Give up impulsivity
Remember how you spontaneously bought something in a supermarket or on Amazon many times? For most people, unplanned purchases are entirely normal. But not for millionaires. They know how to curb their desires and refrain from impulsive decisions.
Walter Mischel conducted a famous study in the 1960s. Michel encouraged preschoolers to eat marshmallows whenever they felt like it, with the proviso that those children who waited until the adult returned to the room, and only then began to eat, would receive another candy.
The professor continued to monitor the study participants for a long time and found out that people who managed to wait until they returned to the adult’s room during the study and received two pieces of marshmallow instead of one had a relatively lower body mass index, there are fewer drug addicts among them, in addition, they are less likely to divorce and have higher SAT scores.
Distinguish between wants and needs
Wealthy people know how to distinguish want from need. Of course, we sometimes want to buy a house, shoes and an office. But are they essential? Or maybe you want a luxury car?
It is, of course, compelling and a pleasure to drive it, but this is not a matter of prime necessity. Instead of spending money on impractical things, millionaires buy only the essentials and invest, boosting their income.
Perhaps that’s why 61% of people whose income is more than $250,000 a year buy the same cars as the less well-off part of the population.
Prioritize the long term
Entrepreneur and millionaire Timothy Sykes told Entrepreneur:
“Long-term goals, ranging from one to five years, are a great source of motivation. In addition, they allow you to analyze the future and understand how correctly you spend money now.
You must necessarily connect daily tasks with long-term goals, and if it turns out that they do not match, then the goals need to be changed. Adjusting goals can lead to a significant change in daily activities, help to abandon useless ones, and add more significant ones that will benefit over time.
What’s more important? Pay off debts or savings.
People nowadays are more indebted than ever, and it is because they don’t know how to say money while they keep taking the little debts which don’t look big at the start, but as these little debts grow together, they start to look like an enormous debt altogether. We no longer just tell you that your savings account is almost no longer yielding interest—0.01%. With a savings balance of a hundred thousand euros, you even surrender with a negative interest rate of minus one percent.
This average is lower than in previous years, partly because the lending standards were tightened at the beginning of 2021.
Have you built up savings but also have a loan? Then it is a good idea to take a closer look at your financial options. Even though interest rates are now low (three percent with a loan amount of fifty thousand dollars), a loan still costs much more than savings account yields.
The toll on your savings
Therefore, it is a shame to let your savings ‘wither away’ or even must pay a toll on them, while you can also use (part of) your savings to pay off your loan more quickly.
Paying off pays off
If you do not have a loan and are only saving, then a low-interest rate on savings is always better than no interest.
Because even though the interest on loans is now low, you always pay more for it than your savings account yields. Just think: the cheapest loan comes down to three and a half interest with a loan amount of fifty thousand euros.
Borrowing money and saving simultaneously is a waste of your money. This is because you delay the reduction of your debts and the build-up of capital.
Keep a financial reserve
Have you decided to pay off (part of) your loan with your savings? Make sure you keep money on hand.
Advises you to save at least ten percent of your monthly income and a buffer of about three-monthly salaries for unforeseen expenses. It would not be enjoyable to take out a loan again after repayment because, for example, your car breaks down.
Pay off as soon as possible for a debt-free existence
So, we can conclude that you lose money if you have both a loan and savings. An opposite move that keeps you in debt unnecessarily longer. We, therefore, recommend that you – if possible – repay your loan as much as possible so that you can enjoy a debt-free existence again as soon as possible and start building up capital.
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