10 Wealth-Building Habits You Need To Master

February 21, 2022February 21, 2022 / Azuni Blogger / Leave a comment

By Be The Budget

When it comes to personal finance, there are basically two types of habits: wealth-building habits, and wealth-diminishing habits. In other words, every financial decision you make will either move you closer to wealth, or further from it.

So, it stands to reason that the more wealth-building habits you adopt, the more likely you are to become wealthy. I mean, if you only ever make financial decisions that have been proven to make people rich, then you should end up rich too, right?

In theory, yes.

But here’s the thing, while it’s easy to talk about wealth-building habits, actually adopting them requires a whole lot of discipline and consistency.

Beyond that, with a seemingly endless amount of bad financial advice out there, the lines between good financial habits and bad financial habits have gotten a little blurry. And that’s exactly why I decided to write this article.

In this post, I am going to lay out 10 of the top financial habits that have been proven to help people build wealth; the wise, and honest way.

In other words, I’m not talking about the kind of wealth that requires all sorts of risk, stabbing friends in the back, or leveraging yourself to the hilt. More often than not, that just leads to financial (or relational) misery. Rather, the habits in this article are meant to build wealth, and a meaningful financial legacy over the course of your entire life.

So, if you’re in this financial game for the long haul, and that all sounds good to you, then keep reading.

1. Set Better Financial Goals

One of the things I have found throughout my personal finance journey, is that most people have a general idea of their financial goals. That said, very few people actually write them down and clearly define a timeline in which they would like to achieve said goals.

For instance, it’s normal to hear someone say, ‘I want to be a millionaire’. But, the problem with goals like this is that they lack definition and clarity.

I mean, if you want to be a millionaire, what’s your timeline for achieving that goal? Also, what kind of steps are you going to take on a consistent basis in order to achieve it?

A better goal would look something like this:

“Within the next 15 years, I am going to have a net worth over a million dollars. In order to achieve this goal, I am going to get out of debt in the next six months, and invest a minimum of $3,500 per month in mutual funds with an average annual return over the last 10 years of at least 10%.”

Seriously, between the first goal and the second, which person would you expect to actually become a millionaire? I would bet on the second person.

Plain and simple, if you want to build wealth, you need to get in the habit of setting better, clearly-defined financial goals.

2. Live On A Budget

Budgeting is one of the most important wealth-building habits you can adopt, because it is your daily and monthly plan for achieving your financial goals. It is also your guide for when it comes to making sound financial decisions.

I can personally attest to the power of budgeting, because the day my wife and I decided to get on a budget, we were in $34K of debt, with a net worth of somewhere around -$25,000. (Yeah, I don’t love telling this part of the story, but it’s the truth.) On a better note, after living on a very strict budget over the next 12 months, we got completely out of debt and increased our net worth by almost $75K.

Now, I know that isn’t what you would consider ‘wealthy’, but if you take what we were able to do over the course of a year, and extrapolate it over the course of 10, 20, or 30 years, it turns into some serious wealth. And seriously, it all boils down to sitting down with a budget every day, tracking your expenses, and checking-in and refocusing on your financial goals.

That’s why living on a budget is one wealth-building habit you need to master.

5 Ways People Lose All Of Their Money

February 18, 2022February 18, 2022 / Azuni Blogger / Leave a comment

By Marc Guberti

One of the worst financial fates someone can endure is losing all of their hard earned money in a matter of days or weeks. While this doesn’t happen to most people, it unfortunately does happen to some people.

$100,000 turns into $0 and a few hard years of work go down the drain. It’s incredibly heart breaking just to think about this scenario, but it’s one we must actively seek to avoid.

There are several reasons why some people lose large chunks of money seemingly overnight. These are five of the more common reasons why this phenomena happens.

Not Tracking Their Expenses

If you don’t keep an eye on your expenses, you can suddenly fall prey to them. While the drop to zero isn’t as dramatic, it whittles away your wealth over time. This can have an accelerated impact if one or more of your income streams suddenly dry up.

Tracking your expenses on a spreadsheet will give you a deeper appreciation of where your dollars go. You’ll hesitate each time you’re presented with the opportunity to spend your money. This is a good thing because you’ll then only spend money on meaningful purchases rather than impulsive ones.

When you track your expenses, you’re more likely to focus on experiences rather than the accumulation of stuff.

High Risk Investments

Investing is paramount for building wealth over time, but it can get ugly if you invest in high risk assets. Cryptocurrencies and options are two high risk, high reward investments.

While it’s okay to have some high risk investments in your portfolio, you should keep it to a minimum. There’s a big difference between 0.5% of your portfolio getting wiped out versus 20% of your portfolio getting wiped out.

If your investments keep you from sleeping at night, you need a different strategy. Sure, a high risk, high return reward can result in significant appreciation in a short amount of time. Some options traders turn $500 into $100K. However, it’s just as possible to turn $100K into $500.

Some high risk investments don’t even present a proper risk-reward ratio. Shorting stocks is among the riskiest ways to invest because you can double your money at the very best and face unlimited losses at the very worst. Some shorts end up losing their entire portfolios because a stock suddenly shoots upward (I’m looking at you, GameStop).

Gambling

I went to Las Vegas once because my brother was speaking at an event there. I had always heard of it but was curious with what I would find. I knew I’d be in a place where gambling was very popular, but I was unprepared for the amount of slot machines and different card games I saw there along with the smell of cigarettes.

Casinos aren’t exactly my cup of tea, and I’ve never gambled in them. Not even with $5 just to see what would happen. If you don’t start, you never have to stop.

Gambling can quickly deteriorate wealth because people’s prides get hurt in a system designed to make them lose. No one wants to end in the red, so they keep gambling hoping from one stroke of luck that they end up in the green again. Then, they get greedy and want to get even deeper into the green. That puts them back in the red and leaves them very frustrated.

Many businesses capitalize on people’s desire to gamble, and the effect the industry has on people’s lives is disastrous. It’s not worth it. You can have fun in plenty of other ways.

Getting Into Bad Debt

Debt is a silent killer that compounds over time. It’s the reverse of your stock gains compounding over time, and if you don’t stay on top of it, debt can have a devastating effect on your net worth.

Most people slowly get into debt and don’t feel it until the compounding makes it unbearable. There are some types of debt that are good such as a mortgage. Good debts are tied to reliable assets. Bad debt such as credit card debt can take a toll on your wallet.

But then there’s a gray area. Investing in stocks with margin is a great way to boost your returns when things are going well. However, investing with margin can have disastrous consequences if things don’t go your way. Although margin debt is for investing purposes, you put yourself in an extremely vulnerable position. Some people can get wiped out if their portfolios go down 20% to 50% because of their level of margin.

Excessive leverage is how Archegos lost $110 billion in 5 days according to the Financial Times…even though the fund only had $20 billion in assets. Archegos used an investing device similar to a CDO, a high leverage asset that led to the Great Recession.

Most of the heavy losses in the stock market are attributable to margin gone wrong. I like stocks more than real estate, but leverage only makes sense with real estate. If you use margin in the stock market, you’re playing a very risky game.

7 Lessons from The Richest Man in Babylon: Build Wealth Like a Millionaire

December 10, 2021December 10, 2021 / Azuni Blogger / Leave a comment

By Andrew

The Richest Man in Babylon by George S. Clason is a fascinating lesson in personal finance written in short, easy-to-digest stories. It was first published in 1926, but the classic parable style and timeless concepts about how to build wealth continue to provide value as if it was written today.

Originally written as a series of pamphlets, the parables were eventually collected into a book. The book provides many timeless lessons about spending, saving, and investing to build wealth that are as applicable today as when it was first written.

The Richest Man in Babylon – Summary in 3 Sentences

The book is set in ancient Babylon, and follows the story of Arkad, the richest man in all of Babylon, imparting his wisdom to a younger man, Bansir, who wishes to become wealthy.

It lays out the basics of personal finance – spend less than you earn, save 10% of your income, and invest wisely – in an engaging parable format (stories told to teach a lesson). The book teaches that if you follows these basic lessons, work hard, and continue improving your skills, you can build future wealth through passive streams of income.

7 Lessons from The Richest Man in Babylon

The book is divided into three sections. The first 7 lessons are the “cures for a lean purse” that Arkad (the richest man in Babylon) shares with Bansir, and then there are two other related parables that impart the last two bits of wisdom. This article will cover the overarching lessons in the book.

Here is a summary of the main lessons from The Richest Man in Babylon:

Pay Yourself First
Live Within Your Means
Put Your Money to Work
Keep Your Money Safe
Be a Homeowner
Insure Your Future Income
Improve Your Skills to Earn More Income

Lesson 1 – Pay Yourself First

This, my students, was the first cure I did discover for my lean purse: For
each ten coins I put in, to spend but nine.

The first lesson given by the wealthy Arkad to his students was to pay yourself first. This may be the most basic maxim in all of personal finance, but if you don’t follow it, you will never escape the paycheck to paycheck cycle.

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Study: How Wealth Reduces Compassion

September 24, 2021September 24, 2021 / Azuni Blogger / Leave a comment

As riches grow, empathy for others seems to decline

Who is more likely to lie, cheat, and steal—the poor person or the rich one? It’s temping to think that the wealthier you are, the more likely you are to act fairly. After all, if you already have enough for yourself, it’s easier to think about what others may need. But research suggests the opposite is true: as people climb the social ladder, their compassionate feelings towards other people decline.

Berkeley psychologists Paul Piff and Dacher Keltner ran several studies looking at whether social class (as measured by wealth, occupational prestige, and education) influences how much we care about the feelings of others. In one study, Piff and his colleagues discreetly observed the behavior of drivers at a busy four-way intersection. They found that luxury car drivers were more likely to cut off other motorists instead of waiting for their turn at the intersection. This was true for both men and women upper-class drivers, regardless of the time of day or the amount of traffic at the intersection. In a different study they found that luxury car drivers were also more likely to speed past a pedestrian trying to use a crosswalk, even after making eye contact with the pedestrian.

In order to figure out whether selfishness leads to wealth (rather than vice versa), Piff and his colleagues ran a study where they manipulated people’s class feelings. The researchers asked participants to spend a few minutes comparing themselves either to people better off or worse off than themselves financially. Afterwards, participants were shown a jar of candy and told that they could take home as much as they wanted. They were also told that the leftover candy would be given to children in a nearby laboratory. Those participants who had spent time thinking about how much better off they were compared to others ended up taking significantly more candy for themselves–leaving less behind for the children.

A related set of studies published by Keltner and his colleagues last year looked at how social class influences feelings of compassion towards people who are suffering. In one study, they found that less affluent individuals are more likely to report feeling compassion towards others on a regular basis. For example, they are more likely to agree with statements such as, “I often notice people who need help,” and “It’s important to take care of people who are vulnerable.” This was true even after controlling for other factors that we know affect compassionate feelings, such as gender, ethnicity, and spiritual beliefs.

In a second study, participants were asked to watch two videos while having their heart rate monitored. One video showed somebody explaining how to build a patio. The other showed children who were suffering from cancer. After watching the videos, participants indicated how much compassion they felt while watching either video. Social class was measured by asking participants questions about their family’s level of income and education. The results of the study showed that participants on the lower end of the spectrum, with less income and education, were more likely to report feeling compassion while watching the video of the cancer patients. In addition, their heart rates slowed down while watching the cancer video—a response that is associated with paying greater attention to the feelings and motivations of others.

Difference Between Income and Wealth

September 24, 2021September 24, 2021 / Azuni Blogger / Leave a comment

Surbhi S explains the key difference between wealth and income

While income is generated, wealth is created, there is a big difference between two. Many think that these two terms are one and the same thing, but in reality, income is a stream of money, which a person receives from different sources such as salary, rent, profit, interest etc., that helps in the creation of wealth and wealth is the total market value of all the assets possessed, stored or saved by a person for future use.

The former is the money earned by a person, over a limited period say one week or one month, whereas the latter is the money earned by a person during his lifetime. So, if you are also confused between these two terms, take a look at the article provided below to have a clear understanding of these two terms.

Definition of Income

We define income as the monetary return that accrues/arise or is expected to accrue/arise at fixed intervals from certain sources. It is an amount of money, which a person gets, receives or earns, either through investing capital or through providing goods or services. It is the fundamental requirement of an individual, household or business to finance routine expenses. The sources of income can be:

Wages and salary from employment.
Rental income from house property.
Interest on savings and securities.
Dividend income.
Income from business or profession.

In accounting terminology, income is net of revenue, i.e. revenue less all expenses and taxes. Moreover, while the calculation of taxes, income covers only revenue receipts and includes those incomes also which do not arise on a regular basis, such as winning from lotteries, horse races or crossword puzzles.

Definition of Wealth

Wealth denotes the current market value of total assets owned by an individual, society, company and country. It is the sum of all tangible and intangible assets, an entity possesses, that can be exchanged for money including savings, investments, real estate, cash and other valuable items less all liabilities.

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