Blog · Financial Goals
7 Financial Habits to Become Financially Successful
L.J. Jones, CPA & CFP® · June 27, 2022
There is endless financial advice to buy or invest in something. But financial success is built from consistently making good decisions over time. To become financially successful the emphasis should be on the habits formed, not the products purchased. These 7 financial habits will help you manage your spending, increase your savings, lower your debt, and benefit from investing.
As a financial planner, I have seen so many people talk about some product or investment as the superior option for becoming financially successful. The truth is that financial success is built with a combination of good decisions over time, not one single decision. Instead of focusing on the outcome, young lawyers would be better off creating a collection of good financial habits.
1. Focus on Security Today Before Freedom Tomorrow
Even the best-laid plans go wrong. Financial security is established with an emergency fund of 3-6 months of savings, proper insurance coverage, and proper withholdings on your salary. Take care of these first before taking on more investment risk.
2. Pay Yourself First
I encourage clients to save 15%-20% of their income with each paycheck. Automate this transfer to coincide with each paycheck so the habit sticks.
3. Use Debt Prudently
Not all debt is bad debt. Law school loans, for a career that pays significantly more over a lifetime, are a reasonable use of debt. Before taking on debt, ask: what happens if I can't repay it, and does it meaningfully improve my life relative to its cost?
4. Spend Less Than You Make
Nearly 50% of people earning over $100,000 still live paycheck to paycheck. Take care of taxes and savings first, then necessary expenses, then spend the remainder enjoying your life.
5. Be Comfortable With Building Your Wealth Slowly
Getting rich quickly and becoming poor quickly are two sides of the same coin. Compound growth starts small but accelerates the longer you stay invested.
6. Don't Interrupt Compounding Growth
Pausing or withdrawing from investments even briefly can substantially reduce their future value. Maintain an adequate emergency fund and proper insurance so you're never forced to interrupt your investments.
7. Reward Yourself Now and Later
Financial success means living your ideal life today, not only in the future. Celebrate milestones along the way to reinforce good habits.
Final Takeaways
Good financial habits create a framework for making better financial decisions. When you focus on what you can control — your habits — the outcomes take care of themselves.
Have questions of your own?
I’m not taking new ongoing clients right now, but I’m still glad to offer a free 30-minute Meet & Confer — to answer your questions, add you to the waitlist, or point you toward another advisor.