I want to become a millionaire one day, and I believe I’m on the right track. I make a decent income and am net worth positive (assets minus liabilities). I have very few expenses, no mortgage, no dependents or pets. I’m financially savvy and manage my investments wisely. My goal is to reach the milestone in the next ten to twenty years at which point I’ll be in my 50s. In the meantime, I’ll keep my eyes on the prize which is as much about accumulating assets as it is about creating more freedom for myself (although, I feel very financially free at the moment).
Suggesting I’m well-off would be an overstatement, but I do like my current financial situation given that I wasn’t born at the finish line. According to some reports, my race diminishes my odds of becoming a millionaire along with not being born to one (1 in 5 born to vs. 1 in 30 not born to – The Millionaire Next Door), but I’m hoping my zest for life, street smarts, hustle, and desire to keep learning and developing will put me over the top.
Anatomy of a Millionaire
Naturally, various factors play a role in becoming a millionaire as I eluded to in the previous paragraph. However, factors aside, knowing the rules of the game will dramatically increase our chances. While new content about creating wealth surfaces on YouTube and Amazon (self-published ebooks) daily, four bestselling books are all we need to decipher the millionaire code.
The Millionaire Next Door
I only recently read The Millionaire Next Door (MND) and wish I would’ve read it years ago. MND uncovers the attitudes and behaviors of millionaires’ through thorough research conducted by co-authors Thomas Stanley and William Danko. MND is full of insights regarding how millionaires think, plan, act, consume, and operate in business and life. It highlights how millionaires manage their cash flow, investments, gift giving, and estate planning. Furthermore, it addresses activities that derail wealth accumulation such as high consumption lifestyles and misperceptions about financial advisors.
When asked who are the affluent, the authors responded, “Most of the affluent in America are business owners, including self-employed professionals. Twenty percent of the affluent households in America are headed by retirees. Of the remaining 80 percent, more than two-thirds are headed by self-employed business owners. In America, fewer than one in five households, or about 18 percent, is headed by a self-employed business owner or professional. But these self-employed people are four times more likely to be millionaires than those who work for others.”
Rich Dad Poor Dad
I can’t say I care much for Robert Kiyosaki because his brand and business activities lack integrity and ethics (also, being linked to Donald Trump doesn’t help). However, Rich Dad Poor Dad (RDPD) offers many essential truths regarding wealth. The book was originally self-published in 1997 before being picked up commercially to become a New York Times bestseller. It has since sold 26 million copies and continues to rank well on Amazon.
RDPD emphasizes the importance of entrepreneurship, financial literacy, knowledge, corporate entities, and taxation. Also, Kiyosaki explains the relationships between assets, liabilities, income, and expenses and how they impact different socioeconomic groups through a series of reader-friendly diagrams. In discussing action steps, he suggests:
- Stop doing what you’re doing and take the time to assess your situation, work, and life.
- Spend time looking for new ideas and opportunities.
- Find someone who has successfully done what you want to do and consult with him/her.
- Keep developing your skills by taking classes, reading, and attending seminars.
Think and Grow Rich
No other word best describes Think and Grow Rich (TGR) than essential. TGR is a rite of passage on the way to living a fulfilling life and amassing wealth. I read this book many moons ago, and I’m thankful I did. TGR is an extension of Napoleon Hill’s earlier work, The Law of Success, where he outlined 16 rules to achieve success. For TGR, Napoleon further distilled these laws from interviewing 500 millionaires and produced 13 guiding principles for achievement.
TGR asserts that desire, faith, and persistence can propel one to great heights if one can suppress negative thoughts and focus on long-term goals. Where The Millionaire Next Door is quantitative in nature, TGR offers a robust qualitative argument for creating affluence. Also, it provides many enduring statements the continue to inspire and motivate millions of people around the world. Some might think the path to millions is only about dollars and cents, TGR argues it’s about something more, something deeper within ourselves.
A Random Walk Down Wall Street
As I’ve said on this blog and in my books and courses, owning up to your investing activities is critical to becoming wealthy. Your advisor and all the middlemen in between sap your returns through relatively high, hidden, and unjustified fees. The fee barrage surfaces by way of poor recommendations due to conflicts of interest, lack of fiduciary responsibilities, and incompetence. Your advisor is a salesperson masquerading as an intelligent investment steward. As a result, success in investing doesn’t start with an advisor; it starts with you.
A Random Walk Down Wall Street (RWDWS) is one of three books I recommend to investors. I’ve included it here because of the role it can play in optimizing your investing activities and returns. If I can point to one book that changed my perspectives on investing, strategy, and the entire financial sector, it’s this one. In RWDWS, you’ll learn the necessary investment terminology and concepts to invest successfully and sensibly.
The Path to Riches Distilled
These four books combined have taught me a lot about money, business, career, and life. The lessons and insights I’ve absorbed have made me a more well-rounded person. I wish more people made better use of their time reading classics like these to enhance their lives. Conversely, too much time is spent on a myriad of dumb down activities and distractions that don’t improve our lives, for instance, social media surfing, video games, and reality television programs. Nevertheless, I’ll offer you what I believe are the most critical lessons from these books.
Be frugal and financially disciplined
Perhaps Stanley said it best, “whatever your income, always live below your means.” Not only is this statement profound, but it also speaks to frugality and financial discipline. To be frugal is to be sparing or economical about money or food. Synonyms of frugal include thrifty, careful, cautious, prudent, penny-pinching, close-fisted, tight, and stingy.
Millionaires become millionaires because they’re careful with their money. For example, contrary to popular belief, millionaires aren’t the ones driving luxury cars; they value their hard-earned dollars too much and typically purchase regular cars. In other words, they favor function over form. There is a strict adherence to frugality that yields increasing wealth. Furthermore, millionaires do not try to keep up with the Joneses. Who then is driving luxury cars? Probably high-consumption and high-maintenance individuals, posers, and folks from the trust fund brigade.
It’s easy to spend money; you know it, and I know it. Saving money for the future isn’t as gratifying or fulfilling as spending it today. Most people fall into the latter category thus never accumulate enough assets to become wealthy or financially independent. It takes real financial stick-to-itiveness to stash away the recommended 15% to 20% of each paycheck consistently. Being financially disciplined means staying on top of your balance sheet, avoiding unnecessary risk-taking, living below your means, and diversifying your investments prudently.
An important point worth noting, I don’t agree with the premise that to be frugal means to give up worthwhile experiences, for instance, travel. I believe you can manage your finances sensibly AND enjoy a wonderful lifestyle. Yes, you can have your cake and eat it too. Life doesn’t, and shouldn’t, be a lifeless path to prosperity. In the end, I would happily forgo momentary wealth for experiential bliss. The latter seemed to be missing from those study in MND.
Choose a financially responsible spouse and healthy relationships
Maybe not an insight you would deem critical, but selecting a spouse who is also frugal and financially savvy multiplies your odds of becoming rich. On the other hand, being with a person who is spendthrift or ignorant about money usually, makes matters worse. Individuals who go through what is typically a costly divorce, often divorce because of money problems, which is one of the several common reasons. Having two people on the same page regarding financial matters can lead to promising outcomes.
Relationships, on the whole, is an aspect of life that requires constant monitoring. When I think about Judge Judy, a television program, it’s as much about courtroom drama as the relationships we keep. Some individuals are assets, and others are liabilities to your well-being and financial health. My experiences tell me that most people are liabilities which is why I’m very careful about the company I maintain. Surround yourself with positive, self-sufficient, and astute friends and associates, and you’ll do your pocketbook a huge favor. Also, beware of the takers and soothsayers out there.
Understand how to invest your money
Most self-made millionaires are knowledgeable about investing and, they can analyze the merits of financial opportunities very well. Regarding investing in stocks and bonds, millionaires call their shots instead of outsourcing and passing the buck to investment advisors. However, consultants are used for services that tackle much more complex matters such as individual/corporate tax strategy, estate planning, life insurance, and legal affairs. Where some people view advisors as an expense, millionaires see them as an investment to help reach their financial and lifestyle goals.
The affluent practice diversification through homeownership, investment accounts, and business holdings among other. They don’t have their money all in one basket. Although not always the case, attracting multiple streams of income is another trait of wealthy individuals.
Seek entrepreneurship or be entrepreneurial minded
How many self-made billionaires became billionaires working for someone else or the man? None, zero, and zilch. Being employed, as opposed to being self-employed or a partner or founder of a company, is often a futile path to riches. MND, RDPD, and TGR all promote the notion that entrepreneurial endeavors are the best chance of striking it rich. According to MND, two-thirds or 66% of millionaires were self-employed, and 75% of this group considered themselves to be entrepreneurs. Other self-employed millionaires were professionals such as doctors and accountants. RDPD emphasizes the importance of entrepreneurship and corporate entities to gain financially through various income and tax strategies. Conversely, employees don’t have the same maneuverability and leeway to capitalize on wealth accumulation strategies. Additionally, companies highly influence the financial futures of their employees whereas business owners are more in control of their outcomes.
Going it alone isn’t for everyone nor is everyone capable. In which case, employees should personify the entrepreneurial spirit and aim to reach the top. C-Suite executives of most Fortune 500 companies are paid extremely well without having to take on the risks associated with business ownership. Also, employees can remain employed while operating part-time businesses to increase their incomes and wealth prospects.
If you possess knowledge and skills that most other people have (general knowledge), it’s difficult to justify paying you a premium. Why would an employer pay you more given the market is saturated with your abilities? For example, the ability to use Microsoft Word. On the other hand, if you have specialized knowledge and proven skills in an in-demand area such as machine learning or artificial intelligence, the current job market will likely pay you premium due to the availability of experts versus supply.
Not all millionaires became such because they specialized. In fact, many ran “dull businesses” like mobile-home parks and pest control operations. However, these books make the case that niche businesses and possessing specialized knowledge are practical approaches to take.
Niche businesses attract fewer competitors allowing for greater market share. Specialized knowledge as an employee or self-employed person can yield promising career prospects. For instance, if you’re someone who is well-versed in international corporate tax law, companies such as Apple and Amazon will pay you a lot of money to help them dodge taxes and stash cash overseas. Possessing subject matter expertise and authority can easily equate to six and seven-figure incomes (but remember it isn’t how much you earn; it’s how financially disciplined you are).
Enjoy what you do
Do you have to love your profession to generate millions from it? No, but you have to like it a great deal, be highly engaged, and obsess over it to produce profitable outcomes. I use to think that passion was a mandatory requirement in the millionaire equation, but interest and enjoyment in what you do will suffice.
People who enjoy, and even love, what they do want to make the most of each workday yielding desired monetary and experiential rewards. On the flip side, I can’t image someone who is very disengaged, disgruntled, and resentful of his job using it as a catalyst to become wealthy.
Keep learning and developing new skills
MND, RDPD, and TGR all speak about the importance of education and lifelong learning. Only one in five of the millionaires studied in MND were not college graduates. In another post, a couple of research reports that highlight how much education is correlated with income. RDPD suggest that most individuals need to learn and master only one more skill to experience a significant increase in their wages. Lastly, TGR states that successful people never stop acquiring specialized knowledge related to their purpose, business or profession.
Set goals and plan
Millionaires just don’t magically or randomly become millionaires. They set goals and plan meticulously. Their planning efforts drip into both personal and professional activities. They are mindful of what they’re trying to achieve and set milestones to reach. Cash flow management and budgeting are cornerstones in their financial planning activities.
Don’t lose faith or quit
Millionaires and successful people don’t give in or surrender. They may pivot, but they continue to keep at it. They maintain a robust desire to fulfill their plans and are determined to achieve. Persistence is a hallmark of who they are, and when they fall, they pick themselves up and move on. They have faith in themselves and the people around them.
Use your time wisely
If I can add an ingredient to the millionaire equation, it would be to appreciate your time. I didn’t get this from any of the books above, but that millionaires maximize their time makes sense. I don’t think many billionaires and millionaires became wealthy by sitting in front of televisions all day, putting in half-ass efforts, or by wasting time with people who couldn’t further their agendas. Conversely, millionaires guard and treat their time as a highly precious and guarded commodity.
Time is fleeting and quickly erodes which I know to be true as an options trader. One day your 20 years old, the next day 40, then heading into retirement. We can’t afford to make only some days count; we have to try to make them all count so that they add up to the lifestyles and finances we desire.
What’s one of many action steps I’ve taken to make better use of my time? Although I’ve never been a huge consumer of commercialized sports, I set a goal to diminish my time allocation to watching sporting events, for example, golf tournaments and NFL games. In fact, for the first time, I didn’t tune into the Summer Olympics except for a few snippets of Usain Bolt.
I know that watching athletes and balls flying around does little to increase my wealth and chances of success. Paying attention to LeBron James or Sidney Crosby doesn’t improve my business activities one iota. However, I do enjoy the competitive nature of sports and will continue to watch some events in the spirit of entertainment and downtime.
My overarching thought is if I could trade all the hours I wasted on unimportant people and things for personal and career development, how much further would I be along the path to success? I’ll never know, but the aspiring millionaire in me is focused on the present, future, what I can control, and how I use my time going forward. Consider the following; who or what are you transferring your time and money to and what are you getting in exchange?