Each one of us starts out with a unique set of advantages and disadvantages, but self-made millionaires are people who reach high levels of wealth without the help of a large inheritance or trust fund. Self-made individuals start from scratch and build their wealth over time, beginning first by mastering basic money skills like budgeting and moving on to saving and investing after that.

As the financial planners who work with self-made millionaires know, the money habits of the newly rich are practices that just about anyone can learn from, no matter what your financial situation when you first start out.

To get some insight into how self-made millionaires manage their money, CNBC Select asked Faron Daugs, certified financial planner, founder and CEO at Harrison Wallace Financial Group, about the financial habits his wealthiest clients all share that could apply to the average person.

For the purpose of this article, Daugs focused on only his wealthiest self-made millionaire clients who have not inherited wealth or trust funds. According to Daugs, these clients have an average net worth around $6 to $8 million and range in age from 40 to 55 years old.

“These are individuals and couples that started with little,” Daugs tells CNBC Select. “Some worked right out of high school to start their careers and worked their way up, and some graduated college with $50 in their checking account.”

No matter how Daugs’ clients started, they all use the below 10 habits to help them grow and maintain their wealth. These practices take time and discipline, so Daugs’ suggests getting started with one or two now and incorporating the others as your money skills improve.

Here are the 10 habits that Daugs’ wealthiest self-made millionaire clients have incorporated into their financial life that you can, too.

1. They avoid debt

This may seem obvious, but dodging any debt is certainly a habit that can help your overall financial picture. Outside of the mortgages on their home, Daugs says that his clients make sure to reduce and eliminate all debt.

“If you want to build wealth, you cannot waste money on paying interest on consumer credit, such as credit cards and even car loans,” Daugs says.

Because most credit cards charge notoriously high interest whenever you carry a balance, prioritize paying these balances off in full every month (and on time to keep a good credit score). Only charge what you know you can pay off and avoid store credit cards in general. (They are known for having low credit limits, high interest rates and limited usability.)

2. They buy their cars, and plan to keep them long-term

For the most part, cars depreciate in value the second you drive one off the lot.

Daugs says his self-made millionaire clients typically buy, instead of lease, any new car with plans to hold onto it for a while. By keeping their cars long-term, they can use the time between car purchases to save up cash that would otherwise go towards a monthly payment.

“If you need to finance the car, pay it off as soon as you can and plan to keep the car long after that loan is paid off,” Daugs says.

3. They have emergency funds

Having a solid reserve of cash that you can tap into in an emergency goes a long way. If you have an unexpected expense, such as an urgent car repair or medical bills, a rainy-day fund that is immediately available for withdrawals can help you afford it. This way, you don’t need to charge the expense onto a high-interest credit card or take out a personal loan.

Most of Daugs’ clients have six to nine months of their monthly expenses set aside (financial experts generally suggest three to six months’ worth of your living expenses as a baseline), but you should do what works for your cash flow. And, know that any amount will help. “This is one of the first steps someone should do in building a solid financial foundation,” Daugs says.

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4. They invest

Once building up an emergency fund, Daugs says his clients have organized investment plans, whether its in stocks, bonds or exchange-traded funds (ETFs).

He suggests setting up a monthly or bi-monthly automatic transfer of cash from your checking account into an investment account. This way, you can forget about having to remember to manually invest and you can then learn to live on the funds you have available.

“Most of my clients do not miss having that money in their ‘cash flow’ and then they can use those invested savings for future car purchases, vacations or other short- or long-term goals, without incurring additional debt,” Daugs says.

As a general rule of thumb, you should save at least roughly 20% of your income each month, and Daugs agrees. This 20% goes toward your savings plans, emergency fund, retirement and investments. How much you take out of your paycheck to invest depends heavily on your income and investment goals, but getting used to living without that 20% is a good start for both your savings and you investments.

Before you invest, make sure you know how much risk you can take on and the time frame for when you’ll need the money. If you are in your 20s or 30s saving up for retirement, you can generally take on a little more risk in exchange for aggressive yields because you won’t need your money for several decades if you plan to retire in your early 60s. For those in their 40s or 50s, their investment time frame for retiring is much shorter. Therefore, they are generally more reluctant to take on risk so to better protect their money.

5. They take advantage of everything their employer has to offer

It’s worth looking over your employer’s benefit plans thoroughly. Companies offer more than just retirement plans that can help you save money and even invest to earn more.

Leveraging some of the below benefits can be helpful to you, just as it is for Daugs’ clients.

  • Employer retirement match: If you can afford to do so, make sure you are contributing enough to match any employer contributions. “The match is basically ‘free’ money to you,” Daugs says.
  • Employer life or disability insurance: Your employer’s group plans can offer significant savings versus buying these insurance policies individually.
  • Employer Health Savings Account (HSA): If you qualify for a HSA, some employers will match your contributions up to a certain amount. Your contributions are tax-deferred.
  • Employer legal services: See if your employer plan offers legal services. If you ever need to have estate planning documents prepared, such as wills or trusts, you can save money in attorney fees if you use the legal services offered in your benefits plan.
  • Employee Stock Purchase Plans (ESPP): If your employer offers ESPP, you can typically put up to a certain percentage of your pay into this plan that then allows you to purchase the company stock at a discount to the market price. “If you feel good about your company and their stock, this can be another cost-effective way of investing to continue to build your net worth,” Daugs says.

6. They don’t try to keep up with the Joneses

Keeping up with “the Joneses” is a typical way people dig themselves into debt. But living beyond your means time and time again eventually catches up to you.

When building wealth, like with Daugs’ clients, “fight the need to have the latest and greatest gadgets,” he says. “So much money is wasted on constant ‘upgrades’ these days and can cost you both money and lost opportunity.”

It’s only human to want to compare your life to others, but take another look at your lifestyle and budget, focusing on what’s most important for your own personal goals. These are your needs and wants that truly matter to your bottom line and happiness.

7. They utilize tax deductions

When they can, Daugs’ clients try to minimize the taxes they pay. This includes finding some element of tax savings in everything from retirement plan investments, to home mortgage interest, charitable contributions, college funding and health savings accounts.

“Make sure you are participating in the plans and programs that can have multiple benefits,” Daugs says. “This is an area where it is helpful to consult a financial and tax professional.”

8. They look for other income streams

Many of Daugs’ clients diversify their investment portfolios with other assets, such as rental properties that provide passive income.

It’s likely that the average person doesn’t own multiple properties, but there are other rental opportunities that provide another source of passive income with little effort on your part. Some ideas include renting out a room in your house/apartment or renting out your car while you work.

9. They start saving for their kids’ college early on

College savings plans, like a 529 plan, help Daugs’ clients kick-start their children’s future education early so they have less of a financial burden years later.

But the long-term benefits don’t stop just there. These plans also allow tax-free withdrawals when you take out money to pay for college.

“By getting started early, you can save a significant amount of money in future cash flow and tax savings,” Daugs says. “It does not take a lot to get started, but the power of compound returns can be so beneficial to you if you have time.”

Earn cash back on your spending for your kid’s college fund by signing up for a credit card like the Upromise® Mastercard®. Cardholders earn 1.25% cash back on every qualifying purchase and can link their card to an eligible 529 College Savings Plan to potentially earn 15% more on their deposits.

10. They seek advice

Lastly, Daugs’ clients make a habit of being well-informed about their money. They have a basic understanding of their earnings, what they own and how much their investments cost.

For many people, saving and investing money can certainly be intimidating and confusing. Luckily, there are plenty of free online resources to help guide you. Between finance apps like Mint and YouTube channels like “Rule One Investing,” you can access this educational content on the go or from the comfort of your own home.

And if you are seeking someone to speak to one-on-one, such as a financial advisor, make a point to ask about the fees they charge. They should be able to be transparent about what their services cost, as well as clear on explaining your money and investments to you. “Your advisor should be both a partner and educator for you,” Daugs says.

Bottom line

As you can see from Daugs’ 10 habits of his wealthiest self-made millionaire clients, there are a lot of moving pieces to having a solid financial plan. Embracing opportunities to pay off debt, save, invest and learn, all while avoiding potential pitfalls, make a big difference on your ability to build your wealth.

“My self-made millionaires started by reducing their debts to increase cash flow and build their ‘rainy day fund,’” Daugs says. Once these were in place, they were then able to incorporate the other investment habits and really grow their assets.

No matter how simple or obvious a money habit may be, the point is that you stick to it. “Discipline is key and with it you can build the financial future you desire,” he says.


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