Most people that are still stuck and struggling with the day-to-day economic challenges wonder about what they need to do to become a millionaire. Some believe it is a talent or luck, while others think that one is born into it.
Despite all these reasons provided by people across the globe, the true and dependable answer remains surprisingly simple and direct: shrewd and smart money management.
Millionaires typically adopt and integrate a few simple principles of life, which play a central role in helping them lead the pack and maintain their wealthy position in society. While the rules or guidelines do not necessarily make anyone a millionaire, they serve as a guide to give people the best possible shot at achieving the most out of life.
The following money management principles will go a long way into leading any given individual, irrespective of their socioeconomic status, to a life of self-made millionaire characterized by luxury and comfort:
• Invest Wisely
• Have Rainy Days Fund
• Avoid Leverages
• Avoid Interest Rates
The stories people read in the news sources about others acquiring affluence in areas that appear and sound complicated, often make the struggling start believing that investing in things outside their everyday life and experience is the sure way to getting rich. According to Corley (2018), a renowned financial planner, this is just a mere assumption, which is wrong and misleading.
Individual millionaires possess the inherent characteristic of investing where in areas that they have a deep understanding in. Before they channel their funds to a given business project, millionaires must gain the much-needed understanding of the project’s ins and outs. In this way, they remain well positioned to spot and exploit good investments and avoid the bad ones.
This wise approach to investing follows their acknowledgement and appreciation of the fact that money at hand should grow. Rapoza (2014), a business reporter with over 20 years’ experience, asserts that cash is king for millionaires.
Referring to a recent survey by Legg Mason, Rapoza (2014) reports that a millionaire will always identify and invest in lucrative, long-term ventures, including real estate, bonds, non-traditional investments, and equities. In this regard, when ready and about to invest, one should seriously consider gaining a proper understanding of potential investments.
Have the Rainy Days Fund
Most businesses worldwide become bankrupt for lack of emergency funds. Since people attain their wealthy status by engaging in different business activities, millionaires understand that success lies in the ability to prepare adequately for emergencies.
Rather than put plans on hold and take debts to recover losses, they avoid such risks by securing their investments through comprehensive and effective insurance plans. This way, when faced with inevitable curve balls of life, millionaires can effectively handle the problems and continue running their money-generating activities as usual.
Most importantly, they always fill back the rainy-day fund immediately after recovering from the loss.
Some people strongly believe that the only way to get ahead is borrowing money from different financial institutions with the sole purpose of magnifying their gains. On the contrary, Rapacon (2018), a key contributor to US News on financial issues and related topics, argues that millionaires know that too much leverage as well as debt eat into their wealth.
When faced with bad times, leverage magnifies losses, reducing gains. With this acknowledgement, a millionaire typically takes the slowest possible but a steady path to accumulate wealth. They only go for leverage or debt when the prevailing condition makes it a necessity.
Beware of Interest Rates
According to The Conversation (2018), the interest rates tend to give people more problems than debts. In fact, the high interest rates in developed and underdeveloped economies remain inextricably linked to the rise in mental conditions and diseases. The secret of becoming a millionaire revolves around interest avoidance.
Interest payments, like leverage, play a pivotal role in undermining saving and investment because they eat away gains or profits. Most millionaires are smart, as they save for big purchases, avoiding consumer loans and credit cards at all cost.
The Bottom Line
It is evident that most myths directly and indirectly associated with becoming a millionaire are misleading. Attaining the millionaire status does not necessarily come by chance.
Millionaires have crucial money saving techniques and follow certain rules in life, including avoiding interest rates and leverage, and investing wisely. The money saving principles discussed present individuals with the vital information necessary for becoming self-made millionaires.