Too many people making investing hard or complicated, and when investing gets complicated it gets hard. In fact, there’s a whole tv channel dedicated to the intricacies of the investing world.
Millionaires tend to do things differently. After all, if they were like everyone else they wouldn’t be millionaires. The way that millionaires spend and save is simple yet lucrative.
“Hey, Stephen” the inquisitive reader yells, “How do you know how millionaires invest?”
Well, my fictional patron, that’s because I am one. I became a millionaire in my early twenties. For me, it was entirely by luck. Every young millionaire becomes wealthy through luck, but they only keep their wealth by being strategic.
Forget everything you know about hedge funds, bankers, and complicated terms like “derivatives”, “options”, and “commodities”
Secret 1: Millionaires have a Purpose and Plan
Why do you want to save money?
How would your life change if you had a million bucks?
What peace and security would you feel if you no longer had to worry about money?
We don’t build accidentally. It’s done by finding a reason to build wealth, then making a plan. The simplest way to build wealth is to cut expenses then auto-transfer from a checking account into a brokerage account to invest.
I don’t do this though, because I’m always trying to push myself to save more. Every month I create a budget estimating all of my expenses and on the first of the month, I transfer all the extra money into my brokerage account.
If you want to build wealth you need to start by making a plan.
Secret 2: Millionaires Invest Simply
Most wealthy people don’t suddenly get money overnight. Very few of us inherited anything or won the lottery. It’s much more likely that you’re average neighborhood rich guy got money by steadily investing for a few decades having a rich uncle leave them a couple million.
So how do they get rich? The most common way is by investing in index funds and waiting. If you started investing in an SP500 index fund 40 years ago and invested $250 per month, you’d have almost 2.2 million today.
With investing the keys to success are consistency and time. Invest once and watch it grow, invest every month and you’ll watch it exponentially grow.
The really good news is that you don’t even need a financial advisor to do this. Just open an online brokerage account and start auto-investing. I suggest Vanguard since they are owned by their customers. Almost all brokers today are fee-free and commission-free, so it doesn’t really matter; just be sure you’re funding your account and buying an investment.
Secret 3: Millionaires Don’t Live Lavishly
I drive a 2009 Honda fit. Seriously. My car is over 10 years old and has about 90,000 miles. I bought my house for $264,000. It’s in a nice area, but definitely not lavish. I could afford a much nicer car and a more extravagant house. Why don’t I buy bigger and more expensive things?
I don’t need them. Plus houses and cars tend to have a negative effect on your net worth. The is because they cost a ton to maintain and often don’t provide a way to make money. It’s mostly about choices.
For example, if I bought a bigger house I could rent out spare bedrooms to get an income, or if I had a nicer car I could drive for door dash or uber. I’d rather not do this thing, so for me there’s no need.
It’s important to remember to buy for your needs, not for your desires. Too often people will purchase a jeep because they love the outdoor lifestyle, but how often do they go off-road? The same thing happens for houses. If I had a guest bedroom my friends could visit, but in reality, they would rather stay in the hotel down the street. This last example literally happened to me.
Have a plan, invest simply and with consistency, and live well below your means and you too can be a multi-millionaire that most people think doesn’t exist. We’re out there and work normal jobs. We just have more fun because we don’t worry about paying the payments on our oversized truck.