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How To Go About Making Your First Million

Making your first million might seem like an impossible dream, but I’ve seen enough people from all walks of life do it to know it’s not. Anyone can make a million. Here’s how.

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The stepping stones to making your first million are actually the foundation blocks for achieving financial freedom — something most of us are striving for. While it requires a tremendous amount of luck to become very wealthy, anyone can achieve financial freedom.

The secret is not how much you earn or how much you have but rather how much you spend. If you can control your spending and live a sustainable life, you can achieve financial freedom relatively quickly.

Three steps to financial freedom

I believe there are three steps to financial freedom, these steps need to be followed in a specific order to be sure of reaching your goal. I will explain each step in more detail, however it is worth noting that very few people manage to achieve the first two steps by retirement age.

Living with too much debt is the primary reason that most people fall behind the few who get it right.

Your steps to financial freedom:

  • Be debt-free
  • Have an emergency fund
  • Ensure your income from assets covers your expenses.

Related: Becoming A Self-Made Millionaire: 5 Things To Do To Become Wealthy

1Be debt-free

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Most of us will need to borrow money early in our careers. Usually we need debt to buy our first vehicle and home, some people might also need to borrow to start a business. Debt can be a wonderful tool for wealth creation if it’s used to buy assets that will appreciate in value at a good growth rate.

This can be called good debt and should be used wisely. However you also get bad debt, which is usually incurred on your credit card, overdraft or via a personal loan and is used to buy items that have limited resale value.

Many people use debt to buy clothes, shoes, furniture, holidays and entertainment. This is pure wealth destruction as this debt is enormously expensive and you are only deriving a short-term emotional benefit from these purchases. If you cannot buy these goods with cash, you simply should not buy them at all.

2Have an emergency fund

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Once you have eliminated all your bad debt and have a limited amount of good debt, you should start building up your emergency fund. This is money that is available at short notice to cover unforeseen expenses. If you don’t have an emergency fund, how will you pay for damaged car tyres or pay an insurance excess when your geyser bursts at home?

In most instances, you will need to use your credit card or some other form of debt. This only sets you back again as you now need to pay off debt before you can get ahead. I think an emergency fund should be three to six months’ of your expenses.

If you spend R20 000 per month then your emergency fund should be worth R60 000 to R120 000. This money can be stored in your access bond, a money market account or savings account.

Related: 20 Habits Holding Me Back From Being A Millionaire

3Have investments that can generate enough income to cover expenses

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You should only start building up your investments once you have finished the first two steps. Unfortunately there are no investments that are guaranteed to grow faster than the interest charged on a credit card or overdraft.

This means there is no point building up your savings and investments when you owe money on your credit card. You should aim to build up an investment portfolio that is 20 times the amount of your annual expenses. If we assume that you spend R20 000 every month, this is equal to R240 000 per year.

If you want to be financially free, you will need at least R4,8 million of investments. I would also suggest that you have extra capital to cover additional, unplanned expenses, so you should aim for R5,5 million. This money should be invested in a range of investments that include cash, bonds, property and shares.

With modern investments you can buy all of these different types of assets in one portfolio. This could be in the form of a balanced unit trust or share portfolio with exchange traded funds (ETFs).

The best way to build your investment portfolio is by developing a savings habit where you spend less than you earn every month so that you can save the difference. Ideally you should save at least 15% of what you earn every month. For those who are really serious about achieving financial freedom even earlier, aim for 33% of your earnings.

Related: 25 Leadership Lessons From Millionaire Business Owners

Many entrepreneurs will struggle with this as they (correctly) argue that their capital is best invested within their businesses. I agree with this view in the early stages of a business’ life. However, once the business starts to stabilise and generate sustainable profits, the business owners would do well to draw a portion of the profits and invest them outside of the business.

This is a form of risk management where you can create an asset that is unrelated to your business. The ideal combination would be a great business investment that continues to generate real wealth while you have an investment portfolio that provides income certainty.

This allows you to continue managing your business with relative freedom while ensuring that you and your family have relative financial security.

What you spend determines your future

It is pointless allowing your lifestyle costs to escalate at the same rate as your income escalates. If you do not control your personal expenses so that your income increasingly exceeds your costs, you are not creating the savings momentum required to build up your investment capital.

This is a problem faced by many high income earners who spend large amounts on vehicles, leisure properties and other lifestyle assets. I believe that you should have a balance in life, you should derive enjoyment from your efforts but it should be balanced with the need to build your asset base so that you can maintain a lifestyle in the years ahead.

Spend time on investments with your spouse

Financial stress is one of the biggest causes of divorce. It is noteworthy that many people who have achieved financial freedom at an early age are married and work in partnership with their spouse when it comes to financial decisions.

I think it is nearly impossible to create wealth if you and your spouse are not on the same page with regard to spending and saving. It’s the same as two horses trying to pull a heavy load but one horse is moving in the opposite direction to the other. The end result is that a lot of effort is expended but no progress made.

Related: 3 Truths Every Millionaire Knows About Money

Don’t be afraid to get your hands dirty

We all know the stories of the tech billionaires who spent a few months working in their parents’ garage and managed to create sufficient wealth to feed a small country for decades. These are great and inspiring stories but they represent a very small percentage of the people who have tried to achieve the same result with no success.

People who embrace more unfashionable businesses offering services that people need on a daily basis are more likely to achieve sustainable financial success. For example, everyone needs a plumber, electrician, painter and handyman from time to time.

I realise there are very few parents who will brag to their friends that their school-age son is planning on becoming a plumber but there are many plumbers who have achieved financial independence comparatively early. Their contemporaries who became doctors and lawyers might have had more aspirational careers but many of them are still forced to sell time every day to cover their lifestyle costs without being able to build their savings.

Related: 15 Wise Money Quotes From Millionaires And Billionaires

As many business owners will tell you, it may not be glamorous owning your business, but it can be enormously rewarding when you start to build an asset of value that can be sold.

This is especially valuable if the business can sustain itself without the daily input of the owner or founder. Personally, I would be advising young people to start focusing on careers that will enable them to build the skills to own their own businesses one day.

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Personal Finance

The 3 Decisions That Will Change Your Financial Life

There’s nothing worse than a rich person who’s chronically angry or unhappy. There’s really no excuse for it, yet I see it every day. It results from an extremely unbalanced life, one with too much expectation and not enough appreciation for what’s there.

Tony Robbins

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Without gratitude and appreciation for what you already have, you’ll never know true fulfilment. But how do you cultivate balance in life? What’s the point of achievement if your life has no balance?

For nearly four decades, I’ve had the privilege of coaching people from every walk of life, including some of the most powerful men and women on the planet. I’ve worked with presidents of the United States as well as owners of small businesses.

Across the board, I’ve found that virtually every moment people make three key decisions that dictate the quality of their lives. If you make these decisions unconsciously, you’ll end up like the majority of people who tend to be out of shape physically, exhausted emotionally and often financially stressed. But if you make these decisions consciously, you can literally change the course of your life today.

Decision 1: Carefully choose what to focus on

At every moment, millions of things compete for your attention. You can focus on things that are happening right here and now or on what you want to create in the future. Or you can focus on the past.

Where focus goes, energy flows. What you focus on and your pattern for doing so shapes your entire life.

Related: 10 YouTube Channels Every Entrepreneur Should Follow

Which area do you tend to focus on more: What you have or what’s missing from your life?

I’m sure you think about both sides of this coin. But if you examine your habitual thoughts, what do you tend to spend most of your time dwelling on?

Rather than focusing on what you don’t have and begrudging those who are better off than you financially, perhaps you should acknowledge that you have much to be grateful for and some of it has nothing to do with money. You can be grateful for your health, family, friends, opportunities and mind.

Developing a habit of appreciating what you have can create a new level of emotional wellbeing and wealth. But the real question is, do you take time to feel deeply grateful for your mind, body, heart and soul? That’s where the joy, happiness and fulfilment can be found.

Consider a second pattern of focus that affects the quality of your life: Do you tend to focus more on what you can control or what you can’t?

If you focus on what you can’t control, you’ll have more stress in life. You can influence many aspects of your life but you usually can’t control them.

When you adopt this pattern of focus, your brain has to make another decision: 

Decision 2: Figure out, What does this all mean?

Ultimately, how you feel about your life has nothing to do with the events in it or with your financial condition or what has (or hasn’t) happened to you. The quality of your life is controlled by the meaning you give these things.

Most of the time you may be unaware of the effect of your unconscious mind in assigning meaning to life’s events.

When something happens that disrupts your life (a car accident, a health issue, a job loss), do you tend to think that this is the end or the beginning?

If someone confronts you, is that person insulting you, coaching you or truly caring for you?

Does a devastating problem mean that God is punishing you or challenging you? Or is it possible that this problem is a gift from God?

Your life takes on whatever meaning you give it. With each meaning comes a unique feeling or emotion and the quality of your life involves where you live emotionally.

I always ask during my seminars, “How many of you know someone who is on antidepressants and still depressed?” Typically 85% to 90% of those assembled raise their hands.

How is this possible? The drugs should make people feel better. It’s true that antidepressants do come with labels warning that suicidal thoughts are a possible side-effect.

But no matter how much a person drugs himself, if he constantly focuses on what he can’t control in life and what’s missing, he won’t find it hard to despair. If he adds to that a meaning like ‘life is not worth living,’ that’s an emotional cocktail that no antidepressant can consistently overcome.

Yet if that same person can arrive at a new meaning, a reason to live or a belief that all this was meant to be, then he will be stronger than anything that ever happened to him.

When people shift their habitual focus and meanings, there’s no limit to what life can become. A change of focus and a shift in meaning can literally alter someone’s biochemistry in minutes.

So take control and always remember: Meaning equals emotion and emotion equals life. Choose consciously and wisely. Find an empowering meaning in any event, and wealth in its deepest sense will be yours today.

Once you create a meaning in your mind, it creates an emotion, and that emotion leads to a state for making your third decision:

Related: 13 Habits Of Self-Made Millionaires You Could Adopt Today

Decision 3: What will you do?

The actions you take are powerfully shaped by the emotional state you’re in. If you’re angry, you’re going to behave quite differently than if you’re feeling playful or outrageous.

If you want to shape your actions, the fastest way is to change what you focus on and shift the meaning to be something more empowering.

Two people who are angry will behave differently. Some pull back. Others push through.

Some individuals express anger quietly. Others do so loudly or violently. Yet others suppress it only to look for a passive-aggressive opportunity to regain the upper hand or even exact revenge.

Where do these patterns come from? People tend to model their behaviour on those they respect, enjoy and love.

The people who frustrated or angered you? You often reject their approaches.

Yet far too often you may find yourself falling back into patterns you witnessed over and over again in your youth and were displeased by. It’s very useful for you to become aware of your patterns when you are frustrated, angry or sad, or feel lonely. You can’t change your patterns if you’re not aware of them.

Now that you’re aware of the power of these three decisions, start looking for role models who are experiencing what you want out of life. I promise you that those who have passionate relationships have a totally different focus and arrive at totally different meanings for the challenges in relationships than people who are constantly bickering or fighting.

It’s not rocket science. If you become aware of the differences in how people approach these three decisions, you’ll have a pathway to help you create a permanent positive change in any area of life.

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Personal Finance

7 Steps To Achieve Financial Freedom

Achieving financial freedom doesn’t necessarily mean becoming filthy rich – not that that hurts.

Brian Tracy

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In this video, Entrepreneur Network partner Brian Tracy explains the seven steps you need to take to achieve financial freedom. Now, financial freedom doesn’t mean becoming filthy rich – lottery winners go bankrupt all the time. Instead, financial freedom is about becoming disciplined and using your money in a way that ensures you can live the sort of life you want both now and in the future.

Related: 5 Qualities Of Successful Entrepreneurs

That’s why the first step isn’t about getting a lot of money. Instead, it’s about teaching yourself to think positively about money. That way, you’ll be in the right mindset to move forward.

Click play to learn more.

This article was originally posted here on Entrepreneur.com.

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Personal Finance

4 Ways To Become A Millionaire Even When You Start With Little

It costs nothing to take advantage of the limitless opportunities online.

Timothy Sykes

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The hardest part of becoming successful is getting started to begin with. But despite the challenges ahead of you, there’s a way to become a millionaire when starting with little. I’m going to show you four reasons why you can become a millionaire with just a small investment.

1First focus on learning, not big gain

Education is your greatest weapon. Focus on learning in the beginning. Don’t make the mistake of focusing on making huge gains in the beginning. Learn everything you can because this is how you build the foundations for long-term gains.

They say that if a millionaire goes bankrupt they’ll nearly always be able to get it back. And that’s because they might have lost their money, but they have the knowledge of how to get back to where they need to be.

Related: 21 Choices Millionaires Make That You Aren’t Making But Should Be

2You can learn loads about any topic online

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I’m grateful for the internet. It’s the single biggest library in the world. You’re reading this article right now and you’re acquiring knowledge you wouldn’t have been able to acquire 40 years ago. Use the internet to its fullest extent, whether that’s through reading books, browsing articles or watching video tutorials.

Set some time aside every day to learn something online. It could be a video series or a favorite blog. When you get into the habit of learning regularly you’ll find that you advance much faster.

3Focus on the niche you love

These days you can learn about anything and target the niche you’re passionate about. This is what I was able to do with penny stocks. I found a gap in the market and provided knowledge to people who wouldn’t have otherwise being able to access this sort of information.

You can do that with absolutely any niche. When you find a niche you’re passionate about and you use the reach of the Internet you start to make huge gains.

4Prove your expertise by creating free content

Your reputation as an authority is the new business card. There’s a reason I created a penny stock guide and made it free for all. You may have already seen ads for it on social media. The way to succeed with little is to create a reputation through your content.

It’s the gateway to success because through free content you start to build relationships with others who value your work. And from there everyone gets richer.

Related: How To Become A Millionaire, Explained In 1 Minute

You can do lots with a little

The days when you needed a huge investment to become successful are long gone. These days you can do so much with just a little. Find what you love, advance your knowledge in that area, and create a product that fulfills a need. Finally, work on building up relationships through portraying yourself as an authority on your subject.

Combine everything together and you can accomplish anything.

This article was originally posted here on Entrepreneur.com.

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