“Wealth consists not in having great possessions, but in having few wants!”
Who doesn’t want to be a millionaire? Everyone does, but very few are. Believe it or not, this is what it truly takes to become one, instead of only dreaming about being one:
Rule 1: THINK LONG TERM
Stay put – the “power of compounding” does wonders! This means that what you earn on your initial investment is also further invested, and earns interest. In the long run, the results are phenomenal. Here’s an example: if you invest Rs. 100 at 10% for 10 years, simple interest would give you Rs. 200 back after 10 years (Rs. 100 original investment and Rs. 100 as interest (Rs. 10, or 10% of Rs. 100 being for each year)). However, the magic of compounding can give you Rs. 1,083 back at the end of 10 years! That is the difference. When you invest, think long-term. Make compounding your best friend!
Rule 2: COMPOUNDING APPLIES TO EXPENSES AS WELL!
The power of compounding is magical – but it applies to expenses also. Don’t think that an expense of Rs. 100 a month is “just Rs. 100 a month.” Instead, you see it as stealing Rs. 1,200 from you every year and Rs. 17,300 from you every decade – having Rs. 17,300 extra, for each time you don’t spend Rs. 100, can remove years from your working life. From now on, to calculate any expense long-term, use these two formulas:
- To calculate a weekly expense compounded over ten years, multiply the price by 752.
- For a monthly expense, multiply by 173.
This will help you decide whether it is worth splurging, or no!
Rule 3: LIVE WELL BELOW YOUR MEANS
Frugality is probably the number one thing most wealthy people have in common. Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Believe it or not – majority of the millionaires live on 10% of their income, or less.
Rule 4: FINANCIAL INDEPENDENCE IS MORE IMPORTANT THAT DISPLAYING STATUS
Did you know that people spend money they don’t have just to look good in front of other people? Very often, people are indoctrinated with the belief, via TVs and advertisements, that “those who have money spend lavishly” and “if you don’t show it, you don’t have it.” Don’t fall for it – it is a trap. Advertisers spend billions hiring psychology experts just to make you think you want to buy something you don’t need. Stop trying to appear wealthy. It’s much better to become wealthy instead.
Rule 5: ALLOCATE YOUR MONEY, AND YOUR TIME, TOWARDS BUILDING WEALTH
On an average, millionaires spend significantly more hours per month studying and planning their future investment decisions, as well as managing their current investments, than high-income non-millionaires. Here’s why: building wealth is the result of studying wealth and applying those principles. Invest your time in learning and studying how to save or make more money.
Follow these rules, and you’ll be there, too!
Click here to know why we keep our money idle, and how we can make money work for us, instead of us working for money:
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