Good financial behavior throughout the year and our lifetime has a profound impact on building wealth.
Around this time of year, financial and tax experts are publishing their most important things to consider lists for year-end tax and financial planning. While we know this is an important task to complete before year-end, we also know that good financial behavior throughout the year and our lifetimes has a much more profound impact on building wealth.
At the end of the day, how we “behave” with our money makes all the difference. Bestselling books underscore this philosophy. For instance, Morgan Housel shares many best practices in his bestselling book, The Psychology of Money. Like The Millionaire Next Door by Thomas J. Stanley; the premise is that accumulating wealth is more about long term behavior and less about how much you make. We see this in action every single day. And more importantly, being consistent with the right behaviors will withstand the test of time.
Why are these behaviors important?
Wealth is usually derived from a series of good financial habits. For most households, (70-80%) it does not come from inheritances, winnings or getting lucky, according to the Federal Reserve. In fact, only 20-30% of people receive inheritances, and the average inheritance is approximately $46,000. (Note, however, the top 1% receive inheritances that average $719,000.)
Most wealthy people are wealthy because they establish good financial practices. Let’s look at a few.
10 Best Practices
What are your Behaviors with Money?
It is always a good time to take stock of current financial habits. It can be a mental conversation with yourself or an active conversation with your partner and/or advisor. Here are some questions to get you started.
What is Out of My Control
There are many things out of our control. (The shenanigans in Washington are a perfect example.) These are the biggies:
What is Within My Control?