There is perhaps no more important decision than to take charge of your own financial future.
We live in a world of opportunity, and yet most Americans are buried in credit card and other debt. We are surrounded by people who are getting rich, but most of us are running in place.
If you can read this, you are literate, have a computer, you are part of the “wired generation”. You can become as financially independent as you wish to be. Here are the Top 10 keys to your financial success:
- Decide to be financially successful. This is different than wishing, hoping, wanting or even desiring to be rich. Make a commitment that this is going to happen! Financial independence is not an accident or matter of luck, and it usually requires some inconvenience.
Have you decided to achieve this goal?
- Understand how money works. Most of us never studied finance or investing in school.
Most of us were never even taught to balance a checkbook! To master anything, you have to understand it. Read. Study what successful people do. Take classes.
- Master your relationship with money. Some of us spend for excitement, to show off, to prove we can. Some of us are addicted to spending, and some of us are just careless about it.
Whatever your relationship with money, understand it and develop a relationship of respect, appreciation and gratitude. Use it wisely!
- Set specific goals. They should be challenging, but not unbelievable, just out of reach but not out of sight. Challenge yourself to be out of debt by a specific date. Make a commitment to saving an exact amount each month.
- Develop a budget. A budget is a set of dreams and aspirations. It’s how you really, really want to use money to benefit your family and run your life. Budget to buy the things you really want, and to eliminate the “impulses”, the toys that waste too much of our income. A budget is a map to your destination. Have one and use it!
- Reduce spending. Yes, this comes after making a budget, because when you begin getting control of your money (rather than the other way around) you have powerful new reasons to reduce expenses. Most self-made millionaires live far below their means! You should too.
- Begin investing. Most of us spend or speculate. Both are roads to disaster! Invest in things you understand. Invest cautiously, wisely, and regularly. The objective is not to “make a killing”, but to get rich over time. Know and obey the distinction between gambling, and putting your money to work for you.
- Increase assets. Most people try to increase their income, and that’s a mistake. Making more money means paying more taxes. It takes time and hard work. And, when wealth arrives in the form of cash, it’s easier to spend. Millionaires buy stocks and buildings, they invest in assets that will make them rich – and that are hard to spend on a whim!
- Reduce taxes. Most Americans pay more in taxes than for food, clothing and shelter combined! It is your largest expense! The poor and middle class don’t realize how much they pay because it’s deducted from their pay check. The wealthy know there are legal and appropriate ways to shelter income, to invest in socially-responsible ways, and that the tax code encourages this. Learn the tax laws and use them for your benefit! (Yes, it’s the most boring reading you’ll ever do, and worth it!)
- Use your wealth wisely. Someone once said, “The reason most of us aren’t rich is that we’d spend it all on ourselves.” Give. Share. Help others. When you use money to make a difference, to have a positive impact, you get the chance to do more. Being greedy and selfish will not draw money to you. Investing in your community, will!
To begin your education about money and becoming a millionaire, I highly recommend several books on the subject. Two of the best are: “The Millionaire Next Door” by Thomas Stanley and William Danko, and “Rich Dad, Poor Dad” by Robert Kiyosaki and Sharon Lechter.
Most middle-class Americans will earn well over a million dollars during our working lives. Even if you start working as late as age 30 (after college and a few years of kicking around looking for your niche) and plan to retire a few years early, say at age 55, and assume your average income is $50,000 per year, during those twenty-five years you will earn 1.25 million dollars! With the combined earnings of husband and wife, and perhaps having started work at a younger age or being willing to continue into your 60’s, the potential to earn (and pay taxes) on several million dollars is very real.
Where does the money go? That is entirely up to you! As many observers have noted, millionaires don’t necessarily earn more, but they spend less. They live below their means.
They live well, but they do not spend on items that depreciate, or on frivolous items to impress their friends. They invest wisely, often in their own businesses, or in stocks or other investments that they understand and are willing to monitor closely. They take moneyseriously. And, the y expect to retire wealthy. They value money, and they pay attention to it.
They manage it. They accumulate and they let it work for them, rather than always working for money, from one paycheck to the next.
The secret to becoming a millionaire? Do what millionaires do, and do it over and over, until you arrive at your goal.