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Tips From Millionaires: How To Get Rich Easily

Tips From Millionaires: How To Get Rich Easily

Payday should be a happy occasion, but it sometimes seems that the money is spent before it even hits the bank. Living paycheck to paycheck becomes the norm, and you can never get ahead because you have nothing left after the monthly “bill collectors” get their share. It may seem like it takes luck and the lottery to become rich, but a little knowledge can take you a long way. Take a few tips from a millionaire and watch your money grow.

Make a Budget and Financial Plan

If you want your money to grow, you have to start by developing a smart budget and financial plan. Keep a notebook or a journal detailing your plan and stick to it.   A budget and financial plan can only work if you are willing to take it seriously. Write down your income and then tally up all of your bills to see how much you will have to spend. More importantly make sure that you have enough money to sustain your household. If your bills are larger than your income, you need to make some adjustments.

Before you attempt to invest or funnel your money in other directions, you should always pay your monthly bills. Being in debt keeps you from reaching your full financial potential so cut out any unnecessary spending. Write down any goals that you would like to obtain such as paying off your credit card debt, paying off your student loans or investing in a money market account. With any leftover money make sure that you use it wisely. You can put extra towards paying off debts, or you can invest in an IRA or contribute to a 401K plan.

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Create Multiple Income Sources

Of course bringing in a steady income is important but when it comes to being a millionaire, bringing in multiple streams of income is even more important. Take on an extra part-time job to bring in a little extra. Side jobs such as grass cutting, car washing and even selling on eBay are additional ways to make money. With the way, the job market can sometimes dip it helps to have a backup plan. This tip is especially important if your full-time income is not enough to cover all of your monthly expenses.

Work for yourself. Take the time to start your own business. Start building your empire or brand.   You can start off small. Turn your favorite pastime or hobby into your side hustle. Sell cosmetics online or start your own clothing line out of your home.   Nothing is better than being your own boss. A majority of the people who are in the millionaires club work for themselves. 

Save, Save And Save Some More

When you are first starting off it can seem hard to save but as little as $25 or $50 per month can make a difference. You don’t have to put your money under your mattress to watch it grow. Put it in a savings account that accrues interest and let your money work for you. Build an emergency fund so if you are laid off work or have a family or household emergency you are covered.

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Find small ways to save money. Eat out less, downgrade your cable or tweak your grocery budget so that you can save more. Pay off your credit cards and any other debts so that you can save this money. You should aim to save as much of your income as you can. The more you save, the more you have to invest either back in your own business or in the market. Many millionaires started off small, but their ultimate goal became to save just as much if not more than they spent.

Make It A Rule To Live Below Your Means

Most rich people will probably tell you that one of the biggest mistakes that people make is living above their means. Expensive cars, clothes, jewelry and trips are nice, but they come at a price. Don’t allow your paycheck to control you; control the paycheck. Remember your financial goals and stick to them. Of course, this does not mean that you cannot have nice things, simply focus more on needs than wants.

Do your research and avoid mistakes during the car buying process to ensure that you make the best choice for your budget. You don’t have to get an expensive or flashy car simply because you can afford it. Maybe considering buying used instead of new which can save you even more money. The money you save can be put into savings and take you that much closer to your goal.

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If you are guilty of impulse shopping, avoid malls and boutiques and instead focus on wearing the clothes you have. Cash is king. Though, in an emergency, you may have to use a credit card, you should try to limit their use. If you know that you will not be able to pay it off within a few months, then do not charge it. Think about all the times you have declared in desperation, you have nothing to wear but yet have a walk in closet full of clothes. 

Talk To The Professionals

It is a common misconception that you have to be rich to talk to a financial planner. A financial planner helps you to make smart decisions with your money regardless of whether its one hundred dollars or one million. A financial planner can help to explain about portfolios and investments. They will use their expertise to help you make a decision not make it for you. It is still your job to be involved in the process and know exactly where your money is going. Millionaires often use financial planners to help them manage their money, but they are also often involved in the day-to-day affairs of their finances. So remember to follow the money.

Will you become a millionaire soon just because you follow these steps? No, you may not but you will be armed with all of the tips you need to develop your plan and get the ball rolling. The ball is in your court.

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Featured photo credit: GotCredit via flickr.com

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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