The secret to becoming an everyday millionaire is often learning to have power over purchase. It can be challenging to resist the latest shiny object especially if everyone else has one.
However, building your tower will take patience and discipline. Wealth doesn’t happen by accident. When it does, it is not long-lived. Ever heard of the lottery curse?
Budgeting
The amount of money we make is not as important as what we do with what we have earned. In Everyday Millionaires, Chris Hogan shares that 94% of the millionaires he studied live on less than they earn.
Creating a budget to tell your money where to go instead of wondering where it went is not limiting; it’s liberating. But starting can be the hardest part. But like I tell my math students — the more you do it, the better you get at it.
'For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?' Luke 14:28 Click To TweetDebt
Avoiding debt is another hallmark of everyday millionaires. Getting out of debt and saving up to pay cash for things is the best place to start. Can you imagine coming home from vacation without months of credit card bills? Or how about a debt-free Christmas? Instead of taking a year to pay these things off, use the sinking fund approach to save up for them.
Telling yourself no may be necessary to accomplish that. Money spent on shiny objects cannot be saved for vacations or Christmas shopping. Again, it’s not the amount of money we earn, it’s the choices we make with the money you have.
Investing
Everyday millionaires invest at least 10% in retirement. If possible, they take advantage of “free money” through an employer-sponsored 401k/403b. If there is any match, grab it. If you’re young enough, this is the one thing you can do that will virtually guarantee you change your family tree.
If not, maximize a Roth IRA. Though it’s not as easy as payroll deduction, it’s tax-free forever! Learn about low-cost stock market index funds like VOO or VFINX. Avoiding expense-laden mutual funds and costly commission-based financial advisors allows you to retain up to hundreds of thousands of addition earnings over a lifetime. (I use Vanguard.)
Finally, leave it alone! There is a temptation for newbie investors to try to “time the market.” (Many an economist/mathematician has explained why this can’t be done.) This usually results in buying high and selling low. Dollar cost averaging is the way to go. When they market is low, you’ll just be buying more shares for when it goes back up. The market can be a turbulent roller-coaster ride, so it’s best if you stay buckled in.
In the end…
In the end, we’d all like to achieve financial independence. Whether our goal is to retire with dignity or travel, start with the end in mind. Then be intentional with these three tactics: budgeting, avoiding debt for shiny objects, and investing.
Everyone in America can (and should) become millionaires.