At first glance, the construction of a net value of $ 1 million may seem inaccessible, but this is more realistic than one can imagine. Your annual income certainly plays a role, but the way you split your savings really matters more than your salary. The best cocktail to reach the million? A solid work ethic, responsible spending habits and wise investment.
Achieving this goal of course requires many sacrifices.
The concept of profit margin
A profit margin is not strictly reserved for companies . This also applies to individuals. “By increasing the gap between what you earn and what you spend, you end up with a profit exactly the same way a business gets a profit. This benefit can then be used to pursue long-term financial objectives.
To reach specifically a million dollars, you will have to increase your savings rate much more than 5 to 15%. The hardest part is to keep half of your income and make tough choices to defer current spending in exchange for future financial success. For families with two incomes, it is possible for example to live on a single income, to save and then invest the other wages. But then, how to learn to invest, create a plan and stick to that.
Start small and have patience
Avoid making transactions on your investments or from your investments. Create a solid investment plan, invest over the long term to become a millionaire. Those who buy and sell more often tend to underperform compared to those who buy and hold, according to Vanguard Research.
The story of Chipotle illustrates this. After finishing culinary school in 1993, Chipotle founder Steve Ells wanted to open a refined restaurant. He lacked funds for his large-scale project. he then asked a small loan to his father and opened his first Chipotle, to raise funds for his exclusive restaurant. After selling 1,000 burritos in the first month, he was able to save enough to launch his high-end restaurant. its success was launched with the popular chain of restaurants Chipotle Mexican Grill. Also, plan to fail along the way. Do not be surprised if there are bumps on the way before reaching the million.
Getting rich: a question of mathematics
With the help of a simple calculator one can know how much you want to invest with which final benefit.For example, you can calculate that if you invest 500 € per month in a stock market fund, or a startup and earn an average return of 7% assuming an inflation rate of 2% it will take 36 years to become a millionaire. If you start at the age of 25, at the age of 61, you will be a millionaire. If you start later, you will have to save and invest more. The safer the investment will be the less it will yield and the more you will have to save. But what is certain is that it will take time. Fear and impatience can be your worst enemies. Starting a business and developing it to succeed does not happen overnight.
Making your first million will often take longer than making your second. Whether through building a business, or years and years of backup, the first million is often the most difficult. Stay engaged, stay patient and stay focused on your goal. In the book, Millionaire Next Door, the award-winning authors Thomas J. Stanley and William D. Danko studied how individuals become rich and their results are not surprising: those who become rich are those who best manage the gap between Income and Expenses Realistically think about it: you can not create wealth if you spend everything you earn, or worse, spend more than you earn. You do not need to be the next Richard Branson to make your first million. This might seem obvious, but if you want to make your first million, choose a trade that will earn you more than you spend on. If you work just enough to pay rent, food and transportation it is unlikely that you would get rich. No need to be brilliant to become a millionaire, but it is necessary to be disciplined, hardworking and creative.
Find the idea to monetize
Another difficult phase to assume is abandoning free time and leisure to pursue its goal. If you want to make your first million dollars: Do not endure with consumer credits. If you do not have money to buy something, then you do not need it. Always be alert to progress intellectually. Learn the skills to excel in your chosen activities. The challenge of having a brilliant idea is to be able to monetize it. No matter if it is a product or service, as long as people are willing to pay for the benefit offered. For example, Spanx founder Sara Blakely became the youngest female billionaire in the United States by inventing flattering underwear to wear under white pants. Its net worth is currently $ 1.04 billion, according to Forbes. The creator of Beanie Babies, Ty Warner, has accumulated a fortune from her stuffed animal empire. He has judiciously created a fairly expensive range of products and sold it in limited quantities, which has resulted in a growing popularity of its products. Forbes estimates the net worth of Dakin Toy Company’s representative at $ 2.7 billion. Perhaps your invention solves a problem encountered by many or amuses the masses. Anyway, people are willing to spend money on something that adds value to their lives.