Simple Financial Habits to Help Build Wealth

Building wealth isn’t just winning the lottery or getting a surprise inheritance. Wealth can also come little by little when you follow some simple financial habits, like setting up an automatic transfer so you save before you spend, keeping your expenses steady even when your income grows and staying invested when the market feels shaky.

Good financial habits are small actions you can take consistently to manage your money so you can achieve your goals. These small steps add up over time and can create more wealth than waiting for a one-time windfall. People who build lasting wealth know which financial habits matter and stick with them. 

Let’s go over some of the most important financial habits you can add to your everyday routine that can help you stay on track to build your wealth.

• Basic financial habits 
• Advanced financial habits
• Year-round checklist of financial habits
• Bad money habits to avoid
• How to stick to good financial habits

Cover your bases: Basic healthy financial habits

Before getting into advanced wealth-building strategies, make sure you have the fundamentals covered. These are the most basic money habits that create a solid financial foundation. Review this list to confirm you’re already doing all of these.

Live within your means

When you spend less than you earn, you’ll see your wealth start to grow.

Budget and track expenses

A budget shows you where your money goes so you can make informed choices. Track your spending for a month to spot any areas where money is slipping away and not adding value. Use simple categories, like housing, food, transportation, investments and discretionary spending. Review your budget monthly and adjust as needed.

Set clear financial goals

Be specific, like “max out my retirement account contribution this year” or “reach a $100,000 net worth by age 35.” This will help you make decisions that move you closer to your financial goals. 

Use automatic payments and deposits

Set up automatic transfers from your paycheck to your savings and investment accounts. Schedule recurring bill payments so you never miss a due date. 

Build an emergency fund

Aim for 3-6 months of your essential living expenses in an emergency savings account. This fund can give you financial security and keep you from derailing your long-term financial plans when unexpected expenses arise.

Manage debt wisely

Focus on paying off high-interest debt first using either the “avalanche” or “snowball” methods. Once you knock out some debt, you can redirect those regular payments toward your wealth-building investments.

Protect your credit health

A good credit score can give you better options when you need to borrow money via a loan or some other means. Check your credit report annually to catch any errors, keep your credit card balances below 30% of your limit and always pay your bills on time.

Invest early and consistently

The earlier you start investing, the more time your money has to grow through compound returns. Set up automatic contributions to your retirement and investment accounts. Consistency matters more than timing the market.

Beyond the basics: Add these financial habits to build wealth

You’ve got the foundational habits covered. Now, let’s talk about the habits that can accelerate your wealth building. These strategies will require more attention and fine-tuning, but the power of compounding will start to show up in bigger ways.

Keep tabs on your risk tolerance

Your comfort with investment risk shifts as your life changes. Check in with yourself once a year. Is your portfolio risk aligned with your tolerance and your timeline? As you get closer to needing your money, you can gradually shift toward more conservative investments.

Adjust your investment amounts

When your income increases, boost your investment contributions before your lifestyle has a chance to expand. Those extra contributions can compound over time to produce real wealth. Your future self will thank you!

Avoid lifestyle creep

When your income goes up, make a plan for how you’ll use that extra money. You might put half toward investments, another portion toward savings or paying off debt and leave a little for fun. This lets you enjoy the reward without losing sight of your long-term goals. 

Minimize the fees you pay

Review what you’re paying annually on investment management fees, fund expense ratios, banking fees and advisory fees. Look for low-cost index funds with low expense ratios—under 0.20% is ideal. The money you save in fees can stay invested and compound over time.

Diversify your income streams

Find ways to add income streams, like rental income, dividends from investments, a side business or freelance work. Multiple income streams provide extra money you can use to accelerate your wealth-building.

Rebalance your portfolio

Over time, some investments grow faster than others, which can throw off your portfolio mix. Rebalancing means adjusting back to your target by selling some winners and buying more of some underperformers. Most people do this once or twice a year to stay on track.

Have a tax strategy

The more you can save on taxes, the more money you’ll have working toward your wealth-building future. Max out tax-advantaged accounts like a Thrift Savings Plan (TSP), a 401(k) and Individual Retirement Accounts (IRAs). Consider whether traditional IRA or Roth IRA accounts fit your goals, and learn how strategies like tax-loss harvesting could offset gains. 

Stay calm during market volatility

It’s normal for the stock market to go up and down. When you see your portfolio value drop, resist the urge to check it constantly or make emotional decisions. Stick to your long-term financial plan and keep making your regular contributions.

Your year-round checklist to wealth-building financial habits

You don’t need to do everything at once. Some habits work best as daily routines, while others need attention only once a year. Here’s how to organize your wealth-building habits by frequency so you can fit them into your life.

Avoid these 4 bad money habits

Even with solid wealth-building habits in place, certain behaviors can undermine your progress. Watch out for these common traps:

1. Trying to time the market. Don’t jump in and out of investments based on predictions about what the market might do next. You’ll often miss the best market days, pay more in taxes and likely end up with lower returns than if you had just stayed invested.
2. Keeping up with others’ spending. Comparing yourself with what others have can lead you to spend money on things that don’t align with your actual goals. Focus on your own path.
3. Ignoring small recurring charges. That $10 monthly subscription you forgot about costs $120 a year! Several of those kinds of forgotten expenses can add up fast. Review your recurring charges every few months and cut what you’re not actively using.
4. Making emotional financial decisions. You might panic and sell during a market drop or make a major purchase when you’re stressed. Sleep on big decisions and make them when you’re thinking clearly.

How to stick with your new financial habits

Knowing what to do is one thing. Actually doing it consistently is another! Here’s what you can do to make these wealth-building money habits stick.

Start small

Don’t try to implement every habit listed here at once. Pick 2 or 3 that will have the biggest impact on your personal finances and build from there. Once those habits feel automatic, add another one.

Automate what you can

The less you need to think about good financial behavior, the more likely it will happen. Set up automatic transfers, automatic bill pay and automatic investment contributions and let them run in the background.

Track your progress

Keep a log of your net worth, your savings rate or your debt payoff progress. Seeing the numbers move in the right direction will reinforce why you’re sticking to these habits. Celebrate your milestones along the way for extra motivation.

Adjust when life changes

Your habits should evolve with your life. If you get a new job, have a baby or move to a new city, revisit your financial habits and adjust them to fit your new situation. Being flexible helps you stick with your wealth-building plan.

Improve your financial well-being with Navy Federal Credit Union

Building wealth takes consistent action over time, and we’re here to support you at every stage of this exciting journey. Continue to educate yourself about financial topics like savings, budgeting and investing with our MakingCents resources. 

When you’re ready to take the next step, contact our investment services team to discuss your wealth-building goals. Our financial professionals can help you create a personalized financial plan and investment strategy that matches your goals and risk tolerance. You can also explore our investment options to see how we can help your money work harder for you.