I grew up resenting rich people. Since I lived in a working-class household, they had a lot more money than money. But looking back, that resentment was actually jealousy in disguise.
I wanted to be like rich people. Of course, the chances of making a million dollars are slim. But I wanted the freedom that comes with being “rich.” The type of freedom that enables you to wake up every day with a smile on your face, knowing you can do pretty much anything you want.
So, I studied the financial habits of wealthy people for a few hours each day. And slowly but surely, I began to see consistent patterns in their spending, saving, and investment habits.
Adopting the habits of the 1% changed my life around. My income is much higher. My expenses are lower. And, of course, my entire financial situation has massively improved over the past few years.
If you want to do the same, here are several things you can do:
Take Advantage Of Tax Benefits And Deductions
Imagine you’re playing a game with the IRS. Chances are, you’ll want to identify ways to increase your probability of winning. Or, at the very least, it would be a good idea to know how the game works.
Taxes are similar. If you understand the local tax code and the various legal deductions, it’ll quickly become much easier to reduce your annual tax bill. For example, here’s how Graham Stephan purchased a Tesla for $78 per month:
- He got a Tesla Model 3. However, he managed to get 100% financing at a 3.75 APR for 72 months. This meant that he had to pay $4,437 in taxes and fees. Plus, he also had to pay $640 per month (or $7680 per year) for the actual car. That puts the total cost of his Tesla at $12,117 per year.
- Even though Graham pays that amount out of pocket, he will receive a $2500 electric vehicle tax rebate from California. He’s also eligible for a $3,750 tax credit. That brings the net cost of a Tesla down to $5867 per year.
- Since Graham purchased the car for business use, he can write off $1,438 in loan interest. He’s also able to write off the $4,437 in taxes, registration, and fees. Plus, he can depreciate the value of the car by $8,200 in the first year. In total, that’s a $14,075 write-off, or $4,925 in tax savings.
- The net cost ($5867) minus the tax savings ($4,925) means that the total cost of buying a Tesla is $942 per year (or approximately $78 per month).
Study the tax code and identify where you can make (legal) deductions and where you can’t. It’s also worth looking into the various tax rebates that you might be eligible for. Chances are, you’ll be able to save a little bit of money on your tax bill each year.
Adjust Your Lifestyle To Live Within Your Means
If you want to improve your financial situation, it’s essential to spend less than you earn. Quoting an article published by CNBC:
“Creating and sticking with a budget will help you avoid overspending and impulse purchases. Tracking how much money you have coming in and going out on a monthly basis is something that needs to be reviewed often. This allows you to know how much money is left after the fixed expenses are paid. This surplus amount of money is how you get out of the continuous cycle of living paycheck to paycheck. It’s how you can start to build wealth.”
I create a budget every month and review my bank statements. Although it only takes a few minutes, the impact it has on my finances is profound. Because if I’m overspending in a specific area, this strategy enables me to recognize that I need to reduce my expenses.
Consider doing the same. Write a list of your monthly expenses and then compare it to your income. The aim is to get your costs as low as possible. In doing so, you’ll eventually escape the perpetual cycle of living paycheck to paycheck.
Like you, I want to get ahead with my finances and live an incredible life that’s full of prosperity. So when I began implementing the above financial habits, I quickly found myself having a lot more money in my bank account than ever before.
Of course, you’re not going to become wealthy overnight. I’d be lying to you if I said that would happen. But if you continually put one foot in front of the other, you’ll inevitably make a lot of progress over time.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.
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