Ten Steps to Becoming a Millionaire

US News lists 10 "secrets" of millionaires' money management as follows:

• Start early to avoid financial pitfalls. Adrian Cartwood, 49, 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.

• Believe that you can do it.

• Articulate your vision for success. Jen Smith, author of the Millionaire Mommy Next Door blog, says that the saying, "I want to be rich," is too vague. Instead, she recommends imagining what your ideal life as a millionaire will look like.

• 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.

• 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.

• Practice smart budgeting. Smith recommends tracking how much you spend each month, something she does religiously.

• 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.

• Decide how much money you really want. For many people, $1 million won't be enough.

• Invest against the grain. Corey recommends making investment decisions based on the exact opposite of what everyone else is doing.

• Live below your means.

Here's my take on these:

• Starting early has several advantages. The two biggest I see are: 1) On the cost side, you haven't yet learned to borrow and spend like crazy, especially if you've been a poor college student for four or more years. So if you start early and live like you have for the past years, you'll keep expenses low. 2) On the investing side, the more time you have to invest, the more time compound interest can help you out.

• Whatever you do, you need to believe in yourself. Otherwise, who will?

• One of the keys to successful goal setting is to be specific. Be specific about what you want, what you're going to do to get there, and so on. Then be sure to measure yourself against these goals. This is one reason I track my net worth each month and records various financial statistics -- so I can see how I'm progressing versus my goals.

• As far as I know, there isn't divorce insurance, so on that front you simply need to marry wisely. But you certainly can insure against other potential disasters like death, disability, being sued, and loss of property/assets.

• I disagree that there isn't "pure luck" in life, but I do agree that hard work often opens up more "lucky" events in life.

• Funny how millionaires budget, isn't it? I love that fact that most millionaires simply do the basics of money management -- budget, control debt, spend less than they earn, invest over the long term, etc. -- and "somehow" they become rich. It's amazing, huh? ;-)

• One day we're going to have a debate on the "do what you love" idea. Right now, I'm in the camp that most people can't really do what they love and get rich because what they love (cycling, playing golf, traveling the world, etc.) doesn't pay much. But they do need to do something they can at least find some joy/sense of accomplishment in or they won't go that far either. So maybe "do something you like but that pays well" is a better guideline for getting rich?

• I have a number I'm shooting for. Do you?

• The article notes that now is the time to buy stocks since they are doing poorly. I've been buying all the way down (and now up a bit) and am counting on the fact that in five to ten years the investments I'm making now will be worth a significant amount more than they are now.

• I like to say "spend less than you earn", but it's really the same as "live below your means." Spending less than you earn is my single-best piece of financial advice and the first step toward getting rich.

I'm always fascinated by the wealthy and hearing how they became that way and what financial principles they put into practice to get there. If you are the same way, check out some of these posts:

• "Real" Millionaires Different than What Media Portrays

• Frugal Millionaires' Money Mottoes

• Frugal Millionaires on Investing and Mortgages

• Millionaires Tell How to Become a Millionaire 

Comments

[Wise Money Matters]

I think doing what you love is very attainable if you think outside the box. Like Golf? Start a golf tutoring service or build a golf course.

Like cycling? Open a cycling/outdoors store.

Like to travel the world? Start a blog reviewing destinations.

Chances are that you aren't the only one who loves to do that thing. So you have to think how to leverage that. It won't always be easy but it's definitely doable.

[Greg / Wise Bread]

Doing what you love is key because the passion is a prerequisite to being great at something. It's the love that will get you through the inevitable dip. [1]

If you love golf, presumably you keep working on it even if you're not getting paid. Just thinking about and happily doing something everyday will make you great at it. And over the course of your career, that passion will lead to better and bigger opportunities.

On the other hand, if you hate lawyering, you will find every excuse to avoid it, making you a mediocre lawyer. And that mediocrity will hold you back throughout your career -- lower raises, first on the chopping block, etc.

[1] http://sethgodin.typepad.com/the_dip/

[jeffinwesternwa]

The "Millionaire Next Door" and "The Millionaire Mind" (Stznley/Danko) books should BOTH be on a prospective M'aires MUST read list, I did the first before my first million, found the ssecond one enlightining before the 2nd M....be frugal, start w/ 10% minimum under all circumstsances and gradually save/invest to 15%-25%, AVOID debt, (I graduated in 1982 w/ NO student loans, $3K in the bank and 2 (allbeit 11 and 13 year old) cars paid for and a job lined up (during the '82 recession - which was FAR WORSE for employment than today's times)...Anyone can work up to full-time while a student and Think Big!

[Kirk Kinder]

Great post...common sense that isn't so common.

I especially like the point about buying equities. I think we are a couple years away from getting out of this, and returns will be a bit lower for the next five years. However, the yields on stocks, REITs, etc. are much higher than guaranteed Treasuries. Surely, investors will be rewarded for taking risk over the next 10 or 20 years. So loading up now and ignoring the movements for the next couple years will pay off.

Also, buying appropriate insurances is key.

[Kate]

On doing what you love, I tend to agree with FMF on this one. I love writing and would prefer to do freelance writing on subjects that interest me, but as many writers would tell you, "don't quit your day job." At this point in my life, my family needs the financial stability my paycheck provides. I do some writing for my job and have a little input on some of the subjects of my writing, but it is not a job I LOVE, it is a job I like.

[Warning on the next part: I'm bringing up a religious topic, so if you're not interested, skip this.] This also brings to mind my Bible study with my child last night. We were reading from Proverbs, and we came across 12:11, which reads (depending on the translation): "He who tills his land shall have plenty of breat, but he who chases fantasies is void of understanding." My child didn't understand, so I explained it this way: "Suppose you own a farm, and you work your land. You'll be able to feed your family. But suppose you own a farm, but you really want to be a rock star, even though you don't have much talent. That's chasing after fantasies. It's not that no one should pursue a career in music, but if you don't have the talent, you shouldn't leave what you have to go after something you're not likely to attain."

I have fair writing talent, but I'm not going to be the next Neal Gaiman. I'll stick with doing the job I like, even though I don't love it. Maybe I can do what I love later, or maybe I won't have that chance, but "self-fulfillment" is not the most important thing in life (nor are riches, I might add).

Sorry, I got a bit preachy.

[Mike Hunt]

I'd appreciate an article "10 steps to becoming a billionaire" as I'm already a millionaire and have a lot of time left in my career- I'm 35.

-Mike

[DR. ARTFREDO C. ABELLA, Ph.D. - WHITTTIER, LOS ANGELES, CALIFORNIA, U.S.A.]

I will suggest ten steps to become a millionaire:

1. Love what you do;
2. Lear to leverage other people's money, time, intelligence and leadership;
3. Practice diversification in your business and investments;
4. Create multiple streams of income. Never stick in one line of business alone giving you single source of income;
5. Produce more than what you consume;
6. Pay yourself first;
7. Find a business need and fill it;
8. Practice integrity at all times in dealing with your business, stakeholders and community;
9. Practice persistence in reaching your goal;
10. Never lose money.