Becoming a millionaire most likely doesn’t just happen to you - it takes planning and perseverance. It may surprise you to learn that four out of five millionaires are self made, own their own business (typically ordinary), consider themselves to be entrepreneurs and do not lead glamourous lifestyles. Here are some steps you can take to grow your net worth (source: T. Stanley, The Millionaire Next Door).
Live below your means Well duh! Discipline yourself to save something from every pay period in order to accumulate money to work for you. Have a budget and work your budget every month.
Save a minimum of 10% Accumulate wealth by saving and have the discipline to increase savings every year.
Invest your savings in businesses Savings should be put into growth-oriented investments. We all have the opportunity to own businesses by buying stock. Stock prices can be volatile but minimize the volatility by owning stocks through diversified mutual funds. Investing on a regular basis allows you to take advantage of stock market downturns through dollar cost averaging.
Don’t follow the herd Stock market downturns are often great buying opportunities. This is when many investors sell stocks instead of buy. Said Warren Buffett in an op-ed article for the Wall Street Journal, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.”
Hire a financial adviser You often need an independent third party to help you make the right financial moves - especially during times of uncertainty. A good financial adviser will help you develop a good investment strategy, keep you focused and help you keep your emotions in check.
It takes discipline to live below your means, save and invest. One of the millionaires interviewed by Dr. Stanley never made more than $60,000 per year, but said, "I have accumulated most of my net worth by living below my means - I have everything I want, but I have learned not to want too much."