

1. They Keep Learning

Once they’ve identified areas in which they want to gain wealth, they start educating themselves in those fields.

Invest in your self-knowledge by reading the relevant books, following the right bloggers and spokespeople, and keeping up to date with policy changes in the news. There are tons of resources out there (although it’s important to first check their credibility) that will help educate your financial decisions.

The Psychology of Money by Morgan Housel explores the often irrational and unpredictable behaviour of people when it comes to managing finances. Through insightful anecdotes and research-backed insights, Housel highlights key principles that shape our financial decisions, emphasising the importance of understanding our own biases and emotions in money matters. The book offers valuable lessons on building wealth, managing risk, and achieving financial security by focusing on timeless truths rather than short-term trends.

Or, of course, just ask your adviser for updates – we live and breathe this stuff every day. Whatever source you pick, stick to it – everyone has an opinion and too much conflicting information from multiple sources can be confusing, overwhelming and prohibit action.

2. They Ask For What They Want

Most people realise that to create wealth initially, their income needs to increase.

By creating more disposable income, you can use it to generate wealth. Always look for how you can add further value to the job you do and seek out training opportunities to widen your skill set and result in income increases.

What value means can be different for every company, but by building strong relationships with your managers and the company’s leadership you can begin to understand your employer’s strategic goals and the role you play in achieving them.

Asking for what you want takes confidence and belief in your own value. Allow the experience of mentors, within an official and unofficial capacity, to guide you on what to ask for and when. It’s all part of the adage – if you don’t ask, you don’t get.

3. They Get Onto The Property Ladder Early

Buying a house as early as possible opens the opportunity for other investments.

Paying off your mortgage more quickly is one option you might consider. By doing so, you could reduce the amount of interest you pay over time, potentially freeing up more money for other purposes. If you reach certain loan-to-value ratios, it may be possible to leverage your property for other investments, such as managed funds, using the money you would have otherwise spent on mortgage repayments.

Investing in property is one approach to potentially increase your net wealth over time. Properties can appreciate in value and build equity. Instead of allocating funds to rent or discretionary spending, some people choose to invest in a mortgage as a way to build wealth. However, this strategy depends on individual circumstances and financial goals.

4. They Seek Out Passive Income Options

Passive income is often associated with earning money with minimal effort or ongoing time commitment, commonly through avenues like rental properties or shares.

While rental properties can provide a steady income stream, they may not always be as passive, or profitable, as expected. Ongoing maintenance, tenant management, and mortgage payments can require significant time and financial investment. 

Investing in shares can offer passive income through dividends, but it's important to be aware of the potential for fluctuating investment values and the need for active portfolio management. Additionally, understanding the dividend payout schedule and having patience for investment growth are essential.

Starting or investing in a business that requires minimal day-to-day involvement from you is another option. However, even businesses perceived as passive may need active oversight to ensure continued success and profitability.

It's crucial to recognise that investments often perceived as passive can require more active involvement than initially anticipated. Conducting thorough research and having realistic expectations can help you navigate the complexities of passive income.

5. They Run Their Personal Finances Like A Business

Understanding the significance of budgeting and cash flow is crucial in managing personal finances effectively.

A lot of people spend their money ad hoc, so are surprised when the $100 a week of discretionary spending (e.g. eating out) is actually $200-$300. A clear budget helps keep you on top of your spending and makes you aware of how much you have left over to invest. It also allows you to build accurate financial goals that are specific, measurable, attainable, realistic, and time-based (SMART).

Successful businesses know where they are financially at all times – personal finances should be no different.

6. They Spend & Borrow Smartly

Mastering smart spending habits and staying within your budget are essential steps on your journey to financial security. Aim to make purchases with cash whenever possible to steer clear of high-interest credit or hire purchase options.

Consider the possibility of separating additional loans from your mortgage, as this strategy may offer advantages depending on your unique financial circumstances. By doing this, you can prevent accruing interest on items with depreciating value over time. 

Furthermore, this approach promotes flexibility and personalised financial management, ensuring that your mortgage is precisely aligned with your individual needs and goals. By adopting this method, you can enhance your overall financial decision-making process with greater clarity and confidence.

7. They Invest

Diversifying investment options across multiple platforms is a key strategy for building wealth.

For retirement planning, it's recommended to save approximately 10-15% of your annual income. If 8% is allocated to KiwiSaver, consider investing an additional 5% in managed funds, which offer liquidity and can be accessed relatively easily.

Over time, these investments can grow, providing funds to help pay off a mortgage or support a comfortable retirement lifestyle.

8. They Prioritise Insurance To Safeguard Their Current & Future Wealth

Investing time, effort, and money into organising finances and accumulating wealth warrants protection through appropriate insurance.

The types of insurance you need will vary based on your individual circumstances. However, the focus should be on selecting insurance products that prevent financial erosion in unforeseen events.

Insurance serves as a crucial financial safety net, protecting families from the potential loss of income due to unforeseen circumstances such as death, illness, or injury. By covering expenses during these challenging times, insurance helps prevent the need to liquidate assets like your home, safeguarding your life savings and maintaining your ability to invest in future opportunities.

The assurance of financial support from insurance means that in the face of adversity, you can focus on recovery and well-being without the added stress of financial instability. This protection is vital for preserving your standard of living and ensuring that your financial goals and plans remain intact.

9. They Seek Advice

Successful individuals understand the importance of seeking expert advice across all aspects of life, including finance. When it comes to managing your money, financial advisers are invaluable resources. They possess the expertise and market insights to guide you towards financial success.

Partnering with a financial adviser offers you a tailored approach to financial planning, designed to align with your unique goals, risk tolerance, and evolving circumstances. With their guidance, you can navigate the complexities of financial decision-making with confidence, ensuring a secure financial future tailored to your needs.

But it's not just about the numbers. A financial adviser is there to provide peace of mind, acting as a trusted confidant who understands your aspirations and concerns. They're your partner in financial well-being, offering support and guidance every step of the way.

So why hesitate? Take the first step towards a brighter financial future today by partnering with a financial adviser who can help you navigate the path to success with clarity and confidence.

Disclaimer: This article has been prepared for the purpose of providing general information, without taking into consideration any particular investor’s objectives, financial situation or needs. Any opinions contained in it are held by the author as at the report date and are subject to change without notice.