I Want to Be a Millionaire
I started in the financial services industry when I was 20 years old, and at the time, I had a magnet on my refrigerator that said, “How can I be out of money if I still have checks?” I had a lot to learn to bring me where I am today.
In the early days of my career, I met with a lady preparing to retire. She spent her lifelong career as a secretary for a well-known beverage company. Her top pay over her life-long career didn’t knock my socks off, but do you know what did—She saved one million dollars for retirement. How could that be? At 20 years old, I thought you needed to be a movie star or some big wig CEO in order to amass a fortune of that size. Twenty plus years ago, one million dollars was a lot more money than today, but the principles remain the same.
I have learned a lot over my career. There is no magic bean to become a millionaire. Instead, it is a slow, deliberate and rewarding process. Here are three steps to get you headed in the right direction.
Create an Emergency Fund
Create an Emergency Fund- We are in the middle of a global pandemic. At this point, I don’t have to tell you that bad stuff happens. Sometimes when it rains, it pours. Having a reserve fund helps you get through those bad times without having to dip into your funds set aside for longer-term goals. A common rule of thumb is to have 3-6 months' worth of your salary set aside for those rainy days. I don’t always use the guide of several months’ salary, but given today’s events, six months doesn’t seem like a bad idea. I do think each person should look at their particular situation. Consider what kind of emergencies could throw you off track; loss of employment, health care needs, accidents, emergency travel, and even upcoming planned expenses. Make sure you have funds to cover those events, even if multiple emergencies come up at one time.
Start Saving and Investing
It is simpler than you think; creating the habit of saving is half of the battle. At 20 years old, I could only afford to save $5 a week, and on some weeks, that goal was only accomplished by finding the change under the couch cushions. I pledged that every time I had a windfall of money, either from a pay increase, bonus or gift, half went to savings, and the other half went to increase my living standard. That 5 dollars a week turned into $10, then $20, and so on. The other half of the savings battle comes from the power of compounding. Albert Einstein once said, “He who understands it earns it….” In simple terms, compound interest means that you start to earn money on your money, which multiples your money at an accelerated rate. Think of a snowball rolling down a hill. It starts small, but it keeps getting bigger and bigger as it rolls down the mountain. Imagine what your investments could look like over a long period.
Learn to Budget
It’s hard to believe that the word budget isn’t a four-letter word. Most people who make a budget want to accomplish more with their money. When you set goals for what you would like to accomplish, you can align your budget around the importance of achieving those goals. Start with itemizing your income, how much do you have coming into your household. Then consider your expenses. Today several apps can help account for your spending. Tracking your expenses over some time will help you get a clear picture of your spending. Right now is the perfect time to do it. If you are anything like me, the stay-at-home order cut my spending to a fraction of what it usually was. In all honesty, I don’t miss everything that I was spending money on. Don’t forget to think about irregular expenses such as expenses you pay on an annual basis, birthdays, or holidays. Ensure that you are spending less than you are making, and include room for savings and investments.
If I can go from the mentality of “How can I be out of money if I still have checks” to a CERTIFIED FINANCIAL PLANNER™ writing about how to save a million dollars, anything can happen? Focusing on these three tips can help put you on the right track to saving a million dollars. These types of goals don’t happen overnight, but with a disciplined approach, you can achieve your savings goals.
Good stories help to inspire people. If you have a good financial planning story, I would love to hear it; share it with me at firstname.lastname@example.org.
This material is provided as a courtesy and for educational purposes only. Investing involves risk including loss of principal. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. This article contains links to articles or other information that may be contained on a third-party website. River City Wealth Management is not responsible for and does not control, adopt, or endorse any content contained on any third-party website. The information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. Past performance is not indicative of future results.