Delayed gratification denotes a person's ability to wait in order to obtain something that he or she wants. Many of us would like a shiny new car, the latest new clothes, or the latest electronic gadget. Many of us would also use credit card debt and money that we can't really afford to acquire these products.
By practising delayed gratification, we can avoid getting ourselves into those bad debt scenarios. We may also realise that in the end, we don't need the new product after all, and thus any excess money can be put towards investing, where the money will grow with time.
Have a think about this just quickly: Would you be better off to take out a loan (with a high interest rate) to buy a new car which depreciates, or save $20000 slowly and invest that money? I can assure you that the person who invests will be in a far better financial situation in five years time than the person who funded the car with debt.
7. Regular saving.
Along with saving money in your emergency fund, you should also save regularly to invest. This may sound simple, and it really is. The key here is to pay yourself first. What I mean is that, most people receive their pay, they then use it to pay bills, buy groceries, spend money going out, and then save what is remaining. Have you noticed there is very little or never anything left that is remaining? Do you live from pay to pay and have nothing to show for it? Our nature as humans will always find ways to use the money coming in. Even a lot of the very wealthy people have their money problems and have little to show after all their expenses.
The real secret to wealth is not what you earn on savings and investments, but how much you can save in the first place, and when you start. The earlier you start, the more time your money has to compound in the long run. Paying yourself first is another one of those important money rules. Aim for 10% of your pay if possible, or even 5%, but start today.
8. Compound interest.
Compound interest is getting interest on your interest. When you put money into your savings account, the bank pays you interest. Say you have $100 in your account and at the end of the month, the bank pays you 10% interest. By the end of that month, you will have $110. By the end of the next month, the bank pays you 10% on $110, which is $11. You then have a total of $121. The process then continues each month. By the end of the first year, you would have approximately $2350 (and you have only saved a total of $1200 of your own money). This is the power of compound interest, described by Albert Einstein as the "eighth wonder of the world".
By doing this, banks will also see that you are saving regularly, and will more likely lend you money to buy your first house or to invest.
9. Set goals, plan, and reward yourself.
It is important to have some goals so you know what to aim for. Write your goal down. This will help you focus on it and provide inspiration if you can see yourself making progress. Some suggestions might be to start an emergency fund of $1000, or to pay yourself first and save for that holiday you want, instead of taking out a personal loan, or to reduce your mortgage.
Whatever your goals, you should have a set plan on how you intend to achieve these goals. When you reach it, reward yourself. Set a new goal and repeat the process.
10. Financial knowledge.
You may have heard in the news that there are people out there that win the jackpot in lotto, but after a few years, they have then lost it all with nothing to show. They were not able to value the money. They did not have the knowledge or financial mindset to invest. What they don't teach us in school is money management. Therefore, we should seek to learn this ourselves.
Try to read as many books on money and investing as you can. Attend seminars. Seek out a financial coach, an investor, or a financial planner. Find someone that has achieved what you want to achieve, and ask as many questions from them as you can. The sources of information are almost endless in this day and age. Wherever you find the information, aim to never stop learning.