1. Setting up automatic investments. The vast majority of young millionaires achieved their financial status by investing money. Unless they are a celebrity or were born into a wealthy family, they had to be diligent about investing money either in the stock market, a business venture, or real estate. You must do the same. One way to do this is by making your investments automatic. Have a certain amount of money (aim for 10 to 20 percent of your salary) automatically deposited into investment accounts like your workplace retirement account, Roth IRA, or brokerage account. Consider investing the money inside the accounts in index mutual funds, making a profit of around 10 percent each year. Making these investments automatically prevents you from having to put money in the account each month. When you don’t rely on yourself to make the investment and instead make it automatic, you increase the chance that you will meet your investment goals and accumulate wealth faster.
2. Having a separate account for savings. Along with investing 10 to 20 percent of their income, many young millionaires have a certain amount of money they save. While most people start with a goal of having $1,000 in a savings account for emergencies, many young millionaires and financially savvy folks exceed this amount. The general rule of thumb is to have 3-6 months of living expenses in a savings account just in case your income changes, or you happen to lose your job. Aside from having money in a savings account, many financially savvy young professionals also save money for other things like yearly vacations, home purchases/renovations, holiday gifts, or car repairs. Consider setting up savings accounts for those things as well.
3. Living a modest lifestyle. Aside from saving and investing money, many financially savvy folks who achieve millionaire status also live a modest lifestyle. Instead of spending money on numerous expensive things, they tend to live below their means. In fact, there’s a saying that you can either look rich or be rich, but most people can’t do both. To ensure that you have enough money to save or invest 20 percent of your income, you have to decrease the amount of money you are spending on other things. This means you may not be able to lease expensive cars or buy a large home right after residency. Becoming a millionaire requires that you prioritize building wealth by investing a large chunk of your income. For most people, living a modest lifestyle is the sacrifice they make to invest the amount of money needed to build wealth.
4. Pre-planning large expenses/vacations. Most people don’t just wake up rich. Becoming financially successful at a young age requires a great deal of planning. Instead of being surprised by unexpected expenses or accumulating lots of credit card debt after each vacation, many financially savvy folks plan ahead. They save in advance for large purchases and vacations. They create a budget for how much they will and won’t spend. Then they stick to it. A large factor in who does and does not accumulate wealth depends on how disciplined you are and how well you plan ahead. Start doing so now.
5. Paying down [personal] debt aggressively. Lastly, many financially savvy folks who end up becoming millionaires for the first time at a young age try to minimize personal debt. They try to avoid taking out huge car loans or mortgages and tend to pay back any money charged on the credit card within a short time frame. They understand that accumulating debt and keeping it for long periods of time costs them more money in the long run since they end up paying a great deal in interest. Most financially savvy people try to make interest by investing money instead of paying interest by accumulating debt.
Do you want to be a millionaire at a young age? If so, what are some things you can start doing to put yourself in a good position to reach that goal?
Altelisha Taylor is a family medicine resident and can be reached at Career Money Moves.
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