Prior to coming to InvestEd, I had worked at big companies and typically with those that had already established their millions of dollars. This means that I can let you in on the big secret on how they got to where they were…
In reality, despite what their wealth might imply, they hadn’t done anything exceptionally special. *gasp* I know! The vast majority of them just continued to save as much as they could, and took advantage of their employer-sponsored plans, while also trying to add things along the way like IRAs, other taxable investments when applicable, and talking to a financial advisor. When it comes to our own personal situations though, this can be tough. I realize individuals have student loans and credit card debt, etc, so getting started is often an uphill battle. Our advice is for everyone to start small and build on the behavior of saving. Let’s break it down to real-life situations.
If you have your expenses in check and keep them the same, when you DO get that raise or promotion, it will be much easier to increase savings. However, usually, when we get a raise, we have a habit of doing what is called ‘lifestyle creep’ and end up increasing our spending along the way. In order to actually achieve lasting results, we have to do things better! I know this may seem obvious, but just think about how much quicker you can get to your goals if you use the increases along the way to achieve your goals, instead of just spending it. The same idea can be applied if you don’t have a raise, but instead, you’ve paid off a debt and now have a fraction of your budget freed up again. You can choose to add those funds that were previously allotted to your debts and add it to your savings; if you still have debts, you can repurpose those funds to help pay the next debt down while still adding some to your savings.
Next up, be consistent! For actions to become habits, you have to be consistent. That applies to whatever you’re doing, especially when it comes to saving or investing. When finances are involved, we can often get distracted by things like market fluctuation, what our neighbor is doing with their finances, or even.global pandemics. However, when you have resolve in what is truly important, these types of situations shouldn’t affect what YOU are trying to accomplish.This is one of the main reasons we utilize asset allocation with our investment approach. By saving consistently, it uses a calculated approach to help guide us to our financial goals. It helps mitigate risk, while also providing consistency in long term returns.
Lastly, you want to be realistic with your expectations and goals. For example, if you want to “become a millionaire” ask yourself “Why?” What are you looking to accomplish by becoming a millionaire? Be more specific than that when you think about your finances so that you can develop an approach that is also a realistic one. Like I mentioned in the beginning, the majority of my millionaire clients had done nothing crazy to achieve millionaire status; how they distinguished themselves and grew into that financial bracket was by being consistent, focusing on saving and keeping their financial goals prioritized appropriately. Because of deliberate actions like that, becoming a millionaire was simply a side effect. There aren’t too many things in life that you can achieve without covering the basics and financial success it one of them. Start off simple and master the basics to get where you want to go.
Stay tuned for the next part of the series… Actions of a Pre-Billionaire.