How to Become a Millionaire (How to Become Rich)
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Yeah, yeah, a million dollars ain't what it used to be. But it's more than 90%+ of all U.S. households have. So who wouldn't want to be a millionaire?
This article from Money Central is written by a millionaire and in it she shares her tips on how to become a millionaire. The key tips:
* Make financial security a priority.
* Spend less than you earn.
* Save and invest regularly.
* Pay down debt.
* Own a home.
Good, simple, basic, effective tips. I'll come back to these in a minute, but let's first review a few other tidbits from the piece:
* If you haven't got a plan, it's way too easy to lose your way: spending money on stuff that isn't important, taking on debt that's toxic rather than helpful, giving in to despair when markets turn against you. Having a long-term goal, and a long-term view, are essential to keeping your balance.
* I bless my Depression-era mother, who grew up poor, knew how to pinch a penny and put a high priority on savings. She understood the importance of "paying yourself first," so from my first job I've been in the habit of saving at least 10%, and often 20%, of my gross pay. She taught me to use credit cards as a convenience, not an excuse to buy stuff I couldn't afford. She viewed people who carried credit card balances with the same suspicion and displeasure with which she regarded people who didn't keep a tidy house.
* Again, automated investing plans really help. We invest regardless of whether the market is up, down or sideways. We know that, in the long run, a well-diversified portfolio of stocks beats out every other investment, even if there are some bumpy times along the way.
* Another key: Don't cash out your 401(k) when you leave a job. About half of all workers do, and that's nuts. It's not just the taxes and penalties that eat up a quarter to a half of your withdrawal. More importantly, every $1,000 cash-out costs you $10,000 or more in future retirement income. So roll the money over into an IRA or your next employer's plan.
* But it does mean you should avoid high-rate debt and be cautious about your total debt load. Keeping your housing expenses to 25% of your gross pay, for example, will help ensure you've got enough left over to fund your other goals and have some fun once in awhile.
* Despite the ups and downs, owning a home has long been the cornerstone for wealth for most people. Consider that the median net worth of all homeowners in America in 2004 was $184,400. For renters, it was $4,000. Among the richest 10% of households, 96.9% are homeowners, compared with 69.1% of all households.
* We’ve discovered (duh) that it's easier to meet your goals, and have money for fun, if your income is rising. So we've invested in education, launched our own businesses and looked for new ways to generate cash. In today's ever-changing economy, you have to be ready to learn new skills and take new directions.
* Finally, and maybe most importantly: My husband and I don't live just for tomorrow. Our long-term goals are important to us, but we also want to enjoy life today. The fattest bank account in the world wouldn't be worthwhile to us if we didn't have a chance to enjoy each other, our daughter and our lives. So we appreciate the financial mileposts when we achieve them, but we know there's more -- a lot more --to life than money.
Just an excellent, excellent, excellent article all the way around. All this, and she also recommends two of my all-time favorite finance books -- The Millionaire Next Door and The Automatic Millionaire. What's not to love??!!
If you've been reading Free Money Finance for more than two seconds, you know how I talk about these issues on a regular basis. Here are some links that provide additional thoughts on what the article has highlighted:
Have a Financial Plan
* Pretend It's Not a Budget: How to Create a 'Spending Plan' You Can Stick To
* MND: Why do Millionaires have Budgets?
* MND: Have a Budget
Spend Less than You Earn
* How You Can Become Wealthy
* Even the Rich Need to Spend Less than They Earn
* It's Not What You Make, It's What You Spend, Part 3
Save and Invest Regularly
* Why I Like Index Funds
* Poverty to Prosperity
* The 15 Minute Investment Portfolio
Pay Down Debt
* 7 Credit Card Trends that Can Cost You
* Yes, You Can Erase 15 Years of Debt in 14 Months
* Get Out of Debt, Part 1
Own a Home
* My Formula for Buying a House
* Why Homeowners Get Rich and Renters Stay Poor
* Increase Your Home's Value with Cheap Landscaping Tricks
Importance of Education
* Sell College to Your Kids
* The Value of an Education
* Facts on Education (and the Value of It)
Other Topics Mentioned
* The Richest Man in Babylon, Keep Part of All You Earn
* Don't Kill Your Retirement Fund When You Change Jobs
* Maximizing Your Greatest Asset: Why Your Career is So Important
Thursday, August 7, 2008
Let me present some rationalities on How to Become Rich:
1. MAKE FINANCIAL SECURITY A PRIORITY. The best way to insure financial security is by availing ourselves or our businesses with insurance. Insurance is an institution that would share the financial risk of ones company during times of fortuitous or force majeur events. Fire, life, accident, retirement, old age and disability insurance are geared towards providing cash and income to those who can no longer be productive. Save for the rainy days, follow the ways of the ants - store your grains during summer for the winter days to come. Another way of having financial security is to buy properties having capital gains and develop it. Touch the interest and the fruits of the capital gains but never touch or withdraw its original capital or investment. Develop and teal the land for productive and agricultural gains but never sell the land itself for financial security. Another concept of financial security is to prepare a will while a person is still alive, it will provide a better management of ones property if he dies. Create multiple streams of income including passive ones to ensure regular incomes from many sources. Depending in one form of source to earn an income is debilitating and risky.
2. SPEND LESS THAN YOU EARN. This means earn more than you spend. Millionaires are people who are bigger than their financial problems, it means living within your means and saving a portion of what you earn to afford a haven for investment in the future. As your income increases your standard of living must remain the same is one of the surest path to being rich and millionaire. Buy things that will meet your needs rather than your wants. Self gratification in buying things that we desire and want is the only way to poverty.
3. SAVE AND INVEST REGULARY. Remember the three legged stool for one to become rich - earn money, save it and invest in high yield instruments like time deposits, demand drafts, treasury bills, stocks, bonds, mutual funds and marketable securities. He who saves and puts value into his money for future investment purposes will become rich. Make it a habit to save, save, and save regularly then diversify the investment to minimize risk will make a person financially independent and successful in business. Meet your obligations and pay first all fixed expenses and minimize payments to variable expenses. Variable expenses are expenses which could be controlled like public relations overheads, even city services could be controlled, lights off to all electrical appliances when not using to control so much payment for electricity. Do not leave leaky faucets unrepaired to avoid over payments to water services.
4. PAY DOWN DEBT. Make money your slave and not your master is the best advice. Do not borrow money since borrowed money becomes our master rather than our slaves. One of the best sign of successful business is when we can meet our financial obligations promptly whether it will be by the millions of dollars or otherwise. Pay down debt and if possible totally eliminate it. Buy goods in cash basis, it is lot more cheaper and cash discounts or rebates are always given when payments are made through cash. You cannot serve two masters at one time as what the Bible says. You cannot be the slave of money at the same time be the master's of it. Borrow money with a considerable risk taken into consideration and pay the obligations on time. We become the master of money if we can let it work for us, if we can earn income out of the investments that we make. We must treat money just like seeds and as we toil and water it, it grows in an exceeding growth and bears ever lasting fruit. One day we will all end up to be like the Uphanishads, as they get and consume wealth, more wealth are still bountiful and abundant.
5. OWN A HOME. Mid pleasures and palaces though we may roam be it ever so humble there is no place like home according to Walt Whitman. If you own a home, then you will be the owner of it. You can have it rented as you acquire more houses or establishments. A home provides capital gains to the owners where he could have it served as collateral to the banks if he prefers to borrow money. Above all it provides a sanctuary for his family - a place where love and respect reigns above all.
1. MAKE FINANCIAL SECURITY A PRIORITY. The best way to insure financial security is by availing ourselves or our businesses with insurance. Insurance is an institution that would share the financial risk of ones company during times of fortuitous or force majeur events. Fire, life, accident, retirement, old age and disability insurance are geared towards providing cash and income to those who can no longer be productive. Save for the rainy days, follow the ways of the ants - store your grains during summer for the winter days to come. Another way of having financial security is to buy properties having capital gains and develop it. Touch the interest and the fruits of the capital gains but never touch or withdraw its original capital or investment. Develop and teal the land for productive and agricultural gains but never sell the land itself for financial security. Another concept of financial security is to prepare a will while a person is still alive, it will provide a better management of ones property if he dies. Create multiple streams of income including passive ones to ensure regular incomes from many sources. Depending in one form of source to earn an income is debilitating and risky.
2. SPEND LESS THAN YOU EARN. This means earn more than you spend. Millionaires are people who are bigger than their financial problems, it means living within your means and saving a portion of what you earn to afford a haven for investment in the future. As your income increases your standard of living must remain the same is one of the surest path to being rich and millionaire. Buy things that will meet your needs rather than your wants. Self gratification in buying things that we desire and want is the only way to poverty.
3. SAVE AND INVEST REGULARY. Remember the three legged stool for one to become rich - earn money, save it and invest in high yield instruments like time deposits, demand drafts, treasury bills, stocks, bonds, mutual funds and marketable securities. He who saves and puts value into his money for future investment purposes will become rich. Make it a habit to save, save, and save regularly then diversify the investment to minimize risk will make a person financially independent and successful in business. Meet your obligations and pay first all fixed expenses and minimize payments to variable expenses. Variable expenses are expenses which could be controlled like public relations overheads, even city services could be controlled, lights off to all electrical appliances when not using to control so much payment for electricity. Do not leave leaky faucets unrepaired to avoid over payments to water services.
4. PAY DOWN DEBT. Make money your slave and not your master is the best advice. Do not borrow money since borrowed money becomes our master rather than our slaves. One of the best sign of successful business is when we can meet our financial obligations promptly whether it will be by the millions of dollars or otherwise. Pay down debt and if possible totally eliminate it. Buy goods in cash basis, it is lot more cheaper and cash discounts or rebates are always given when payments are made through cash. You cannot serve two masters at one time as what the Bible says. You cannot be the slave of money at the same time be the master's of it. Borrow money with a considerable risk taken into consideration and pay the obligations on time. We become the master of money if we can let it work for us, if we can earn income out of the investments that we make. We must treat money just like seeds and as we toil and water it, it grows in an exceeding growth and bears ever lasting fruit. One day we will all end up to be like the Uphanishads, as they get and consume wealth, more wealth are still bountiful and abundant.
5. OWN A HOME. Mid pleasures and palaces though we may roam be it ever so humble there is no place like home according to Walt Whitman. If you own a home, then you will be the owner of it. You can have it rented as you acquire more houses or establishments. A home provides capital gains to the owners where he could have it served as collateral to the banks if he prefers to borrow money. Above all it provides a sanctuary for his family - a place where love and respect reigns above all.
Start Your Own Business
1. It is always better to be an employer than an employee, if you are disciplined and able to devote time and money. Learn all you can about running a business. Take a class. Ask an experienced business owner for advice. Be careful, though. Many businesses fail, especially in their first year. You could end up with considerable debt, no savings, and no benefits. Get help!
2. Entrepeneurs make up the majority of millionaires, it is high risk, but it is also the most likely way to become truly wealthy. Few people amass great wealth through other means. Less than 1 % become a millionaire through "other" means such as being a rockstar, winning the lottery, etc. So unless you inherit wealth your best shot is doing this.
3. Note that you can start your own business part-time. For example by going into real estate, purchasing, renovating and selling homes is a common way for building wealth for people without money to invest.
Be Smart
1. Learn about budgeting, credit, and debt. Learn how credit cards work! If you get into debt early it can sabotage your progress.
2. Put an amount of money in the bank monthly. 10, 20, 30 dollars is good - $100 is better. By the time you get old, retirement would be easy. (See segment about compound interest).
3. If you are in college and can't afford an apartment and don't like those nasty dorms, then gather with 3 or 4 people, and buy a good sized house while splitting the payment. It'd probably cost less than a apartment. Better yet, buy yourself a home using a mortgage and pay yourself instead someone!
1. It is always better to be an employer than an employee, if you are disciplined and able to devote time and money. Learn all you can about running a business. Take a class. Ask an experienced business owner for advice. Be careful, though. Many businesses fail, especially in their first year. You could end up with considerable debt, no savings, and no benefits. Get help!
2. Entrepeneurs make up the majority of millionaires, it is high risk, but it is also the most likely way to become truly wealthy. Few people amass great wealth through other means. Less than 1 % become a millionaire through "other" means such as being a rockstar, winning the lottery, etc. So unless you inherit wealth your best shot is doing this.
3. Note that you can start your own business part-time. For example by going into real estate, purchasing, renovating and selling homes is a common way for building wealth for people without money to invest.
Be Smart
1. Learn about budgeting, credit, and debt. Learn how credit cards work! If you get into debt early it can sabotage your progress.
2. Put an amount of money in the bank monthly. 10, 20, 30 dollars is good - $100 is better. By the time you get old, retirement would be easy. (See segment about compound interest).
3. If you are in college and can't afford an apartment and don't like those nasty dorms, then gather with 3 or 4 people, and buy a good sized house while splitting the payment. It'd probably cost less than a apartment. Better yet, buy yourself a home using a mortgage and pay yourself instead someone!
1. For safety: Stay as debt free as possible. A paid-for education and a paid-off house will enable you to invest more money in the stock market or your own business. Only gear up low-risk investments with loans.
2. Starting now is better than never starting. The power of compound interest can make anyone wealthy. Example: Investing only $10 every year at 15 % annual profit will give you over $1.3 million after 70 years.
2. Starting now is better than never starting. The power of compound interest can make anyone wealthy. Example: Investing only $10 every year at 15 % annual profit will give you over $1.3 million after 70 years.
Invest
1. Start investing as early as possible. Do not wait until you have "enough" money to invest. You will end up with a larger account in the end if you start investing a small amount early and keep adding more regularly.
2. Make smart investments
If you don't understand what you are investing in, don't. Start with something easy like index funds. They have fewer ups and downs than individual stocks, and you will not have all your eggs in one basket.
1. Start investing as early as possible. Do not wait until you have "enough" money to invest. You will end up with a larger account in the end if you start investing a small amount early and keep adding more regularly.
2. Make smart investments
If you don't understand what you are investing in, don't. Start with something easy like index funds. They have fewer ups and downs than individual stocks, and you will not have all your eggs in one basket.
Start by investing in your most important asset: Your mind
1. Doing well in school and getting an education in a high-paying profession such as doctor, lawyer, economist, etc. will give you a head-start and a safe economic position.
2. Learn about basic economics such as Compound interest and investment strategies.
3. Develop yourself all your life. Increase your professional skills, leadership skills, financial skills, social skills and general life skills. Making yourself valuable will increase your chances regardless of your path to riches.
4. Develop a vision; why should you become wealthy? Based on this, set your goals. You wont rise up unless you are able to build and focus your ambition.
5. Stay healthy; It is very important to stay healthy in your endeavour to become rich. This will enable you to work hard and also increase your life span increasing your earning period. On the other hand, you will be able to reduce the cost on health care.
1. Doing well in school and getting an education in a high-paying profession such as doctor, lawyer, economist, etc. will give you a head-start and a safe economic position.
2. Learn about basic economics such as Compound interest and investment strategies.
3. Develop yourself all your life. Increase your professional skills, leadership skills, financial skills, social skills and general life skills. Making yourself valuable will increase your chances regardless of your path to riches.
4. Develop a vision; why should you become wealthy? Based on this, set your goals. You wont rise up unless you are able to build and focus your ambition.
5. Stay healthy; It is very important to stay healthy in your endeavour to become rich. This will enable you to work hard and also increase your life span increasing your earning period. On the other hand, you will be able to reduce the cost on health care.
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