Following These 4 Rules Will Make You A Millionaire

November 10, 2017

Following These 4 Rules Will Make You A Millionaire

  • Becoming a millionaire takes time, and it’s easy to lose focus.
  • I’ll discuss 4 rules that should help you to achieve your long term financial goals.
  • I prefer the option on growth rather than frugality, which is an often shared method of accumulating wealth.



Introduction

Today, I’ll discuss four essential rules that will almost guarantee to put you on the path toward becoming a millionaire.

You may want to retire, achieve financial independence, buy something you’ve always wanted, or simply want to have enough to do what you love. These four rules will get you there.

Rule #1: FOCUS – HABIT

There are two main factors to becoming a millionaire. One is to focus, and the other is habit.

In life, I believe everything is about your focus and habits. Let’s start with focus.

If you have a clear path of what you need to do to get to where you want to go, and you commit, you’ve already made the most important step toward that million.

On the side of habit, you have to stick to your decision over a long period of time. It’s a relatively long way to a million and many make the first initial steps and then stray just as they were starting to get somewhere.

Now on to our second rule. The practical way to get to millionaire status.

Rule #2: INITIAL CAPITAL – Do Something To Get There, Decide & Commit

The first option to get to a million is by saving and depriving yourself of whatever fun life brings only to die rich. This is a habit that I wouldn’t recommend to anyone because I believe we humans are built to strive for more and for better, to grow and not to limit ourselves by living frugally.

Nevertheless, the saving option is easy. With a 2% yield on Treasury bonds, your savings would be eaten up by inflation and by the time you’d get to a million, you’d probably need another million just to have the same purchasing power.

But the second option is the growth option, and my personal favorite.



I’ve been frugal in parts of my life, but currently, I’m in a growth mode and hope I’ll stay there. The funny thing is that I’ve made so much more money while growing and spending, and thus investing more in myself than what I’d make by being frugal my whole life.

The first step is to grow into some initial capital to invest, and to let it grow to a million or even more. I’m now going to start talking about how to reach a million with a $50,000 capital, which is exactly what I had when I started investing.

I don’t know how you are going to get there, but I believe that anyone in the world today that speaks a bit of English can easily raise $50,000 by doing something they love. Be it an online business, side job, writing a book, whatever drives you. Remember, $50,000 might sound like a lot, but it’s just $10,000 per year if you take 5 years to get there.

Let’s now look at rule three, investing the capital. Now that you have $50,000, you have to invest it.

Rule #3: REAL ESTATE, STOCKS

The main premise for investing your initial capital is to invest for the long term. Everyone is focused on the short term and don’t care much about what will happen in the next 5 or even 10 years. That is the opportunity you have to invest your capital.

In 2009, Goldman Sachs had a price target for Amazon of $100.

Figure 1: AMZN stock price in the last 10 years. Source: Yahoo Finance.

Those who sold when the stock price reached $100 missed out on a 10-fold increase. This is where the long term focus becomes essential.

What’s also very important is that AMZN went from over $90 in 2007 to $42 in 2008, thus it nearly halved in less than a year. Nevertheless, even if you had invested at the worst moment in November 2007, you would now have more than 10 times your initial investment.

To find investments like AMZN, just look at the long term, let’s say 10 years, and put your money there and forget about it. Is it risky? Yes, but by focusing on finding 10-year winners, you can really limit your downside and increase your returns.

Secondly, what I always find mind-blowing and a great long-term investment is real estate because of the economic laws that govern the environment.

It’s easy to take out a fixed interest loan to invest and have somebody else pay your mortgage. A simple example is to invest a 20% down payment on a $200,000 property, that’s $40,000. Let’s say that real estate values double in the following 10 years, or maybe it’s better to say that your real estate value doubles because you bought a smart long term option, perhaps somewhere where the property will be in demand in the next decade. The value of the property after 10 years would be $400,000, and your mortgage payment would remain the same. If you’ve paid off half of the mortgage loan, you’d be at $300,000 in profits plus the cash you’re getting, you’d have an almost 10-fold increase in your money.

With real estate, it’s all about focus. Too many focus on short term stock price movements. Focus on the long term twice in your life, and you’re a millionaire.



Rule #4: HAVE FUN & KEEP THE FOCUS

This is perhaps the most important rule. To become a millionaire, or to just make more, we have to grow and constantly move forward. Just look at the opportunities that have come in the last 10 years, even if there was the financial crisis in the middle of it.

Have fun in life and forget about your investment. When it is 5 times what you initially put in, look for other investments or see if there is still room to grow and leave your money where it is.

Perhaps it’s best to focus on ways to create new capital to invest rather than spend so much time thinking where your next stock purchase will go.

© 2017 Investiv