Based on the book that I read entitled “The Millionaire Next Door” in which the authors conducted a study on how millionaires live, we can deduce what these millionaires undertook to achieve their “millionaire” status. And I will summarize it together will all the lessons I learned on how to become a millionaire.
MILLIONAIRES ARE FRUGAL INDIVIDUALS:
Millionaires know how to pay themselves first. If you are an employee like me, the first thing you should do is to pay yourself first whenever you received your paycheck. Set aside enough savings first before you spend the rest. Use the equation INCOME minus SAVINGS equals EXPENSES.
A good way to know how much you should save is by using the universal rule called Pareto’s Principle of 80/20. In business, you must put most of your efforts on the 20% that bring in 80% of the income. In saving, 80% of your savings come from 20% of your frugal living. In other words, you should live within 80% of your income and set aside at least 20% of your salary every payday.
Millionaires live below their means. Most millionaires are not fund of showing their wealth by living a lavish lifestyle. We are oftentimes compelled by media to live extravagant because that’s how media portrays how millionaire lives – large houses, luxurious cars, expensive jewelries, etc.
However, a lot of millionaires are simple. They wear simple clothes, live in a simple house, drives simple car and yet you will know they are already a millionaire by examining their bank accounts, their stock portfolio and other investments.
Millionaires know how to budget. One way to live below your means is to budget your income. You should assign every peso for each of your expenses every month after taking out your savings from your income.
MILLIONAIRES ARE FINANCIALLY LITERATE:
Millionaires know how to invest. The first thing to be financially literate is for you to know that the value of money depreciates over time because of inflation. And that is why you need invest. You need to let your money work for you because you worked hard to earn it. You should know how to read numbers and to understand some basic accounting terms.
Millionaires are familiar with the terms active income and passive income. You should have a lot of income streams. If you lose one, then there could be other streams that can support you. You should not just put all your nest eggs in one basket but in a diversified portfolio that may probably contains stocks, bonds, real estate, and other investment vehicles. Educate yourself with these types of investments and how these investments provide returns for you and what are the associated risks involved.
Millionaires start early. You should be informed that time is essence in becoming a millionaire. It’s not a quick-reach step on top of a ladder but it involves a lot of time. It’s not an overnight success.
MILLIONAIRES ARE DETERMINED TO BECOME MILLIONAIRES:
Millionaires have goals. You should start with a goal. It will serve as your target and gives direction to your actions. There will be a lot of temptations out there that can sway you away towards reaching your goals but it’s just a test of how determined you are. You must possess the drive and the will power to overcome these challenges. You should have the discipline to achieve success. Overcome your fears. Believe in yourself that you can become a millionaire! You can do it!
Millionaires have mentors. You should get yourself a mentor. He will serve as your guide to become a millionaire. He might not be physically present all the time to teach. You can buy his works of art like books in which he shared all the things that he went through in order to achieve his millionaire status.
Mingle with the same people who have the same mindset as yours. Learn from each other. Create value to each other. Surround yourself with positive people, people who can help you and teach you to reach your goals to become a millionaire. Read books that inspire you, that keeps your drive in flame.
Overall these are the collective thoughts I knew on how to become a millionaire. But I can summarize all these in one line - EARN MORE and DESIRE LESS
Are you ready to become a millionaire? Are you a millionaire in the making?
I would suggest to read on the following articles to increase your financial intelligence and to become the millionaire that you’ve been dreaming to be.
1. What Makes Rich Gets Richer?
2. Secrets of the Rich: Active Income vs. Passive Income
3. Rich Dad Poor Dad and Cashflow Quadrant
4. Cashflow 101 Egame
5. Game of Money - 4 Quarters of Life
6. Singapore’s Youngest Millionaire
7. Frugal Ideas on Your Water and Electric Bills
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