9 strategies to become a millionaire, from everyday people who have done it
by Kathleen Elkins
It's a great day and on Financial Mastery session today, I like to share an interesting post from Business Insider. Enjoy and share !
Not all millionaires have a Hollywood tale of how they grew to be rich.
In fact, many millionaires out there are just like you, living modest lives in average homes and looking for ways to optimize savings.
Farnoosh Torabi spoke with several of these "millionaires next door" on her personal-finance podcast, "So Money," and asked them how they got to where they are today: with a net worth of $1 million or more before age 50.
Here's what the millionaires had to say:
Track expenses diligently.
Record each and every thing you purchase.
"Write out all of your spending and analyze it," Jeremy Jacobson and Winnie Tseng, whoretired in their 30s with multiple millions in the bank, tell Torabi. "Track your dollars. I guarantee you'll find something that either you didn't know you were spending your money on, or you felt was unnecessary."
Jeff Johnson, who reached $1 million with his wife, Amanda, when they were just 34,offers up similar advice: "We know exactly how much we spend on certain categories over periods of time ... Unless you have that data, and unless you're able to figure out how much you're spending on these categories, it's very hard to figure out where you are and where you want to be [financially]."
Establish clear goals.
Talk about your savings goals with your significant other.
"One day Jeremy just came home and said, 'Winnie, do you want to go travel around the world forever?'" Tseng tells Torabi. "And then we started to plan on this. There was a specific goal that we wanted to achieve."
"We didn't have some sort of vague 'Let's retire 40 years from now' sort of goal," Jacobson continues. "We had a 'How do we get there as soon as possible?' idea driving this."
They changed their lifestyle immediately, started saving 70% of their income, and accelerated their retirement track to the point at which they could retire in their 30s.
Live simply and use less.
Live below your means.
Accumulating wealth often boils down to diligent saving and conscious spending. The millionaires next door simply choose to live modestly.
"The really big items that sink a lot of people are houses and cars," Darrow Kirkpatrick, who retired at age 50 with a net worth of $1 million, tells Torabi. He and his family live in a medium-priced home, which they paid off in 10 years.
Julie Rains, who achieved millionaire status by age 40, relayed a similar belief: "For me, living modestly — having a small house and not having a luxury car — really helped a lot. Keep those fixed costs low."
"Live below your means and invest the difference wisely," Kirkpatrick says. "Optimize the few things in life that really are important to you. Spend there by all means, but don't follow the crowd and spend on everything, because you can't optimize everything."
Avoid the financial noise.
Tune out financial noise.
"Yes, I do like to read and listen up on financial news, but I don't let those outside influences distract me," Johnson explains.
"When the stock market drops 200 points, I don't freak out and sell everything ... Don't let others — whether that's your friends, neighbors, or even your family — influence your spending behaviors ... Focus on how you want to behave, and don't be influenced by an outside force."
Be mindful when spending.
Learn to distinguish "needs" and "wants."
"Be thoughtful about each purchase," millionaire Luann Abrams says. "Is it really something that is going to bring you happiness, or can you let that go? Be mindful of where you put your money."
Be cautious when signing up for recurring expenses.
Plan ahead for recurring expenses, such as a gym membership.
"Watching out for recurring expenses is critical," Kirkpatrick says. "Any time you commit to a monthly expense — whether it's a mortgage, rent, car payment, gym membership, or magazine subscription — you need about 300 times that amount in an account, or an investment to pay for that expense over retirement.
"It's better to think of those recurring expenses as a really big number that you've got to save for, instead of some monthly bill. If you take on too many of those, you're basically locking in a lifestyle that you've got to support. It's not that they're all bad — you just want to be very conscious about taking on any regular expense."
Pay attention to employee benefits.
In addition to salary, pay attention to employee benefits.
When you take a job, there are two big sides of the equation, Rains says: your base compensation and your employee benefits. "Pay attention to the employee benefits when you take a job," she emphasizes, from retirement plans to profit-sharing plans to health benefits.
Johnson emphasizes the importance of using your company's 401(k) plan from the get-go: "Whenever you get that first job, contribute to the 401(k), and get the full company match. If you can max out your 401(k), do it. We've been maxing out our 401(k)'s with our respective employers as soon as we possibly could."
Invest early and invest often.
The earlier you get started, the better.
"By investing early, you can accumulate wealth," Rains says. "You don't necessarily have to have a startup that gets bought by Google, or write a best-seller. Those things are great, but there are different paths to becoming wealthy."
Don't forget to spend where it counts.
Save diligently, but don't forget to enjoy your life.
"Yes we can be thoughtful, yes we can be frugal, yes we can track our spending — but at the same time, we have to live, and we have to enjoy things," Johnson tells Torabi. "We don't have to go out to eat every night, but we do have to go on vacations, take our son to the zoo, and do and experience new things ... It's great to save, but you also have to spend — you have to enjoy your life, too.
"Always try to focus on the journey — the day-to-day journey of life — rather than getting to a dollar figure or focusing on the next million."
Article Credit: http://www.businessinsider.com/
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