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5 habits that will make you rich

These habits helped Paula Pant, founder of AffordAnything, and attorney Kevin Ha, founder of Financial Panther, achieve their financial goals. Find out how.

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Many of us aspire to financial independence, but achieving it isn’t always possible without first changing some entrenched habits. Viewing money through a scarcity mindset and making impulse purchases, for example, can feel right when you’re short on cash — but those habits won’t boost your net worth and don’t reflect how you’d want to handle your finances if you actually attained wealth.

For ideas on how to manage money more purposefully, it’s helpful to look at the financial practices of successful people. I spoke with Kevin Ha, attorney and founder of Financial Panther, and Paula Pant, founder of, about five habits of rich people that are worth emulating.

1. Pay off debt fast

Debt can quickly take over your budget and crowd out other priorities, particularly if it’s high-interest debt that’s growing faster than your assets. Ha, who paid off $87,000 in student loans in 2.5 years, recommends people minimize borrowing if possible. “If you do have debt, don’t just play around with it,” he said. “Take action on it because it opens up your life once you have your debt gone.”

Ha acknowledges that paying off debt isn’t easy, but believes the rewards justify the effort. “You have to really work to do it,” he said, but “once you do, you just have so much more flexibility.” Being debt-free allows you to pursue goals that you couldn’t afford when paying a hefty amount of interest each month.

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2. Avoid lifestyle inflation

In order to become rich, your income has to exceed your expenses. Some people grow their income, but then increase their spending by the same amount, effectively wiping out their gains. Ha sees many recent grads make this mistake. After finishing college or grad school, they land a job, then immediately adopt a higher standard of living. Ha warns against inflating your lifestyle like this because it’s easier to maintain a modest spending level than it is to trim spending once it’s gotten out of hand. “If you’re not eating steak dinners every day, and then you start eating steak dinners, it’s hard to take that away later” when you need to make room in your budget for saving or investments, he said.

Ha believes staying humble is key to escaping the lifestyle inflation trap: “I notice that a lot of doctors and lawyers compare themselves to the other doctors and lawyers around them, and so then they start thinking, ‘I need this car,’” for example. Ha also suggests people might benefit from a reality check about how much they really need to live on. “Someone might make a hundred grand a year, and they’ll say, ‘I can’t make it on this,’” but there’s a lot of people that make 50 grand a year,” he said. “So you’ve got to keep that sense of perspective.”

3. Automate your savings

Becoming rich means continually adding to your wealth, and for Ha, the best way to do that is to automate savings. Automation helps you save consistently and takes some of the pain out of setting money aside.

“I set up different sub-savings accounts for different things I need,” Ha said. “An example is, I know I purchase a new phone every two or three years, and so I set it up so that every month I pay myself a certain amount of money to put into a phone fund. And two years from now, I have all that money saved up to buy a new phone.”

4. Create multiple income streams

Rich people generally have diversified sources of income, while someone who’s just starting to build wealth might rely on a single salary. If that’s you, “all of your income is coming from just one employer, and you’ve got all your eggs in one basket,” Pant said. “So if something goes wrong, if you lose your job or anything like that, then you’ve got 100 percent of your income coming from just one source, and that’s kind of risky.”

Pant recommends starting a side hustle, so you have some protection in case your main source of income dries up. “If you work an extra ten hours a week, you can generate an extra $1,000 a month. Not immediately; it’ll take some time. But you can make that happen,” she said.

“If you use that money to build up your savings account and then to make extra investments, that can really accelerate your financial progress in a big way,” Pant said.

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5. Decide whether you’re self-employed or an entrepreneur

To run a successful side hustle, you need to understand what kind of business you want. Pant draws a contrast between self-employed people, who are paid for their time, and entrepreneurs, who create scalable companies. (Seth Godin has popularized a similar concept with his freelancer/entrepreneur distinction.) A self-employed person might work as a dog walker, while an entrepreneur would manage a team of dog walkers or build a dog-walking app. There’s no right or wrong way to run your business, but “whichever one you choose, be intentional,” Pant said.

If your goal is self-employment, don’t get bogged down with hiring and managing other people. But if you want to be an entrepreneur, Pant said, “build something in which you are selling a product or a service. And then hire people to help build and provide that product or service, so that your role is to work on the business rather than in it.” Entrepreneurship may offer greater income potential because it expands based on your vision. Unlike with self-employment, earnings from entrepreneurship aren’t limited by what you can produce single-handedly.

For most people, reaching financial freedom is a gradual process, and none of these habits will make you rich overnight. They can, however, help you nurture your growing wealth and bring you closer to financial independence.

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Sarah Brodsky is a freelance writer covering personal finance and economics. She’s written for KeyBank, Impactivate, and Hcareers, and she has an A.B. in economics from the University of Chicago. Follow her on Twitter @sarahbrodsky.

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About Adam Weinberg

Adam Weinberg is the Brand Director for Haven Life, where he’s working hard to make life insurance easy. Adam is a creative problem solver who uses unique brand moments to create meaningful customer experiences.  Adam has more than a decade of diverse editorial, marketing, and branding experience, including work on several award-winning campaigns for various digital media companies.

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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

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Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

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