5 habits that will help you increase personal profits

Managing your personal finances seems relatively simple until you decide to grow your profits. Once you start pursuing strategies to increase your personal wealth, like investing, things can get complicated.

Your personal wealth building strategy will be unique to you, but developing the following habits will help, no matter what you pursue.  

1. Consult a financial advisor after a personal windfall

Anytime you receive a personal windfall of cash, it’s critical to get advice from a financial advisor. For example, you might come into an inheritance from a relative who passed away, or you might win a large sum playing the lottery, like this woman who won $10 million from a scratcher like VALottery.com that her husband gave her for Valentine’s Day.

If you find yourself receiving a large sum of money, don’t tell anyone and get in touch with a financial advisor before you start spending your money. Receiving a personal windfall comes with big responsibilities. 

For instance, you’ll need to pay taxes, which can sometimes equal 50% of your winnings. Also, the more money you have, the easier it is to spend thousands of dollars on things you don’t really need.

Consulting with a financial advisor is the best way to make sure you make wise decisions with your new and exciting windfall of cash.  

2. Avoid impulse purchases

Almost everyone has made purchases on a whim, but few know how much money they’ve wasted this way. If your goal is to increase your personal wealth, avoid buying things just because it feels good in the moment.

Impulse buys can be sneaky; they don’t always seem like they’re made on impulse. Sometimes there’s a time delay. For instance, you can sit on an impulse for a few days, a week, or a month. By the time you make the purchase, it seems like it was well thought out simply because so much time has passed.

If you counted, you’d be surprised to see how many time-delay impulse purchases you’ve made throughout your life. All of this spending adds up fast. The more money you have, the easier it is to spend it frivolously.

While there’s nothing wrong with buying some things on a whim, it will kill your personal finances if it becomes a habit.

2 Tips to manage the impulse to buy on a whim

- Create a budget for impulse buys. Spending money can be fun, so if you enjoy buying on impulse, set a budget. For example, set a budget of $200 per month (or whatever suits your actual budget) for unplanned purchases.

- Create a worksheet to determine whether or not a purchase is worth the money. For instance, create a series of questions to determine whether you should buy an item. 

The questions might include:

- Will this benefit me long-term?

- Can I resell the item if I get tired of it?

- Is the item just a novelty, or is there real value? 

3. Keep excellent books 

Tracking your personal finances is the foundation of building personal wealth. If you don’t know what money you have and where it’s going, you won’t know how much you have to invest or play with.

Keeping excellent books regarding your finances will give you the insight you need to plan your investments and purchases wisely.

2 Tips to keep your finances organized

- Use bookkeeping software. Software that automatically calculates your expenses, income, and future projections will give you a more accurate image than trying to manage everything on paper.

- Track everything. Don’t skip tracking anything. For instance, track your daily coffee, your fast food runs, and pizza nights.

4. Create a routine for managing your finances

Anytime you create a routine around something, you’ll be more successful. Routines are the best way to develop habits that become automatic actions. When you get into a routine around managing your finances, you’ll be less likely to miss important deadlines or skip paying bills.

With a routine to manage your finances, you’ll also stay on top of your spending and you’ll notice when something isn’t right. For instance, when you manage your finances daily, you’ll notice right away when an unauthorized charge goes through to your account.

2 Tips for creating a money management routine

- Take time to set up your money management system. A week’s worth of planning is always worth the amount of organization you’ll create. Spend time creating your money management system. Once it’s set up, it won’t take much to manage.

- Spend ten minutes at the end of each day reconciling. At the end of each day, spend about ten minutes reconciling your money. Check your daily purchases in your bank account against your receipts and document whatever you’ve decided to enter in your books.

5. Remain committed to your goals

It’s easy to get thrown off-track when you’re met with unexpected expenses or emergencies. Medical bills, vet bills, car repairs, and home repairs can take a huge chunk out of your savings. Setbacks are part of life, but it doesn’t mean you have to quit.

No matter what happens, remain committed to your financial goals. Know that every setback will eventually pass and you’ll come out the other side.

2 Tips to stay committed to your financial goals

- Keep your eye on your goals. Think long-term. Do what’s needed in the short-term to reach your long-term goals. For example, if you generate an extra $50,000 invest that money so it will grow. Sure, you can buy a brand-new car, but new cars lose significant value the second you drive off the lot. Investing your money would be the wiser choice.

- Make tough choices. There will always be tough choices when you’re dealing with finances. For example, you might need to sell a rental property that isn’t generating the kind of profits you’d like. Once you sell it, you can reinvest your money into a better property. Over time, the difference in profits will accumulate, making it a worthwhile move.

6. Find ways to stop trading time for money

This might be everyone’s ultimate goal, and for good reason. You’ll never generate true wealth until you stop trading time for money. There are only a finite number of hours in the day that you can work, and your income will always cap out when that number is reached. After that, you won’t generate more income unless you raise your fees, and there’s a limit to that as well.

The best way to increase your personal profits is to move from time-based pay to value-based pay. Look for ways to provide your services for a value-based fee, rather than an hourly rate.

2 Tips to move to value-based income

- Become a consultant. High-level consultants get paid for their expertise, not their time. Become a true expert in your field and you’ll be able to charge for your skills.

- Create digital assets. Digital assets are something you create once that can be purchased an infinite number of times without any additional work or effort. If you can find a way to produce digital assets in your industry, you’ll be able to generate easy money.

Building personal wealth requires a strategy

No matter how you build your wealth, you’ll need a solid strategy. Developing good habits is a critical part of that strategy. Hopefully, the tips outlined in this article will help you fine-tune your spending and bookkeeping habits so that you can build the personal wealth you desire.