According to Spectrum Group’s Market Insights Report 2018, the U.S. has nearly 11 million millionaires.
But many of those 11 million millionaires don’t drive fancy cars, wear designer clothes, or own jewelry that costs as much as a house.
Just as Thomas Stanley and William Danko write about in The Millionaire Next Door, many of America’s millionaires live and look like Joe and Jane Schmoe, Mr. and Ms. Ordinary.
MOST MILLIONAIRES LIVE SIMPLY
Most millionaires in America are regular people who just happen to have a net worth of at least a million dollars.
They don’t suddenly upgrade their non-flashy lifestyle just because their bank balance reaches seven figures.
FINANCIAL FREEDOM IS THE GOAL
Why should you care about millionaire status?
Because when you follow these millionaire principles, you’ll have financial freedom.
Yep, you can attain financial freedom just by following these principles…way before your account reaches seven figures.
Financial freedom means you can live worry-free about money, without feeling deprived.
And you can have what you want in life.
Here are the 7 principles and steps I used to become a millionaire and live worry-free about money.
PRINCIPLE #1: LIVE BELOW YOUR MEANS & SAVE THE REST
“Living below your means” simply means you have money left over after you’ve paid for all of your needs (housing, food, electricity, etc.) and purchased some “wants.”
When you’re on the path to financial freedom, you make spending choices. Mindfully.
You figure out what brings you the most joy. And that’s where you spend your money. Be frugal everywhere else.
When you have a goal, such as being able to retire by age 45, it’s easier to say no to the latest iPhone or luxury vacation and instead buy the older model or find a less expensive, but just as relaxing, getaway.
Regular-people millionaires buy less house than they’re approved for or could “afford.”
A smaller house not only costs less to buy, but you’ll also save on mortgage interest, insurance, maintenance, heating/cooling, taxes, and furnishings.
You don’t need to be a millionaire to be rich.
Many people mistakenly believe they need to have $1,000,000 in investments before they have financial independence or can retire.
This isn’t so.
Financial independence means you can live off your savings and investments.
That means, if you ever wanted to quit your job, you could.
And you wouldn’t starve. Or have to rush to get another job. (Or have to get another job at all.)
If you can learn to live on a small portion of your income, you can have financial freedom quick.
For example, if you can live off 40% of your take-home pay and invest the other 60%, you could retire in a just 12 years.
Even if you don’t want to retire and stop working, wouldn’t it be nice to be able to walk away from a crappy job, take your time finding a new one, and not have to worry about how you’ll pay your bills?
PRINCIPLE #2: USE A SIMPLE INVESTMENT STRATEGY
Regular-people millionaires take advantage of any company matches for their retirement account. And if their company plans are decent, they max them out.
I don’t try to time the stock market. Or buy individual stocks…because I don’t enjoy researching companies and learning about stocks.
I don’t pay a financial advisor either. Because, by the time I knew enough to choose an advisor, I knew enough to do it myself.
I read books and adopted an uncomplicated, set-it-and-forget-it way to invest with low-fee index funds.
PRINCIPLE #3: DON’T TRY TO KEEP UP WITH THE JONESES
Seeing a neighbor or friend take envy-worthy vacations or buy shiny new cars is hard when you’re struggling to scrape together enough money just to cover the bills.
But here’s something to think about: that neighbor is probably the same as you, struggling to pay bills or eyeball-deep in debt. Or both.
Does that mean you can’t take envy-worthy vacations? No!
But instead of going into debt or depleting your bank account to travel, you can plan ahead. Figure out what it costs, save up, and pay cash.
When you’re trying to live like a regular-person millionaire, you need to put your blinders on, focus on your goals, and not worry about what everyone else is doing.
And express gratitude when you have what you need.
Finding things to be grateful for may feel difficult.
But if you’re reading this, you already have a ton to feel thankful for (roof over your head, clothes on your back, food in your belly, your phone or computer, internet access…)
PRINCIPLE #4: AVOID DEBT
Consumer debt is a leech, stealing your today’s money to pay for crap you probably no longer care about.
If you didn’t have debt, you could be using your money to fund your lifestyle today.
Regular millionaires pay off their debt and then avoid new debt like it’s the plague.
The only debt they consider is a mortgage, and even then, they pay it off as soon as possible.
PRINCIPLE #5: BUY ONLY USED CARS & PAY CASH
Regular millionaires generally avoid new cars since, as soon as the car is driven off the lot, the car depreciates 20% in value. When you drive away in that $30,000 new car, it’s suddenly worth only $24,000.
While this quick depreciation sucks for new car buyers, it’s a win for used car buyers. Buy a car that’s just two years old and you could save over $10,000 off the new car price of $30,000.
Buying a late-model used car is the most economical way to attain wheels. And because regular millionaires are allergic to debt, they save up and use cash to buy their car. And they typically drive their cars for at least 7 years before getting a replacement.
PRINCIPLE #6: HUSTLE
Regular-people millionaires do what it takes to stay out of debt and have money to stash in investment and emergency accounts.
If expenses rise in one area (they have a baby or buy a house), they find ways to cut expenses in another area. Or they sell stuff for extra cash.
Regular millionaires don’t shy away from taking on a side hustle for extra money so they can pay off debt or save for fun experiences.
(I made well over $1,000 recently by pet sitting for just a few neighbors in my spare time.)
Put your ego on the back burner and take on a temporary job so you can achieve your goals faster.
Deliver pizzas, walk dogs, pick up dog poop, pet/house sit, wait tables, cut grass, sling fancy coffee drinks…if you’re professional and exceed people’s expectations, you can get the best shifts, great tips, charge higher rates, and crush your goals.
PRINCIPLE #7: BUDGET
Regular millionaires know what their expenses are and how much they can safely invest each month without coming up short when those occasional expenses, such as insurance bills and life emergencies, arrive.
Creating and managing your budget is the best way to have an accurate view of your financial situation.
And budgets allow you to set fun goals and funnel money to them.
But most importantly, a budget puts you in control of your money and gives you power.
HOW TO BE A MILLIONAIRE IN 12 YEARS
Want to be a millionaire fast? (Fast is relative here, since most people will never be a millionaire in their 75+ years on this earth.)
If you started with $100 and continued to invest $4500 each month, your investment would grow to over a million dollars in 12 years.
How in the world am I supposed to come up with $4500 a month, you may wonder.
First, expenses need to be kept low.
That doesn’t necessarily mean you become so frugal you wash and reuse aluminum foil like my grandmother did.
But it does mean you practice Principle #1 and keep your “wants” to a minimum.
Mansions, exotic cars, and year-long trips around the world won’t be in your immediate plans assuming you have an average salary.
When expenses are low, you can use your excess money to invest.
Here are some other ideas to come up with the needed funds:
- Both spouses work, the family lives off one income, and the second income is invested.
- Get a second job and use the funds to invest.
- The stay-at-home spouse starts a business that can be done with kids around. Business proceeds are invested.
Finding that much money to save and invest may not be easy, but the reward would be worth it. You’d need 12 years of focused saving in exchange for many more years of financial freedom