It turns out
that millionaires are just like us--they just have a lot
more money. When asked about their secrets to success, they don't cite anything
magical or rare, but rather the steady application of wise investing
strategies, hard work, and, believe it or not, a degree of frugality. Here are 10 secrets of millionaires' money management:
Start early to avoid financial pitfalls. Adrian Cartwood, author of the blog How to Make 7 Million in 7 Years, made his fortune by living frugally while he built his technology-related business. People often get into trouble, he says, by racking up personal debt early on, which is big drag on their earnings. "Learn how to live within your means and how to delay gratification; these are the habits that you need to maintain on the way up, so you can keep your millions when you get there," he says.
Believe that you can do it. Before investing in real estate and becoming a
millionaire, Alan Corey, author of A Million Bucks by 30, read
as many biographies and autobiographies of millionaires as he could find. He
says he was searching for a common characteristic that could help him in his own
quest. "What I found was they all had an incredible self-belief that they
would be financially successful," he says. Corey says embracing that level
of self-confidence helped him get to the top.
Articulate your vision for success. According to Jen Smith, creator of the
Millionaire Mommy Next Door site, the saying "I want to be rich" is
too vague. Instead, she recommends imagining what your ideal life as a
millionaire will look like. Smith offers this example: "I want to have $2
million invested so that I can live off of the interest. Then I will quit my
job so that I can volunteer, travel, learn to play tennis and watercolor, and
enjoy picnics at the beach with my family."
Smith's vision involved becoming financially
successful before becoming a
parent. She cut out images from magazines of beautiful places she wanted to
visit and people doing fun things and put them near her desk to help her keep
that vision in mind.
Insure against life's risks. Bankruptcy is often caused by divorce, a death
in the family, or a disability that renders someone unable to work. Conversely,
protecting against those risks through insurance protects wealth. In The Quiet Millionaire, financial planner Brett
Wilder writes that many people either fail to get adequate insurance or pay too
much because they don't understand it.
Work hard--and you'll get lucky. In his new book, Think
Like a Champion, Donald Trump attributes his success to his hard
work, which to outsiders often appears to be luck. But Trump says luck only
comes from working hard. "If your work pays off, which it most likely
will, people might say you're just lucky. Maybe so, because you're lucky enough
to have the brains to work hard!" he says. That same concept, of course,
was advocated by Benjamin Franklin in the 18th century. He said, "The
harder I work, the luckier I get."
Practice smart budgeting. Smith recommends tracking how much you spend
each month, something she does religiously. Every month, she downloads her
transactions into a spreadsheet to keep her spending on track. Smith also says
that, as prosaic as it sounds, maintaining a good credit score is essential to
becoming and staying a millionaire. "A good credit score can save you
thousands of dollars over the course of your lifetime," she says.
Do what you love. Sure, a career in finance might come with a
hefty annual salary, but you probably won't excel at something you don't enjoy.
That's why Corey recommends going into the field that you find yourself reading
about in your spare time. He asks, "Do you read fashion magazines? Get a
job in fashion. Do you read gossip blogs? Get a job in celebrity-based
enterprises. Do you read Car & Driver? ESPN.com?
Yahoo Pets Forum?" Even if the field doesn't seem lucrative, there are
ways to make it to the top--something that's more likely to happen if you love
it.
Decide how much money you really want. For many people, $1 million won't be enough.
"For most Gen-X and Gen-Yers, retiring with a couple million when they are
65 won't be anywhere near enough to maintain even an average lifestyle, because
that little pup called inflation is constantly nipping at your heels as you try
to run towards building your own retirement
nest egg," says Cartwood. A more reasonable goal might be $3 million--an
amount that Cartwood considers the minimum to be a "bare-bones
millionaire" these days. Consider your ideal lifestyle and what you would
like to be able to fund. A mortgage of a certain size? Exotic vacations?
College tuition for your children? Having a concrete goal in mind makes it
easier to get there, says Cartwood.
Invest against the grain. Corey recommends making investment decisions
based on the exact opposite of what everyone else is doing. When stocks are
down, anyone buying can get them at a discount. Corey's rule of thumb doesn't
just apply to stocks. "Buy a foreclosed house, fill it up with roommates,
and you can get a pretty good passive income," he suggests.
Live below your means. Even Eminem, a celebrity and millionaire, scales
back his purchases out of concern for frugality.
London's Independent newspaper reported that several years
ago, as Eminem considered buying a $15,000 watch he liked, he started worrying
that he should save his money instead. Eminem reportedly said, "I don't
want to run out of money; I want my daughter to be able to go to college."
And so far, at least, Eminem hasn't fallen victim to the financial challenges
so many other stars, from Aretha Franklin to Annie Leibovitz, have faced.
On the same note, Smith says even though she's a millionaire, no
one would know it--and that's the point. She recommends saving at least 10 to
25 percent of your income. She also suggests avoiding buying "status"
items, such as fancy sports cars or mansions. After all, bling doesn't make a
millionaire--in fact, too much of it can prevent you from ever becoming one.
http://ca.finance.yahoo.com/news/5-millionaires-made-fortunes-162836675.html
