Theresa Worrell: Rich habits Poor habits Episode 49

Tom Corley spent years studying the difference between the habits of our country’s rich and poor, questioning hundreds of individuals.

On the rich side, these were people with annual gross income north of $160,000 and net liquid assets of $3.2 million or more

Some of the differences between rich and poor are obvious, while others are a little more surprising.

Here are the most important Rich Habits you can take up to reach and maintain your wealth potential:

1. Live within your means.

Wealthy people avoid overspending by paying their future selves first. money savings

They save 20 percent of their net income and live on the remaining 80 percent.

Among those who are struggling financially, almost all are living above their means.

They spend more than they earn, and their debt is overwhelming them.

If you want to end your financial struggles, you need to make a habit of saving and budgeting what you spend.

Here are some sensible ways to budget your monthly net pay:

Spend no more than 25 percent on housing, no matter if you own or rent.
Spend no more than 15 percent on food.
Limit entertainment—bars, movies, miniature golf, whatever—to no more than 10 percent of your spending. Vacations should account for no more than 5 percent of your annual net pay.
Spend no more than 5 percent on auto loans, and never lease. Ninety-four percent of the wealthy buy instead of leasing. These folks keep their cars until the wheels fall off, taking great care along the way so that they save money in the long run.
Stay away from accumulating credit card debt. If you are doing this, it’s a clear sign that you need to cut back somewhere.
Think of savings and investments as two completely different things. You should never lose money on your savings. Try to stash six months of living expenses in an emergency fund in case you lose your job or your business goes belly-up.
Contribute as much as you can afford to a retirement plan. If you work for a company that matches your contributions up to a certain percentage, great. Always take that free money when you can get it.

2. Don’t gamble.

Talk about a sucker bet: Every week, 77 percent of those who struggle financially play the lottery.

Hardly anyone who is wealthy plays the numbers.

Wealthy people do not rely on random good luck for their wealth.

They create their own good luck.

If you still want to bet after knowing the risk, use money from your entertainment budget.

3. Read every day

Reading information that will increase your knowledge about your business or career will make you more valuable to colleagues, customers or clients.

Among wealthy people, 88 percent read 30 minutes or more every day.

Just as important, they make good use of their reading time:

63 percent listen to audiobooks during their commute.
79 percent read educational career-related material.
55 percent read for personal development.
58 percent read biographies of successful people.
94 percent read current events.
51 percent read about history.
11 percent—only 11 percent—read purely for entertainment purposes.

The reason successful people read is to improve themselves.

This separates them from the competition. By increasing their knowledge, they are able to see more opportunities, which translate into more money.

Comparatively speaking, only one in 50 of those struggling financially engages in this daily self-improvement reading, and as a result the poor don’t grow professionally and are among the first to be fired or downsized.

4. Forget the boob tube and spend less time surfing the Internet

How much of your valuable time do you lose parked in front of a screen? Social media buttons on keyboard

Two-thirds of wealthy people watch less than an hour of TV a day and almost that many—63 percent—spend less than an hour a day on the Internet unless it is job-related.

Instead, these successful people use their free time engaged in personal development, networking, volunteering, working side jobs or side businesses, or pursuing some goal that will lead to rewards down the road.

But 77 percent of those struggling financially spend an hour or more a day watching TV, and 74 percent spend an hour or more a day using the Internet recreationally.