MILLIONAIRE—a dream probably everyone may have thought once in life.
But while getting there is actually easier than it sounds, earning your first million isn’t an overnight success.
According to self-made millionaire and millionaireacts.com author Tyrone Solee becoming a millionaire definitely takes time—unless you’re destined to win in the lottery—and it always starts with having the right mindset.
There are more millionaires nowadays than before because getting there has become easier, thanks to favorable economic opportunities.
In fact, many Filipinos still aspire to become one and dream of that seven-figure bank balance.
“A typical ordinary Filipino is someone who supports dependents, who is earning an average income and who is renting a place for residence. These expenses, coupled with social pressure, have certainly an effect on their saving capacity which impedes them from becoming a millionaire. Therefore, being a millionaire is perceived as an achievement,” Solee said.
But what does it really take to earn that millionaire status?
Solee cited two key things: saving and investing.
Have a ‘millionaire’ mindset
“Anyone who wants to be a millionaire must first have the mindset and discipline of saving because it is the foundation of wealth. Saving involves discipline as there will be a lot of temptations to spend with our consumer-driven society.
“To increase savings, one must learn how to budget and control expenses and to increase earnings by having multiple sources of income. This may involve getting a higher paying job, doing freelance jobs or simply multiplying savings through investments.”
Say ‘no’ to instant gratification
“Filipinos must stop the mentality of instant gratification. We are always accustomed to ‘you only live once’ idea of enjoying now because we only live once. We have one-day millionaire mindset. This mentality is very materialistic and consumer-centric, which is why we always don’t have enough. Instead, we must develop the mentality of delayed gratification that involves sacrificing now and enjoying it later. We must learn financial literacy. We must develop the mindset of saving and we must learn how to invest to grow our savings.
“Since they worked hard to earn that money, they feel they are entitled to it and they can do whatever they want to enjoy it. The result is that when a certain emergency arises, they would need to borrow from friends and relatives.”
Income - savings = expenses
“Since most of us are employees, they should pay themselves first by implementing the equation ‘income less savings equals expenses.’ That is, every time they get their income from their job, they need to save first before they spend.
“Using Pareto’s Principle of 80/20, a good gauge is to set aside at least 20 percent of their gross salary first before they can spend the rest for their needs.
“With regard to expenses, a nice model to implement is the so-called envelope method.
“Once they have set aside first at least 20 percent of their salary for savings, the rest should be budgeted prioritizing the needs. This can be done by having envelopes with names on it corresponding to the expenses.
“For example, one envelope is for electric bills, one envelope is for water bills etc. Now after they had set aside for savings, they need to fill in these envelopes with the amounts due. What is left can then be used for spending on their ‘wants.’ Of course, if they can increase the 20 percent they allot for savings, the better.
“Once they implemented these steps, it will then become one of their habits and habits determine their destiny. Surely, with consistency, they can afford to retire earlier than their peers.”
Income trap mistake
“Most common mistake is the so-called income trap and these are common among some managers and leaders of the companies who earn much larger salary. When their income increases due to a promotion or they got a lump sum windfall of money from a bonus, they usually increase their expenses too. They upgrade their cars and smartphones. They buy new clothes. They renovate their houses. They go on luxury vacations. The list goes on. Little did they know that these are all liabilities piling up on their bank mortgages and credit card debts. The result is, even if they have larger income, they still end up with little or no savings at all. They are trapped by their income.”
Earn more; desire less
“Earn more by having multiple sources of income. Upgrade your skills so you can take on a higher paying job. Learn different kinds of investments so that you can make your money work for you. Desire less means you need to downsize your consumption. Prioritize the needs versus the wants. Learn how to budget and live way below your means. Don’t go broke trying to look rich.
“One of the greatest secrets of millionaires is that they have multiple sources of income. When one income stream fails, then there are still others that would give you income. Having multiple sources of income is similar to a driver driving his car on the road with a spare tire. When he gets a flat tire, he can use his spare tire to continue his journey.”
Invest in assets, not in liabilities
“Another greatest money lesson that I learned is the difference between assets and liabilities.
“In school, particularly in accounting, we are told that assets are resources or things owned by a company or individual that has economic value while a liability is an obligation or debt that needs to get paid.
“However, from the definition of Robert Kiyosaki, the famous author of the “Rich Dad Poor Dad” book, assets are anything that put money into our wallet while a liability is anything that drains that money out.
“A simple way to distinguish between assets and liabilities is to ask yourself: ‘If I lost my job, will this eat me, or will it feed me?’
“Assets will feed you, while liabilities will eat you.”