Becoming a millionaire from scratch looks like a huge challenge to most people. Reality is, if you are making an average of $25,000 annual income, you are a life-time millionaire if you keep making that much until you retire. But what happens to this money is that it’s always spent completely, especially with almost everybody just struggling to make ends meet. The increasing prices with no matching increases in salaries it’s not likely to make any progress towards touching that million dollars at one point.
That’s why it is important to understand one fact that’s considered the rule number one to become a millionaire: live cheap, act poor, save.
What happens is that most people in North America eat their lunch in restaurants, change their cars more frequently, go out for dinners to expensive places, buy stuff they don’t really need, spend insanely on gambling, alcohol, smoke, and lottery tickets (which are by the way the most lucrative industries in North America), and end up with huge debts that they can’t pay.
Making your lunch sandwich can save you up to $1300 per year. Going an extra year or two with your car are going to save you at least $1800 per year. Giving up smoking, alcohol, gambling, and lottery tickets can give your finances a huge boost.
What to do with this saved money? Simple, invest it. You don’t need to be a stock market savvy to make an investment. Go to your local bank and ask for a financial adviser to discuss how to invest the money you saved in your 401K or RRSP. If you can save $500 of your monthly salary that might mean a whopping $1000 investment in your retirement, given that your employer usually matches your investment, and both your contribution and your employers are cut from your salary before taxes, which means you might end up giving up $400/month only.
The main cause of the current recession is that people in North America tend to spend even more than they have, and end up sinking in unmanageable debts. When you start thinking about saving more than about the stuff that you want now, even if you don’t need them, you’re on your way to become a millionaire. If you only do the above investment and keep doing it every single month from now on for the next 30 years you can end up with $3-4 millions for your retirement.