https://www.afr.com/wealth/personal...oils-down-to-a-3-step-formula-20191023-p533b4 Tanza Loudenback Oct 23, 2019 — 8.53am Key Points John, who runs the personal-finance blog ESI Money and doesn’t share his last name online, has spent the past few years interviewing millionaires. John was a business executive for 28 years before he retired at age 52 with a $US3 million net worth. Now that he’s interviewed 150 millionaires, he says the formula for getting rich is clear: Increase your income, control your spending, and invest early and often. The key element in each step is time – the earlier you start, the better. Adopting the habits and strategies of rich people can guide you towards wealth, as long as you’re willing to put in the work. John, who runs the personal-finance blog ESI Money and doesn’t share his last name online, has spent the past few years interviewing millionaires. John was a business executive for 28 years before he retired at age 52 with a $US3 million ($4.4 million) net worth. There are three elements to getting rich: earning, saving, and investing. Shutterstock.com John says there are three elements to getting rich: earning, saving, and investing. Now that he’s interviewed 150 millionaires, he’s figured out exactly what it takes to be successful at each step. 1. Increase your earning potential Looking back, most millionaires realised that earning was more important than they originally thought, John found. John wrote. “This means considering both growing your career as well as developing a side hustle. Over time they will both increase and be what fuels strong net worth growth.” Many of the millionaires “started with very minimal paying jobs” and worked hard to develop the skills needed to increase their salary, John said. They also diversified their income, most commonly with investment dividends, side hustles, and income-producing real estate. 2. Control your spending One of the most surprising patterns to John was that the vast majority of millionaires don’t live by a budget. But that doesn’t mean they never did. “Developing a spending self control is vital to becoming wealthy and a budget is the best tool for doing so,” John wrote. “Even if it’s just for the first few years of your financial journey, develop and live on a budget at least until you know you can manage your spending impulses.” Despite not determining their spending for the month or year, many of the millionaires still track where their money goes, John said. The point is to save and invest as much as possible, and you achieve that by keeping expenses and discretionary spending low. Once you’re spending less than you earn, saving automatically, and investing prudently, a self-control mechanism takes over and it’s no longer necessary to budget every dollar. 3. Invest now The maths proves that time is on your side in investing. “Sock away as much money as you can as early and as often as you can to get compounding working for you,” John wrote. He found that, like himself, millionaires overwhelmingly favour simple investments, like index funds. They made their fair share of mistakes early on, but most realised quickly that they aren’t killer Index funds are a type of passive investment that exposes investors to a broad selection of stocks in order to diversify and ultimately minimise risk. They’re low-cost and regularly outperform actively managed funds. One of the easiest ways to invest in index funds is through your retirement accounts, such as a 401(k) or IRA (superannuation in Australia). “Over time you can keep at it or look to expanding into real estate depending on your goals and interests,” John wrote. “After that, it’s simply time. Give it long enough and one day you wake up wealthy.”
I literally read or see an article like this posted 3-4 times a day. Rinse and repeat. Also find out that most of these articles are all written by individuals are between late 20s and early 40s who alllllllllll seem to have a personal financial blog. Yep. They became millionaires and started a financial blog, that's all these people do is write articles about person financial freedom and sell either a book or a seminar. . Blah blah blah.....
Another thing to be careful about, is accidents. They can be a large drain on finances, also live a healthy lifestyle as much as possible in an attempt to avoid large medical bills.
Loaf of bread, 2 Mil very good price, country has more billionaires than the USA!! Hopefully you had massive debts, cause those 20K debt are worth a small bar of chocolate
Should always be net of the median value of a home in the area you need to live in per your family/job/life. We all start life short one house. Own one without debt, we square. Own two without debt, we are long one. The number one benefit of some wealth is not being burdened with unproductive debt. That might seem obvious. But the money you have isn't worth as much as the debt that you do not have.
And how many people do we know in real life who become millionaires and then write blogs as their main remaining purpose in life. None. Not a single one. I don't know a single person in my life who had the aspirations and worked hard and was intelligent and made a lot of money early on and then suddenly completely changed tack, lowered all his or her aspirations in life and motivations and became a full time blogger. I honestly believe that 9 out of 10 of those guys who claim they made more than a million and now are bloggers are outright liars. Not that I find making a million or more particularly hard, especially when someone is in his late thirties or older. But it simply does not compute. Like a trading education seller who never made a dime but claims he can teach the masses profitable trading.
My main gripe with articles like this is that they often unknowingly serve, like lemmings, the deep state, the true operators of America. In order for stock valuations to hold it requires ever more buyers and fresh meat to join in. Wall Street and white shoe America is scared of millennials and younger ones because they don't invest as much as previous generations (not that they could even if they wanted to). Demand has been constantly dropping. It requires fresh demand to grease the rat wheels. But and here is the big but: historically it has never been advantageous to buy at lofty highs in the market. One may argue that retail investors are very poor at market timing and that is true. Some also counter that long term holdings have produced 6-7% equity returns per year which would be terrific if that continued. Those returns were generated when America was the lone wolf and almost all innovations out of the US directly fed into higher stock valuations. That does not hold true anymore. Also, while Warren Buffet is a long term investor he never buys at high market valuations and rather invests in stable companies when valuations are low due to external temporary factors. I came across a research paper that showed that one would generate for superior rturns over just long term holding and fractional investing by * saving up cash and investing it in tbills and wait until * stock markets correct to the downside and to then buy a chunk at 20-30% discounts. One perfect example was December 2018. It does not take 10 years for 10-30% corrections to exhibit themselves. Waiting and then investing in those corrections generates far superior returns rather than keeping on buying at fixed intervals regardless of market valuations. Anyway, that is what I have been doing over the past 15 or so years and it served my retirement account very well. Investing through any subset of the past 15 years produced returns in the region of 6.7% per annum. That is only taking reported inflation into account. It gets worse when investing cash at fixed intervals. Investments at times when markets are depressed produced much higher returns,especially over the past 15-20 hears
"John was a business executive for 28 years before he retired at age 52 with a $US3 million net worth." So basically $300,000 average a year in earnings. He sat in a cubicle (eventually a private office, and then windowed office). Hundreds of thousands of people do that in the USA. And many of them live frugally. If you retire at 52 with a net worth of 3 million, you don't then go out and spend $2,000,000 on a Bugatti because you feel you are "rich". Common sense on #2, yes?