Who wants to be a millionaire?
The Millionaire Next Door is a great book for those who want to achieve wealth in life. Written by Thomas Stanley and William Danko, the book does away with technical jargon that only few people can understand and instead, provides doable tips for anyone who wants to be financially independent.
The book was based on a profile study of more than 1,000 Americans. The respondents were asked about their attitudes and behaviors regarding a wide variety of wealth-related issues. But while Americans may be the respondents of the study, the insights in this book are applicable to Filipinos, as well.
The authors share seven key factors on how one can be financially independent. Surprisingly, these factors have nothing to do with moneymaking schemes, but on the values a person should have.
Live below your means.
To build your wealth, you must learn to live below your means. When a person gets an increase in his monthly paycheck, the common tendency is that his lifestyle also changes. He buys new clothes, new gadgets or takes expensive vacations.
But the authors highly recommend living below your means. Don’t blow your salary increase by acquiring more things like buying new clothes when your wardrobe is still fairly new or soup up your car when it’s just as nice as it is.
Instead, save the money in a high-yield interest bank account or if you have a fair understanding of it, invest the money in the stock market or mutual funds.
Living below your means is also synonymous with avoiding debt. And when I say debt, it means credit card debt! If you don’t have the cash to pay for something, don’t bring out your credit card and swipe it in the machine. The only time that you are justified to use your credit card is during emergency cases.
And if you must use your credit card, make sure you pay the amount in full every month so you don’t incur interest.
Allocate your time, energy and money efficiently in ways conducive to building wealth.
Simply put, people who become wealthy allocate their time, energy, and money in ways to enhance their net worth. The simplest thing you can do to is to have a budget. Know how much you are earning and spending every month. Determine in which areas of your life you and your family spends excessively. Is it for cell phone loads, Starbucks coffee, shopping? A simple Excel file will help you see where your money goes.
By spending time and energy keeping track of your money allows you to see where you can make adjustments. You can probably lessen the number of times a week that you buy from Starbucks and instead direct the money to your savings account. Or you can reduce doing your grocery to twice a month to save on fuel.
Believe that financial independence is more important than displaying high social status.
My grandmother was the exact opposite of this. When my mom and her siblings were growing up, my grandmother preferred that they wear new and fancy clothes rather than have proper food on the table. For my grandmother, appearances were everything, never mind if her family had to scrimp on everything else.
But the book tells us that we aren’t what we drive or, simply put, we are not defined by the things we own. Why buy a whole new set of wardrobe when you have an entire closet full of good clothes? Why buy a new car when your current one is still in tiptop shape? Why buy the newest mobile phone when your current one is still in great working condition?
Do not provide economic outpatient care.
Many Filipinos may frown on this idea. Because we have such strong family ties, our tendency is to provide support—whether financial or otherwise—to our families for as long as we can.
The book doesn’t discourage parents to give gifts to their children, even when they’re already adults, if it’s within reason (and if they can afford it). It’s okay to treat them to a simple vacation once in a while. It’s okay to buy new clothes for their grandchildren when the new school year arrives. If gift-giving and money-giving become a habit, however, then there’s a problem. If you always save your children, grandchildren or other family members every time they are in financial trouble, you are basically teaching them to be dependent on you.
You should lay low in giving them material things on a regular basis so that they will learn to be self-reliant and responsible
Your children should be economically self-sufficient.
This is almost synonymous with the previous insight. For parents whose children are still young, now is the best time to teach them about proper money management. Open a savings account for them and ask them to deposit money regularly. Some parents I know ask their children to save for high-ticket items that they want like PlayStation or Ipod. Then when it’s time to buy the item, they match the amount their children have saved.
But if your children are already grown up and you were not able to teach them good money habits, it’s still not too late. Just follow what we shared in the previous insight and they’ll be just fine.
Be proficient in targeting market opportunities
Anyone has an entrepreneurial spirit. You just have to tap it. Use your skills and hidden talents to make more money. If you love cooking, try doing some catering service on the side. If you like attending to details, you can make money by being an events organizer or wedding coordinator. If you’re into painting, drawing or writing, you can also make big bucks. The idea is to look into yourself and see what skills you can tap to bring you more money.
If you understand stock trading, then you can utilize this, as well. Money market poses some risks but if you play your cards right, you can win big time.
Choose the right occupation.
Okay, this is probably the hardest thing to do. Not everyone can be a company president nor be a CEO of his or her own business. But choosing the right occupation is having the passion and dedication for it. It would be sheer heaven to be in a job that you enjoy and pays you for doing a great job. The right occupation for you is a job that you love.