The Motley Fool

Retirement saving: five habits of millionaire investors

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Couple relaxing on a beach in front of a sunset
Image source: Getty Images.

I’ve always found it bizarre that we tend to learn a whole lot of things at school that realistically, most of us will never use in real life… ever. At the same time, the education system often seems to neglect fundamental real-world topics, such as money management. This is an essential topic that almost every single one of us needs to have a basic knowledge of, yet it’s very rarely taught. And they wonder why people are reaching retirement age with minimal savings?

If you feel you’re lacking financial intelligence, don’t despair. Today, I’m looking at five habits of highly-effective investors that could help you get into top financial shape and potentially retire with a large savings pot.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Spend less than you earn

It all starts here. If you’re spending more than you earn, you may never achieve financial independence. It’s a downward spiral. Buying things on a credit card and paying interest on your debt can get ugly fast. It’s not a good place to be financially and can lead to high levels of stress. So be disciplined and ensure you spend less than you earn.

Save first, spend later

Without a doubt, the easiest way of saving money is to pay yourself first. In other words, as soon as you receive your pay cheque, allocate an amount to savings, before looking at your expenses. Even if it’s just a small amount like £50 a month, that’s better than nothing. It will add up over time and you probably won’t miss it.

Emergency fund

Once you’re putting money aside, the first thing to do is to build an ‘emergency’ fund. This is money that is easily accessible and that can be used for emergencies such as unexpected bills, or an unfortunate situation such as losing your job. Ideally, this should be around three months’ wages. Knowing that you could easily cover something like an unexpected medical bill or urgent house repair will provide great peace of mind.

Set an asset allocation

Once your emergency fund is in place, it’s time to look at investing your money for the future. That way, by the time you get to retirement age, you’ll have enough savings to live comfortably.

One of the first steps here is assessing your risk-tolerance and developing an asset allocation. In layman’s terms, this means working out how comfortable you are with risk (your investments fluctuating in value) and what percentage of your money you want in different assets such as shares and bonds.

If you’re unsure about this, don’t be afraid to speak to an expert. After all, it’s your future at stake here. It’s very important to get this step right as your asset allocation can have a large impact on your wealth over time.

Minimise taxes 

Lastly, when investing, you want to make sure you’re minimising taxes. To do this, look at tax-efficient products such as the ISA. In this type of account, any gains you make are tax-free. Paying minimal tax on your investments can have a powerful effect on your wealth in the long run.

If your financial habits have been poor in the past, it could be time for an overhaul. Implement the financial habits above and you’ll give yourself a great chance of achieving financial freedom.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.