Everyone has bad habits... especially when it comes to money.
I've seen them in myself, my family, and my friends... and you probably have too.
Bad habits might not put you in the poorhouse, but they'll make your financial life a lot more challenging and uncertain than it needs to be.
So if you want to grow your money in the years to come, start practicing these four good financial habits instead...
|1. Form a healthy relationship with money.
Some people view money like a pint of Ben & Jerry's ice cream while they're on a diet... forbidden, gluttonous, but so nice – in a feel-bad-about-yourself-later kind of way.
They think that money is dirty. They think having even a little bit of it is bad. Or they think that liking money, or the things you can buy with it, means that you're selfish and greedy.
If this sounds like you, bad news: You're probably never going to be rich. If on some level you don't like money, you'll probably never have a lot of it. If you think money – and being rich – is "bad", it means that you don't really want it. That voice in your head is going to stand in your way.
If that's the way you feel, that's fine – as long as you realize that you'll never have much money.
But if you think you'd like money, the first step is to make sure that your brain isn't working against you. You need to stop and think about your real attitude. Then, either embrace it... or start with a clean slate that says, "money is good."
|2. Know that money isn't an end in itself.
The number in your bank or brokerage account should not define you.
A far smarter (and more productive) strategy is to re-orient your thinking so you view money as a means to an end.
What's that end? Options. If you have money, the range of opportunities available to you – what you can do with your time – expands dramatically.
Conversely, no money equals fewer options. If you're struggling to make ends meet, your menu of opportunities is limited because you're focused on making rent or the car payment tomorrow. You can't choose what to do, because your amount of money constrains you.
|3. Diversify your 'personal equity.'
The idea behind diversification is simple. If you keep all of your eggs in one basket, you're setting yourself up for big losses – and possible disaster. However, if you spread your risk across different types of assets, your other holdings will help balance out the losses.
But diversification goes beyond just holding a number of different assets... What about your "personal equity"? Is it diversified?
Here's what I mean... First, add up the value of everything you own, like stocks and stamp collections and your home. Then, subtract what you owe (on your mortgage, to the taxman, or to your ex-spouse, for example). What's left is your net worth, or your equity.
When I say "personal equity," I'm talking about a broader definition of your assets. It includes everything from financial, personal, and professional experience to your prospects and earnings power. Personal equity measures how you're going to build your equity in the future.
To diversify your personal equity, think about where you'll be earning your living and how you'll be adding to your savings in coming years. Where is your paycheck coming from? What other sources of income do you have? Where is your professional network – and how strong is it? How transferable are your skills? How many languages do you speak – and how easily could you work in a different country?
If you're not already diversified in these areas, start now.
|4. Invest in real estate.
As my colleague Peter Churchouse says... all human activity uses land.
The hotel that you stayed at on your last vacation uses land. So does the airport or train station you used to get there. In fact, any business needs land... from that tiny tech startup in the garage to the sprawling empires of multinationals.
Given how essential real estate is to everything, you'd think that its importance would be reflected in the average stock investment portfolio. But it's not. At around $2 trillion of total market capitalization, it is small potatoes when set against the energy sector, technology, consumer stocks, or banking stocks.
Don't make the mistake of not having any real estate in your portfolio. Remember, owning your house isn't the same thing as investing in real estate stocks... First, real estate stocks offer the potential for big gains. And second, they give you a simple way to diversify your assets.
These four habits will help make you money... And although many more exist, these are a great place to start. On their own, they might not make you rich. But they will make your life – and building lasting wealth – much easier in the years to come.
Editor's note: Real estate can be one of the best investments you ever make... And despite what hundreds of "experts" say, you only need five simple techniques to get started. Kim's colleague Peter has captured opportunities all over the world using these little-known strategies... even turning one $10,000 investment into a $12.8 million fortune.
You can learn more about these five tips – and why you should invest in real estate today – by clicking here