Let me ask you a serious question. Do you have a millionaire date? That's the date you plan to become a millionaire. I know it sounds like an odd question, but for a moment, take me seriously.
I recently spent some time coaching a couple on their finances. Wonderful people. They were doing a great job following traditional money wisdom. They followed the financial teaching of a famous radio guy, and it was good advice. They were working with a financial advisor. They were making good money and saving/investing the traditional 15% as well as working to pay their house off early. All of these things were very good to do financially. However, there were a couple of things missing.
A Clear Financial Goal
To accomplish something great, you usually need a goal, and not just any goal. You need a specific and measurable goal. For financial goals, you need to come with an amount and a date.
At 25, I was broke, $16,000 in debt with about $500 in the bank, and making $39,000 a year. I realized that was a bad plan. If I wanted a better life, I couldn't repeat those mistakes ever again. I needed to change. I started learning about money. A little later, I put together my first ever financial plan. My millionaire plan. My plan to become a millionaire by age 40. My goal was very specific and simple.
Reach $1,000,000 net worth (a clear amount)
Achieve my goal by age 40 (a clear time)
Now for some people, this may seem like a ridiculous way of looking at your finances, but it's not. After talking with many millionaires, I realized I'm not some special exception to the rule. What I did was normal. Normal for people that become millionaires that is.
People that become millionaires have a clear set of principles they follow. That means the process of becoming a millionaire is repeatable. Anyone can do it. Yes, even broke people. What principles am I talking about? Here are a few.
Don't spend all your money on useless stuff
Don't go into consumer debt and pay more for things than they are worth (interest)
Save and Invest large chunks of your income...into strong growth focused investments
Look for ways to make more money
In short, have a plan for your finances. A millionaire plan.
At it's core, money is math problem, and it follows set principles. Money is fairly predictable over time which means you can plan and forecast when you will become millionaire. Yes, you can plan the year you will become a millionaire. I call this your millionaire milestone year. Do you know yours?
The Right Investments
Financial advisors. There are good ones and bad ones, and there are some in between ones. There are a couple of things you should know about financial advisors.
Financial advisors don't care about your money or your future as much as you do. It's impossible for them to care as much. You're the one that worked for it, money. You're the one that sweated for it and saved it.
You are only one of many clients your financial advisor has. It's easy for you to get lost in the shuffle. Unfortunately, many financial advisors just put your account on autopilot once it is setup.
Financial advisors are trained. Usually they are trained to invest a specific way by the organization they are affiliated with. This training can be both good and bad.
Financial advisors will usually give you one piece of advice. Invest in the stock market. (1) It's what they've been trained to do, (2) it's how they get paid, (3) it's all they know.
Often times, people expect their financial advisors to know more about investing than they do, and this is normally true. However, we should now allow this to be an excuse to turn off the financial part of our brains. Financial advisors can make mistakes with your money too. They can put it into higher fee investments. They can put it into lower return investments. This can cost you a lot of your future wealth.
Your financial advisor is probably not a millionaire, and he probably doesn't have a millionaire plan with a date. In all reality, your financial advisors net worth is probably in the $250,000-$500,000 range, unless they are in their 50s, then maybe they've become a millionaire.
This brings me back to the couple I recently coached. The first thing you should do as you create your millionaire plan is an audit. How much debt, saving/investing, and income do you have to work with? Are your investments performing how they should? In the example couples case, which is quite common, there was a mixture of well performing investments and under performing investments. Just a few under performing investments can result in potential missed growth of hundreds of thousands of dollars.
Without a clear goal, a millionaire goal, how do you know if you're on track? You could be saving and investing, but what's your goal? Is your plan working or are you just going through the motions of what you heard on the radio or what someone taught you?
A Few Goals
If you don't have financial goals, let me help you get started with a few simple ones.
Look at your debt, investments and income. Calculate your current net worth. With your current financial activities, try projecting your net worth in 5 yrs, 10 yrs, 15 yrs, 20 yrs, 30 yrs. Are you happy with the numbers?
Do you have your millionaire date/plan? If not, set it. It generally takes 10-20 years to become a millionaire. I did it in 15 years. I've met others who did it in 7 and even less. Follow the millionaire principles and you'll make it, but the date/goal helps cement your goal in your mind and keep you on track. Ideally, if you become millionaire in your 40s, you'll be a multi-millionaire in your 50s and 60s. Your first million is the hardest to make.
Invest. Invest a lot. Quite a few financial voices tell you to invest 15% into retirement. I prefer hard numbers. Set $10,000/yr as your first investment goal. Reach it within 1-2 years. After you reach $10,000, raise your goal to $20,000/yr, then $30,000/yr, etc. It may sound impossible now, but you'll be amazed at how your mind works on and solves this problem. Don't be surprised one day if you're investing $50,000-$100,000 a year or more. It may sound crazy now, but it does happen. It starts with a vision and goals.
It's very VERY important to be engaged with your finances and not just put them on autopilot with a financial advisor. To do that, I recommend you create your very own millionaire plan. Your millionaire plan gives you goals and roadmap to know if your finances and financial advisor are performing like they should.
If you need some help reviewing your finances or building your millionaire plan, take advantage of the complimentary money mentor discovery call.