Many would love to live the millionaire lifestyle. Spending each day at the beach, on the golf course, or in exotic resorts around the world. Each night would be parties and galas. Perhaps a random trip to the office to check on things and grab some cash from the safe.
Sadly, that is not the normal lifestyle of the typical millionaire. As chronicled in The Millionaire Next Door, the flashy lifestyles seen are those of people who have a large income, but probably would be on the streets within six months of losing that income. Most millionaires work a lot harder than most other people. They forego a flashy lifestyle, instead saving religiously and judiciously buying things that will increase in value rather than drop.
(Never read The Millionaire Next Door? It is a must for anyone wanting to actually become a millionaire.)
Millionaires could afford to buy new cars every few years, but they choose not to because they know they are a wasting asset. Likewise they could buy big, flashy mansions in new subdivisions, but instead they chose to buy modest houses in older neighborhoods since they cost less to maintain and the rate of appreciation for the neighborhood can be judged from its history. Whenever they make a big purchase, it is something that will grow in value such as fine furniture, works of art, or properties. They minimize the amount of money they put into things that go down in value (such as cars).Millionaires also tend to own their own businesses. It is much easier to become wealthy when doing something that allows each of your hours spent at work to be multiplied. For example, if you work for someone, you may get paid $30 per hour. You can earn more by working more hours, but you still only get $30 per hour. If you work for yourself and use the time to design and market a product, you can get paid each time someone then buys the product. If you write a novel, you get paid each time someone buys a copy of the novel. If you own a movie theater, you get paid more if more customers attend the movies and buy popcorn.
Having people working for you also multiplies your time since for each hour you spend supervising, several other people are working to increase the money your business earns. If you hire effective people and manage well (eventually hiring other effective managers), the more people who work for you the more money you can make for each hour of your time. Note that even doctors and lawyers don’t make a lot of money because of their salaries. They make a lot of money because most of them own a practice or are partners in a law firm with people working under them. They are business owners.
So, if you wish to become a millionaire, here are some tips:
1) Spend less than you make, and religiously put money away into assets – things that grow in value and eventually provide an income. Note that investing in your own business can be an asset.
2) Start your own business, or find something to do that multiplies the value of your time. This is a tough step for many to take and requires a certain type of personality, but it definitely makes becoming rich a lot easier.
3) Cut down on expenses and payments as much as possible – it is easier to invest and save if you do not have every dollar spoken for before you earn it.
4) Live below your means. Have a smaller house, older cars, and take less exotic vacations than your level of wealth and income will allow.
5) Make smart purchasing choices. Bring in drinks from home rather than hitting the vending machine every day. Bring a lunch in rather than eating out all the time. When you do eat out, have a water and save $2.50 plus taxes per meal.
(Save money by bringing your own water bottle and skipping the vending machines. Shown: CamelBak Eddy Water Bottle, 0.75-Liter, Cardinal.)
6) Plan your success. Don’t simply hope your investments will grow. Make a budget, plan how much you will invest each month, then stick to that plan. Good luck generally comes to those who have set themselves up for success.
7) Work hard. Whether you own your own business or work for someone else, you can plan on working harder than most other people if you want to become wealthy. Additional money earned generally is available for investments since other expenses have been taken care of.
8.) Hire people to perform tasks you are not skilled at doing. Most millionaires would not work on their own cars, repair their own sinks, or cut their own grass unless it was a leisure activity for them. Millionaires would rather spend the time doing what they do best or with their families than doing tasks that they can hire someone to do who will do a better, faster job. If you will take 8 hours to fix a sink and could make $400 in those eight hours at work, it makes sense to hire a plumber at $150 and instead work the extra hours. Even if it only takes him 1 hour because of his experience and tools, you come out ahead.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.