Becoming a millionaire is a not about luck, it starts with making the decision to be proactive about your money and sticking to a plan.
Rags-to-riches stories may make headlines, but the truth is that you don’t have to stumble on a great idea or inherent a trust fund to become wealthy. You simply have to follow a few basic rules and stick to them. Finance guru Andrew van der Hoven shares them with us:
1 Don’t believe that high income equals wealth
While it’s easier for higher-income households to accumulate wealth, research shows that the size of a paycheck only explains approximately 30% of the variation of wealth among households. What really matters is how much of the income is invested. On average, millionaires invest nearly 20% of their income.
2 Budget, budget, budget!
The majority of millionaires commit to a budget. They know where their money goes, they prioritise saving and they make sure that every cent spent is considered. While they are careful with their cash, they are able to balance the principles of frugality with a comfortable lifestyle.
3 Understand that time is money
Money management takes time and effort, and millionaires are willing to spend time getting it right. Wealthy people spend many hours per month planning their investments and managing their budgets, so they know exactly how their investments are performing.
4 Live beneath your means
Nothing drains your wealth faster than living in a house or driving a vehicle that stretches your monthly budget to the max. In this situation, just one small financial hiccup can throw your budget into stress and force you to raid retirement funds. Many wealthy people live in relatively modest homes and drive reasonably priced cars. They are well aware that interest charges impact their ability to save and so does spending money on depreciating assets, such as a car.
5 Rich people don’t act rich
Genuinely wealthy people do not feel the need to parade their wealth by wearing expensive clothes or flashy jewellery, or to impress others by being ‘big spenders’. Rather, they spend frugally and carefully.
6 Stick to what you are good at
Contrary to popular belief, there are many millionaires who have regular nine-to-five jobs. They often stay with one employer for a very long time – sometimes up to 20 years. Staying with the same company for many years can offer big rewards, including a substantial ending salary and a significant retirement fund.
7 Start saving young
The majority of wealthy retirees began saving in their twenties. They saw the value of investing in a retirement fund that gave them a tax break. The beauty of starting your savings habit young and being consistent is that time compounds the growth of your money; you earn interest on interest and before you know it, your bank balance looks very impressive.
8 Millionaires rarely speculate
More often than not, they avoid taking big risks with their cash, and stick to tried and tested investments. If they do speculate, it’s with money that they don’t require for retirement savings. They let their dividends re-invest over time and participate in the long-term growth of the economy.
9 Don’t be afraid to ask for advice
Most wealthy individuals do not go on gut feel; they usually have trusted financial advisors who work with them to choose appropriate investment vehicles.
10 Pay off your bond
Millionaires pay off their bonds early. This may mean making two or three extra payments per year, or paying a little extra on each monthly bond payment. If you can settle your bond by the age of 50, you have opened up an enormous opportunity to invest.
Access some extra cash in your monthly budget by learning how to stop wasting money NOW. And don’t forget to include these 6 things that should be in your budget!
