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 Come on now, admit it - you want to be a millionaire. Well, you do if you're
like the vast majority of Americans today. Why else would millions of people
throw away their hard-earned money buying lottery tickets?
Well, I have some good news and some bad news. First, the bad news: Short of
winning a huge lawsuit or making it big in the entertainment world, there is
very little chance that you or anyone else will become a millionaire overnight.
And now the good news: It is not only possible, but very likely that you
WILL become a millionaire by the time you retire - IF you haven't already
waited too late to begin and you're willing to prepare yourself by learning and
applying the principles required in order to get rich!
Here
are a few principles of wealth building that you MUST be willing to learn and
faithfully apply if you want to reach your goal of retiring with a net worth of
over $1,000,000:
- You must develop a millionaire mindset.
You'll never become a millionaire if you never learn to think like one. Let me
explain what I mean by that...
Most millionaires who aren't in sports or entertainment (in other words, those
who earned their fortunes) don't really live like they are rich.
They typically drive regular cars and shop at the same stores as everyone else.
In fact, the odds are very high that you live in the same neighborhood as at
least one millionaire and you don't even know it! That's how they got rich in
the first place, by being frugal and not living like a millionaire.
A "me too" attitude of "keeping up with the Joneses" will get you nowhere except
deep into debt. It is quite impossible to become wealthy by financing a
wealthy lifestyle. It simply cannot be done. You have to save, not
borrow in order to retire wealthy - which brings us to the second
principle of wealth building...
- You must save (invest) a portion of every dollar you earn.
I often hear people say something like "I work hard for my money so I'm going to
enjoy it!" This statement is 100% correct, but the foolish choose to enjoy it
all now without investing for the future.
The wise however set aside at least 10% of each and every paycheck with an eye
to enjoying a healthy and happy retirement. You see, we all enjoy the money we
make, we just do it at different times in our lives.
The choice is simple: Either spend all of your income now on things that likely
will never last (and worry yourself sick about meeting day-to-day expenses in the process)
or save a portion of your earnings so you can enjoy them after you quit working.
It's sad, but true that most of the people who end up barely making ends meet in
their retirement years were also miserable during their working years.
They wasted most or all of their income on frivolous things trying to live
beyond their means. Living from paycheck to paycheck is a rough life. I know, I
did it myself for several years.
The bottom line is this: You must take a MINIMUM of 10% of every paycheck and
invest it. In the next section we'll discuss exactly how you can achieve that
goal...
- Pay yourself first.
I know, it sounds like a very hard thing to do. But if you think about it it
really isn't. Suppose your boss came up to you and told you the company was
going through a rough spell and they were going to have to give everyone a 10%
pay cut in order to remain in business. Do you think you could make it if you
brought home 10% less than you do right now? Of course you could, because you
would have no choice!
Get into the habit of paying yourself 10% of your take-home pay each and every
time you get paid. Pay yourself first - before you buy groceries,
pay the rent or go out to a movie. Actually, paying yourself first is easier
than you probably think.
Many employers have an automatic payroll deduction plan where you can
instruct them to deduct a certain amount from each paycheck and deposit it
directly into a bank account, 401k plan or other savings vehicle. If your
employer offers such a plan, take advantage of it.
Most banks also offer a similar service where they will automatically transfer a
set amount from your checking account into a savings account, IRA, or money
market account.
Trust me, you probably won't even miss that 10% but it's the most powerful tool
you have in working toward retiring as a millionaire. Why? Because of the power
of compound interest!
To illustrate, let's say you're 25 years old and you make a commitment to invest
just $200/month and earn an average of 10% per year on your investment. How much
do you think you'll have at retirement (age 65)? Over $1 million!
You don't have the capacity to save $200/month? No problem! All you need to do
is...
- Increase your income.
I can hear you now: "That's easy for you to say!" Actually, it should be quite
easy for you to increase your net income by $200/month (just $50 per week). Here
are a few tips:
- Ask for a raise. If you have done a good job at work don't be afraid to ask
for a raise. You just might get it!
- Change jobs. Maybe there is another company across town that pays higher
wages than your current employer. Apply for a job with them! (But don't quit
your current job until you have the new one locked up).
- Change careers. Are you stuck in a dead-end career field with little or no
room for advancement? Go back to school and get a better paying job in a higher
paying field!
- Get a second job. Find a part-time job on the weekends or at night.
Remember, all you need is an extra $50 per week so a few hours of extra work
should do the trick. You can wash cars, baby-sit, work at the corner convenience
store...
Yes, you might need to generate more income in order grow rich and your standard of living needn't change a great deal, but...
- To build wealth you must live below your means.
In order to be able to invest for a millionaire's retirement, you must save a
minimum of 10% of your income as explained earlier. You simply cannot do this
without living below your means. Otherwise, there will be no money to
invest.
Does this mean you have to live in a run-down apartment and drive a car that
might break down at any minute? Of course not. It simply means eating out less
often, turning the thermostat down a degree or two in the winter or perhaps
driving your car an extra year or two before trading it in.
Housing costs are the largest single expense that most people are faced with, so
they also offer the greatest opportunity for cutting back. Do you really need to
live in a fancy apartment complex with a swimming pool, rec center and gated
entry?
Simply moving to a smaller (but still safe, clean and comfortable) complex with fewer amenities can save
you most or all of that $200 per month you need to retire as a millionaire -
leaving your current lifestyle pretty much intact!
Conclusion
The ability to retire as a millionaire is easily within most people's grasp if they
are young enough to take advantage of the power of compound interest. Even if
you're no longer in your 20's, you aren't out of luck! Although it will
certainly be a bit more difficult, you can still retire with a million dollars
in net assets. You simply have to find a way to invest more money each payday
than the younger folks.
Remember, everyone enjoys the money they make, but the wise among
us make sure they will be able to do so in their retirement years too!
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