Start by being a Billionaire.
It's an old joke. But the concept has two very important truths that you need to consider.
The First Truth: Whatever level of income you are at, if you spend more than you earn, you are not on the path to wealth. If you are a billionaire and spend your
The Second Truth: The concept of "The Rich get Richer....." is true. If you are a Billionaire, with $1 billion in the bank, overnight for one night, your money has earned $2,192. That would be $66,667. per month. In less than 14 months, your invested billion dollars will create another million dollars.
But, even without starting as a billionaire, it is very conceivable that if you focus on your goal and follow the laws of money, you WILL be a millionaire.
Things You'll Need:
- SOME startup cash
- Step 1
DEFINE what being a millionaire means to you.
A banker will consider you a millionaire if your aasets are worth more than your liabilities by a million dollars. Depending on what those assets are though, it is quite likely that they could be valued differently tomorrow.
YOU may define being a millionaire as having a bank
accountwith one million dollars of disposable income.
KNOW exactly what your goal is, and be prepared to work toward it.
- Step 2
Assess your current situation.
IF you possess Aladdin's lamp, you will likely be able to obtain your goal in no time at all.
If not, you need to assess exactly where you are, what your skill set is, and what steps you will need to accomplish your goal.
Even though I don't know your circumstances, I do know the path to get you where you want to go. If you follow these directions, you will eventually be able to reach your goal. The unknown factor is how much time it will take to get you there. Another factor, known only to you, is how much effort will you make to get here? What things will you do to accelerate yourself to the goal?
- Step 3
Make a Lot of Money!
Find a way to make money.
You need to start with something. Your basic needs: food, shelter, and clothing need to be taken care of. If you have a family, you will need to attend to their needs as well.
Obviously a job is a good way to start. There are other ways of making
money, such as selling assets or being self employed, which are all fine. The goal is to have a consistent financial income, and a job is a good place to start.
- Step 4
Find a way to Make MORE money!
Now, CONSTANTLY ASSESS! Find a way to make more money than what you do. Perhaps you need more formal education. An investment of a few years of college gives you better earning potential for your entire life. Make yourself promotable. Discover what your company wants in its management, and BE that.
Perhaps you need to have a part time job as well for a while. Perhaps you are interested in making money from your home, such as selling on Ebay.
Always keep your eyes and ears open to opportunity. But weigh each opportunity carefully. Often that opportunity can come within the same company where you work. Sometimes that opportunity needs to come in a new job or perhaps even a new career.
- Step 5
Spend a LITTLE money!
Live below your means.
Today's biggest temptation is to have it all and to have it all now. The problem is that the cost of that immediate requirement is often putting yourself deep in debt. You want to do the opposite.
My uncle grew up very poor on a 20 acre farm. He and his brothers started a small business. While his siblings were buying bigger homes and fancier cars, he lived in a modest home and focused on reinvesting his capital into his portion of the business. Ultimately he was richer by far over his brothers and ultimately had far greater assets. Simply put, it was his dedication to allowing his investments to grow over time while he lived comfortably but modestly for several years that propelled him to wealth.
- Step 6
PAY YOURSELF. Pretend it's a car payment, and pay it to yourself and invest it. Starting NOW!
Understand the concept that you have a higher potential to make more money in a venture that has more risk. Likewise, you can lose a lot more money in a venture that has more risk.
I suggest you start your portfolio of very solid (lower earning) investments. Start with 3 months salary in a savings account for family emergencies.
Progress to some solid known return items such as CDs.
There are other articules about investments. This one is about making you a millionaire.
Try to invest a minimum of 10% of your income in known return items. Let's use 8% as a return goal, and we'll assume an income of $40,000. If you wait until the end of the year to invest $4,000, you will have $4,000 at 12/31
- Step 7
CONTINUALLY INCREASE your EARNINGS and your INVESTMENT amount.
That may seem difficult but isn't as tough as it seems. If you work for the same company for years, you will most likely increase your salary annually by receiving raises. If you aren't getting consistent annual raises, you need to reasses yourself and your job.
The important thing to remember is to invest more each time you make more. This is one of the secrets to real wealth.
- Step 8
UNDERSTAND and USE the POWER of COMPOUNDING INTEREST
If you wait until the end of the year to invest $4,000, you will have $4,000 at 12/31.
If you invest $333.33/month for each of the 12 months of the same year, at year end you will have $4,149.93. That's not too impressive, but after 10 years, the numbers look like this:
$4000 invested at year end for 10 years = $ 41,221.58
$333.33/month invested for 10 years = $60,981.40
That hardly seems like it's going to make you a millionaire. But let's change just two factors, and see how you DO get there.
Let's change the number of years to 40. We'll assume you start working around 20, and can retire by 60. That means you can start at 25, retire at 65, and still obtain your million dollars.
Did you say you only wanted $1 million?
If you invested your $4,000/year annually for 40 years, you will have your $1,036,226.
If you invest your $333.33/month faithfully for 40 years, invested at 8%, you can retire with $1,163,657.64.
- Step 9
ELIMINATE your credit card debt.
That doesn't mean eliminate your credit cards. Use them often. In fact, use them for almost everything you buy. But pay them off when the bill comes in. That will build your credit.
But you don't want a lot of outstanding credit card debt, because the Power of Compounding Interest works in the favor of the credit card companies a whole lot quicker than it does for you. The amount of interest that you can earn is usually far less than what the credit card companies charge. Remember the Power of Compounding interest works both ways.
- Step 10
If you truly want to be a Millionaire, chances are you want to do it quickly. Use the SAME steps. Push them harder. Find ways to make more money. Find ways to save more money. Find ways to invest more money quicker. Each little tweaking of the formula will move your goal into site much quicker.
- Step 11
PUTTING IT ALL TOGETHER:
Start with your $40,000 salary and invest 10% (on a monthly basis, not on an annual basis.) End result: $4,149.93
Your salary increases to $44,000
Invest 10% on a monthly basis, coupled with
earnings on the $4,149.93 already saved. Result: $ 9,059.30
You're not rich yet. But after just 10 years of saving in the same manner, you would have invested $63,749 and change, and would have a cash balance of $91,320. Nice, but not a million!
After 20 years of consistent saving and investment, you would have input $229,097 and would have $439,562. Hmmm. Getting interesting!
After 26.25 years on the same course,
Input: $ 448,640.
It's a long time. But there's your million dollars. And you aren't close to retirement. If you start at 20, you will only be 46 years old
- Step 12
STAY THE COURSE:
As your investment grows, your sense of security and well being grows with it. If you enjoy your work, you'll want to keep on working. If you don't like what you are doing, you'll have enough socked away to find what you DO want to do.
But, the best advice I can give is for you to stay the course. Change jobs, fine. But life spans are getting longer. As long as you are healthy, work in happiness, and continue contributing.
If you continue the same path for the 40 years originally mentioned, you can retire with not one million dollars, but $5,122,791.
Every small change, particularly early in the game will influence your final numbers. If you can only eek out a 6% adjustment per year, you can still retire with roughly $2.5 million. If you started late, and only have 30 years to invest, you can still retire with $1,590,000.
Or, if your starting salary was only $20,000, after 40 years, you can still reach $1,261,900 with only 6% increases.
It is all about CONSISTENCY, and the POWER OF COMPOUNDING INTEREST, and TIME.