Steve Martin once delivered an opening monologue for Saturday Night Live in which he answered the age-old question “How can I be a millionaire?” His answer was fairly simple and straightforward,Who Wants To Be A Millionaire? Articles “First… get a million dollars.” If at this point you can’t help but feel that Mr. Martin performed an extraordinary feet of oversimplification that night, then I urge you to read on, and hopefully, by the time you finish this essay, you’ll be convinced that becoming a millionaire isn’t nearly as difficult as everyone makes it out to be. Through a simple three-step process which I will lay out clearly, the keys to the millionaire’s club will be shown to be available to anyone willing to merely reach out and grab them.
Before you begin any financial strategy, you must realize that there is a vast difference between what you earn, what you own, and what you’re worth. The amount of money that you earn from going to work everyday is known as your income, and has relatively little to do with your financial status. The sum of the value of all of your possessions is known as your wealth, and is a closer guideline. Net worth is the real gauge of how close you are to becoming a millionaire, as it is the value of all of your assets, subtracted by your total debt. Now that you see that having a large income is not the end all guarantee of financial security, let’s move quickly to what you can millionaire winners due to get that million dollars that Mr. Martin so accurately described as the first step to being a millionaire.
The first phase in your journey involves understanding that time is of the essence. For those who start investing at an early age, the power of compound interest turns time into their greatest ally in wealth-building. Once you have been investing for long enough, your investments will begin to consistently, and eventually rather impressively, outperform your paycheck. This is true no matter what level of income you have already achieved. If you have an annual salary of $50,000, and invest only 10 percent of that each year, earning a 10% annual rate of return on your investment, in 25 years you will have amassed over half a million dollars. At this point you will be earning over $50,000 each year in interest. Continue saving at that rate for another 10 years and you will find yourself earning $150,000 annually in interest. 10 percent of your income may seem like a lot, but if you can find an investment which directly debits the money from your paycheck each week, you will be surprised to find yourself able to live without it. Another way to ease the pain of that 10% decrease in take home pay is to use part or all of it as an excuse to lower your tax burden, which I will discuss later. Now that you’re salting away 10 percent of your income each week, and can’t possibly imagine affording anymore, let’s talk about how you can make one of your largest living expenses work for you rather than against you. I am of course talking about the money that you spend providing shelter for yourself and your family.