Hey, do you know what it takes to become a millionaire?
How do they think, act and save differently
compare to the average people?
In today’s video,
I am going to share how do the rich get richer,
and what their secrets are?
so that one day you may become a millionaire too!
Hey guys, this is Thomas!
Better Mindset | Better Life!
Too many people believe that
the only way to become a millionaire
is to make at least a million a year.
When in reality,
this book with the title,
‘’The Millionaire Next Door’’
written by Thomas J Stanley and William D Danko,
suggests to us that you can become a millionaire
by hardwork, self-discipline
and maybe a bit of money planning.
After conducting a survey to more than 1,000 millionaires,
I will share the top 5 common traits
that the authors found among those affluent people.
Let’s dive in!
Trait #1
Millionaires don’t necessarily have a million-dollar income
but instead they have a million dollar in wealth.
What’s the difference?
Income is what you get paid now
but wealth is the assets you own
and that will eventually generate an income.
What the authors discovered is that
the real millionaires don't appear like millionaires.
They don't dress like millionaires,
don't eat like millionaires,
and certainly,
don't spend like the millionaires that we watch on TV.
They all live below their means.
One of the biggest secrets to why they can remain rich
is mainly because they don’t buy flashy items.
Take wrist watch for example,
most millionaires spend under $250 for their watch
and only 10% of the millionaires
spend more than $4,000 on their watch.
Yes, that doesn’t sound like the stereotypical millionaires,
but remember,
financial independence is more important than social status.
There are so many people who appear wealthy
but in reality,
spend all their money on keeping up with the latest trends,
getting flashy items they don’t actually need,
tying to impress people around them
So how do you know
if you are on track to becoming a millionaire?
To answer this,
multiply your age with your pre tax annual income
and divide that by 10.
Take Tom for example:
He is 50 years old working as an engineer
and making $200,000 pre tax income.
We multiply 50 with $200,000,
this gives us ten million.
We then divided this by 10,
and we get a million dollars,
which means Tom should have $1,000,000 in his assets
On the other hand,
Mary is 30 years old and she makes $50,000.
Her expected wealth should than be around $150,000.
What’s your net worth today?
You can plugin the numbers to see for yourself.
Back to Mary’s case,
is it possible for Mary to accumulate wealth in today’s economy?
This brings us to trait # 3: Learn how to play defense.
Tony is a doctor who makes $300,000 a year,
with out proper tax planning.
50% of his income goes to CRA immediately.
Then he needs to pay
for the mortgage of his expensive house,
the lease payment of his 2 fancy cars,
and a couple of nice vacation a year.
At the end of the year,
he could not save a dime.
Therefore, he is considered as a high-income poor person,
which the book categorizes these individuals as
Under Accumulators of Wealth or UAWs
On the other hand,
Joe makes $60,000 a year,
but he drives a second hand car,
only goes on vacation once every 2 years.
As a result, he can save $30,000 a year.
He then invests into an index fund in a tax advantage account
such as RRSP or TFSA.
Joe is a perfect example of
Prodigious Accumulators of Wealth or PAWs,
Overtime, who will accumulate more wealth?
I think the answer is clear
In general,
millionaires do play both in offense and defense.
Where offense is to keep increasing the income,
and defense is to find ways to reduce spending.
But if you keep letting the spending catch up,
which 99% of the UAWs are doing today,
you will never accumulate wealth.
The best offense is to play defense.
One of the best defensive strategy
is to understand the fact that
everything comes with an opportunity cost.
PAWs understand the price tag on many items
represent way more than what you are actually paying.
They will think about the opportunity cost
which is the loss of other alternatives
when you choose to pay for something.
Let me explain that
Let’s pretend you drink Starbucks coffee twice a day.
You are enjoying the coffee
and the social status from the cup.
Say the coffee is $6 dollars,
so 30 days later,
you have spent $360 for the month.
Times that by 12,
that’s $4,320 in a year.
If we use that money and invest into the market,
with a 10% return per year,
that Starbucks fund will turn into $30,000 after 5 years,
$75,000 after 10 years!
Now, do you still want to buy that Starbucks coffee?
Leave a comment below on whether you think it’s worth it!
That’s the opportunity cost of the dollar sign.
What about time?
Philip goes to Vegas for music festival every year.
He wants to be the money smart guy,
so everyday he spends 2 to 3 hours,
shopping for the best deal in plane tickets.
He also spends a tremendous amount of time
studying for new headphones.
But with the same amount of time,
he can use it to increase his financial intelligence
like optimizing his income or
setting up a household budget
Does it make sense to spend
40 – 50 hours a week to build wealth,
but at the same time,
spend the remaining hours o demolish it?
It’s like going on diet from Monday to Saturday,
then going for all you can eat at Macdonald’s on Sunday.
Trait #5 Life and Goal Planning
Let’s fill in the blanks here:
In the next 5 years, I want to have…
In the next 10 years, I want to become….
What’s your goal like?
And how much time do you spend on planning for your future.
99% of millionaires are goal-oriented and goal driven.
They will write down their short-term goals,
mid-term goals, and long-term goals.
They also write them down not only on the computer,
but also on a piece of paper and put it in the bathroom
so they can see it every day when they wake up.
And compare to the average Joe,
millionaires easily spend 2 – 3 times the amount of time
planning for their finance, acquiring new skillset,
and studying the market trend.
You might think they are already millionaires,
why do they still have to plan?
The answer is because that’s how they become one
and they intend to keep it that way.
When you truly love what you do,
then it’s not considered as work.
Remember, TIME, ENERGY and MONEY
are the 3 resources that millionaires will optimize.
But the first two are resources that you cannot bank
so please use them wisely.
Guys, if you have been watching until this far,
it means that you are looking for ways to up your game.
I really do appreciate it.
Bottom line is
becoming a millionaire is not the hardest thing in the world.
The key to it is to live below your means and invest wisely.
At the end of the day,
it’s not about how much you make,
what matters most is
how much you can keep in the bank account.
If you make $1,000 but spend $1,200 a month,
You will never,
NEVER become wealthy!
And that’s what I have for you today!
Thanks so much for watching!
If you like this video,
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by smashing that subscribe button.
And try watching these two videos too.
Every week, I will share more on how money works,
and how you can work with money!
See you next week!