Have parents been giving their children the wrong advice regarding their future financial security? Is saving money really the key to future wealth? There are actually two schools of thought on that. Some believe saving and investing is the road to wealth while others believe that it’s more important to concentrate on earning money. Investors point to Warren Buffett’s success while earners can emulate Bill Gates. It depends on someone’s talents and goals.
Most of the principles that apply to growing wealth slowly and steadily also apply to those who are focused on earning as much money as possible. Most millionaires weren’t born with money—86% were self-made millionaires.
Always Have a Nest Egg
These days, a million dollars doesn’t mean what it once did. If you plan on spending $40,000 per year in retirement, you’ll need a nest egg of about $1 million. It will take a substantial amount of time to accumulate that amount of money. The focus will be on keeping expenses at a reasonable limit and saving and investing wisely.
If everything goes as planned, by the time retirement arrives, one will be a millionaire. Unfortunately, as John Lennon famously said, “Life is what happens when you’re making other plans.” So, whichever path to riches one chooses, always have a nest egg.
Pay Yourself First
It’s been said at least 1,000 times to save 10% of your income. It’s the reverse of constantly spending a little with a credit card while the debt slowly grows. Steady saving is a habit that everyone should acquire. Millionaires are better at doing this, though. The average millionaire will invest or save about 20% of their income.
Live on a Budget
Yes, that’s boring. One of the biggest problems with budgeting is that many people do not know how to create a realistic budget. It’s necessary to anticipate future expenses and build in a surplus to cover them above the 10% set aside for saving and investing. It could be worthwhile seeking professional assistance when setting up a budget. Learning to be self-disciplined long-term is critical for future success.
After becoming wealthy, most people continue to live on budgets. While the budget now allows for luxuries that were not originally dreamed of, it’s become a habit worth sticking to.
Make a List and Have a Goal
List-making is one of the secrets of wealth building. Over 80% of millionaires are diligent about making to-do lists and crossing off items. Only nine percent of those making less than $30,000 per year make lists. It’s all about constructing a pathway to a goal. Just saying, “I want to be a millionaire” is an amorphous goal and an idle thought. Establish a plan to action with lists.
You can create layers of lists with a five or ten-year goal. Then break that down into one-year goals. After that, put together a plan to achieve the one-year goals and create lists of the steps along the way.
The benefit of list-making is that it establishes a pattern of success. Each item crossed off is a victory, no matter how small, and makes the next success a little easier to achieve. However, there must be an overall goal or list-making can degenerate into pointless activity.
Entrepreneurs are Risk-Takers
A recent poll found that 68% of the millionaires in Canada are entrepreneurs. Canadian women now represent one-third of those with net worths over $1 million, up from 21% only three years ago. Worldwide, only about 16% of the wealthy inherited their fortunes, while half of the world’s millionaires are entrepreneurs.
Becoming an entrepreneur means being comfortable with a certain level of risk. While some entrepreneurs have gambled everything on their dreams and succeeded, many more have lost everything. On the other hand, taking no risks at all is almost a guarantee of failure and is also impossible in the long-term. Learn to measure the degree of risk and then make a rational decision.
Choose Your Friends Wisely
That may be the best advice that a mother ever gave. Spend time with successful people. Learn to be a great networker. Almost 80% of self-made millionaires spend more than five hours a month networking. Only three percent of those making less than $30,000 spend an equal amount of time doing so. Learn what drives someone who has achieved your goal. How do they manage to stay motivated? How do they spend their day? They’ve got the same number of hours to work with, but must be using those hours more productively.
Keep a Positive Mindset
There is a power to positive thinking. If you’ve never read the famous book by Dr. Norman Vincent Peale, do so. Technology might have changed dramatically since he wrote the book, but people haven’t changed. If you burden yourself with despair, defeat, and doubt, it will be impossible to succeed. Don’t waste time on pointlessly waiting for your ship to come in, either. The successful person is figuring out how to build the ship and will become the next shipping billionaire.
Your Destiny Belongs to You
Everybody is dealt a hand with some good cards and some bad cards. How you play that hand is up to you. Taking the best of what work for self-made millionaires and then applying it to your own life and goals can put you on the road to success.
One of the best tips is just to focus on creating your own destiny. Don’t waste time criticizing, blaming fate, or other people. Every aspect of life cannot be controlled, but much can be. Realistic optimism is a much more productive frame of mind.
- Learn how to handle money.
- Believe in yourself and your abilities.
- Work on growing natural talents and acquiring new ones.
- Make a goal and steadily work toward it.
It hasn’t been said previously, but also learn how to balance a personal life with the demands of business. Many very successful people, such as Warren Buffett and Bill Gates, emphasize the importance of their families to their ultimate successes.