1. Earn More Money
Sound like common sense, isn’t it? Apart from your active income which is commonly derived from your job, you'll need to find ways to earn passive income. Unlike active income where you need to work to earn it, passive income is money that comes to your pocket without your active participation. Rental income, royalties from books, income from your network marketing business, licensing fees derived from your products and online revenues generated from your website are some examples of passive income streams.
2. Save More Money
You need to spend much less than what you earn. Lead a frugal live and live well within your means. If you’re the majority that earn a reasonable income and live within your means, you’ll likely have money left over to save. There’s no need to keep up with the Joneses. Don’t be caught up with materialism. It might look good to be spotted driving that sparkling Ferrari, wearing a dazzling Rolex watch, or carrying the latest LV handbag. However, it is extremely costly to “act” rich. Doing so only makes you look like a millionaire rather than being one. It's pointless if your net worth doesn’t reflect you as a millionaire. Don’t get me wrong, I'm not against branded or luxury goods. If you can comfortably afford such luxuries, by all means go ahead to enjoy them. Otherwise, it's wiser to save the money for investment and delay your purchase of luxury items until you could comfortable afford them. Living reasonably well without putting an extra strain on your finances will leave you with extra money to invest to generate more income.
Learn to pay yourself first even before paying your bills. Making your monthly saving automatic is a good idea. Set up a new savings account and instruct the bank to automatically transfer an amount from your earned income to this saving account every month. This new account is not meant for spending purposes but to be used for future investments. It is okay to start small in the beginning. The key is to get started!
3. Invest Wisely
Merely putting your money under your pillow or leaving all your money in the savings account will not make you rich. Many a times, the interest earned is far from being able to offset the inflation rate. This means that your money left in the bank would slowly erode over time and thus, reducing your purchasing power. No investment action on your part would also mean that you'll become poorer as time goes by. Therefore, make your money work harder by investing it to generate higher returns. Carefully study the various investment options such as stocks, mutual funds, properties, commodities among others. Each investment instrument offers a varying degree of risk. Know your risk appetite before you select a particular investment vehicle. Importantly, don’t fall for any get-rich-quick scheme. If the investment sounds too good to be true, it probably is. Investment should take a long-term horizon so never speculate for risky short-term gains. Rather, invest wisely and regularly for the long-term. Don't be too ambitious but set a reasonable target for your return on investment (ROI). In my opinion, a consistent ROI of 8% to 12% is realistic and achievable.
4. Keep Repeating the Process
The final step is to keep repeating Steps 1 to 3 as mentioned above. The more money you earn and save, the more money you’ll have at your disposal to invest in assets that yield high returns.
So you want to be a millionaire one day? Yes, you can. I've done it so I know for sure it's doable. If you stick to this simple 4-Step process and work at it faithfully, your wealth will grow much faster than you realize. I hope to see you joining me in the millionaire club one day!
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