When we think about wealth, we often think of individuals who have high incomes, successful businesses and smart investment returns. What we don’t often consider, however, are the everyday financial habits that allow us to build wealth.
Savvy financial behavior not only builds but protects wealth from myriad risks, ranging from economic downturns to mismanagement that can sabotage value over a long period.
Pay Yourself First
One of the building blocks of long-term wealth building is to get into the habit of paying yourself first.
Mike Hunsberger, owner of Next Mission Financial Planning, said putting money into savings or investment accounts first instead of waiting until the end of the month and contributing any leftover income makes a huge difference.
“As time goes on, you won’t even miss this money because it’s not money you think you can spend,” Hunsberger said.
The best way you can begin paying yourself? Automate the process. As soon as you get paid, Hunsberger recommends having the money come directly from your paycheck (if your employer supports it) or automatically sent from your checking account into a savings or investment account.
Give Each Dollar a Purpose
Katie Ross, executive vice president at American Consumer Credit Counseling, said you can build wealth while keeping a budget by giving each dollar a purpose.
“If your budget doesn’t already include a savings category, that’s a good step to take,” Ross said.
Once you pay off necessities, including debt and discretionary purchases, each month, Ross recommends allocating any leftover money to your savings account. Over time, this will help you build wealth on the side and invest savings to grow wealth over a period of years.
Look at Your Credit
One of the best financial habits to build wealth is looking at your credit.
Sabine Franco, chief esquire and owner of The Ambitious Legacy Firm, said looking at your credit will allow you to identify positive aspects to continue moving forward with and negative elements you should address and eliminate.
Invest in Life Insurance
Many families are using life insurance as a foundation to provide protection and build wealth within their families.
Paul LaPiana, CFP and head of product at MassMutual, said securing life insurance for children or grandchildren when they are young provides them with security throughout their lives.
“Life insurance provides unique benefits to both the insured and to the insured’s family or descendants,” LaPiana said. “Life insurance policies can provide cash values to cover emergencies or to help supplement retirement income.
“Policies can be designed to provide future long-term care benefits or provide a resource to pay for chronic care needs. Ultimately, death benefits are available to help care for spouses, children or grandchildren.”
Consciously Spend Money That Aligns With Your Values
A financial habit that can help build wealth is avoiding impulse spending in favor of choosing to consciously spend money.
Britt Williams Baker, co-founder of Dow Janes, recommends asking yourself whether this purchase is in line with your values. Ask whether you feel positive, negative or neutral about the purchase. If you feel negative, eliminate as many of these purchases as you can. This will help bring a consciousness to your spending and likely will help you spend a little less each week.
Start a Weekly Money Ritual
Time to check in with you and your money! Williams Baker recommends setting aside an hour each week to take care of your finances. Use this time to review recent transactions, check your bank account balance or set up that 401(k) you’ve been meaning to take care of at work.
Establish Legal and Financial Protection
What might happen to you, and the wealth you built, in the event of a sudden death?
Franco recommends creating some sort of estate plan to protect your financial assets. This may be as simple as a healthcare proxy or it may be a more complex trust that ensures you know what will happen to your assets if you are ill or when you are gone.
Stay Out of Debt
“Debt is the No. 1 thing that will keep you from building wealth,” said Williams Baker.
Avoid putting any purchases on your credit card that you can’t pay off that month. If you have credit card debt, pay it off as soon as possible so you can start saving that money and investing toward your wealth instead.
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This article originally appeared on GOBankingRates.com: 8 Financial Habits That Will Help You Build Wealth