Ordinary people become millionaires in their 50s all the time. You don’t have to win a lottery, inherit from family, or become a web sensation. When you’re in your 20s (or 30s if you buckle down), all it takes is dedication, discipline, and a plan.
Get and read the book The Millionaire Next Door. Though it’s 20 years old, the lessons and research are timeless. Find out how 80 percent of millionaires in America are regular wage earners who built their wealth in their working lifetime.
To build wealth, you have to be thrifty. Not the “eat mayonnaise sandwiches every day and have no fun” kind of thrifty. Thrifty where you “skim a portion of your income off the top to invest and live off the rest” kind of thrifty.
As stated in the book The Richest Man in Babylon, “A part of all you earn is yours to keep.” Wealth is not about how much you earn; it’s about how much you keep. Paying yourself first is a critical component to building wealth. Figure 10 to 15 percent of your income is what you pay yourself. You’re worth it right?
Surely you can budget to live off 85 to 90 percent of your income. Once you pay yourself first, the rest you can spend guilt free! Live within your means and don’t fall into the credit trap.
Every increase in pay should be used to increase the amount you pay yourself. Increases in pay represent money you didn’t have and weren’t living on. It should be easy to pay yourself most of the increase and slip a little to your spending account for grins.
Be disciplined in your approach to build wealth. Trust your plan and stay focused. Don’t be distracted by the financial media or marketing campaigns. Don’t base your investments on the crisis of the day or any news-related events. Worldly events are a natural part of life, and we have history into their impact. With a solid investment strategy, your plans don’t need to flex to outside issues — you expect them.
Your plan can and should be simple and based on history and data. We know markets rise and fall in the short-term. That’s a given. We know markets consistently rise in the long-term. That’s a given. Have a plan that exploits these historical realities.
Building wealth can happen by averaging down and having a stock-heavy portfolio. (Read “The Power of Averaging Down” for more information.) Finally, time is your greatest asset. Don’t waste valuable wealth-building time by chasing after pots-o-gold schemes or getting greedy.