5 Keys to Becoming a Millionaire
Do you want to become a millionaire? I’ll assume you answered yes to that question. What are your plans for getting there? Rob a bank? You will probably have to rob a good number of banks to get to a million dollars and then you will most likely end up in jail anyway. On second thought, robbing a bank isn’t such a good plan. Here is a better plan – follow the 5 tips below and you will greatly improve your odds at reaching millionaire status. It won’t happen overnight, but it will most likely happen (and you won’t go to jail for doing any of these either).
How to Become a Millionaire
- Look Long-Term.
There is a big difference between how the rich and the poor approach financial decisions. The rich look at the long-term while the poor look at the short-term. Here is an example when buying a car. The rich will look to see how much they will pay overall for buying the car. This includes purchase price, interest on the loan, and ongoing maintenance costs (or the cost of ownership). The poor on the other hand look solely at the monthly payment. If they can “afford” the monthly payment, then they can “afford” the car.
You need to switch your outlook to long-term thinking if you want to become a millionaire. Before you buy anything, you have to think about the long-term costs associated with it, not the short-term. Are You Focused on Today or Tomorrow?
- Have A Plan.
I asked you earlier what your plan was for reaching millionaire status for a reason. If you have no plan, how do you know where you are going or how to even get there? A good plan doesn’t need to account for everything, nor does it need to include every obstacle you can think of. If you make your plan too concise, you will quit before you even start.
But you do need a solid plan. When do you want to reach millionaire status? What are your investing plans, goals and risk tolerance? What are your career goals? Where do you plan on living? All of these things factor into your plan for reaching millionaire status. Once you have your plan, keep it in plain sight. It does no good sitting in a drawer where you never see it.
- Protect Yourself.
As your net worth rises in value, you need to protect yourself. No longer can you get the cheap auto insurance plan or forego life insurance policies if you have children. Sadly though, this is the one area where so many people fall short. Just one accident and all of your hard work can be wiped out in a lawsuit. I don’t need to remind you how litigious our society has become. You can probably get sued just for looking at someone the wrong way – and they will most likely win! Suddenly you have lost $500,000.
Make sure you have adequate insurance coverage to protect you in the event something happens. Hopefully you never have the need to use the insurance. But having it will allow you to sleep at night.
- Perform Regular Checkups.
As you go through the years building up your wealth, you are going to have to perform regular checkups to make sure you are on track. If you are on track, great, nothing needs to be done. But if you are off track, then you need to figure out why and make the needed changes.
Personally, I do an annual checkup with my wife. We will sit down and review everything. We look at the prior year versus this year and then the overall picture. We try not to get too caught up in the year to year changes as things happen along the way that can make things look better or worse than they really are. For example, maybe last year you didn’t save as much because you needed a new roof and there was an unexpected medical procedure. While this looks bad, if you look at your overall picture, you will see you are still on track with your plan because you saved so much extra during the previous 3 years.
Remember, focus on the long-term. If you see a long-term trend though, you need to correct it so that you can ensure you reach your goal.
- Learn To Delay Gratification.
Arguably one of the most important tips is to learn to delay gratification. The longer you can wait to buy something the better. This is because when you wait to buy, you instead save your money. Thanks to compound interest, your money grows and you become richer. Many times, you will forget about the item and will never buy it. Also, depending on what you are looking at buying, you can get the same item for less money.
For example, I had an iPhone 3G for the longest time. I wanted to upgrade, but waited until the iPhone 5 came out. When it did, I bought the iPhone 4. Why? Because it was now $100 cheaper with a 2-year plan. It was a nice step up from my previous phone and I was happy that I saved the $100.
My Dad did a similar thing. He always wanted a Porsche. When it came time to buy one, he shopped around and found a used one with low miles and a low price. He saved thousands by being smart and delaying gratification.
Don’t look at delaying gratification as going without as you will get what you want, just not right at this moment. Also, don’t look at it as punishment or a bad thing. Remember your goal is to reach millionaire status. Delaying gratification is only getting you closer to your goal. Be happy about that.
Most people have a hard time with this one because we are wired now to need instant gratification. If you can learn to think long-term, the urges for instant gratification will subside.
These tips will help you become a millionaire. Overall, they are fairly simple. You don’t have to do a lot of hard manual labor to reach millionaire status, you just have to be smart and give yourself time. If you can follow these tips, I am certain you will become a millionaire.