HOW I ACHIEVED MILLIONAIRE STATUS AND EARLY RETIREMENT THROUGH THREE KEY STRATEGIES

HOW I ACHIEVED MILLIONAIRE STATUS AND EARLY RETIREMENT THROUGH THREE KEY STRATEGIES

I’ve spent years learning about personal finance, immersing myself in books, articles, and courses. Initially, I believed there was a hidden secret to building great wealth. However, twenty-five years later, I’ve realized that there is no secret. Building wealth largely comes down to common sense, discipline, and time. Essentially, it all boils down to three main principles:

1. Earn as Much as You Can
2. Save as Much as You Can
3. Invest Early and Often

In this post, I’ll explain how you can achieve all three, just as I did, which eventually allowed me to retire as a multi-millionaire, enjoy writing about my experiences, and even donate some of my wealth.

Earn as Much as You Can

First and foremost, you need to earn an income. For most people, this means making the most of their careers. Although my own career path was not always smooth, following certain steps helped me progress much faster than I otherwise would have. Here are seven steps you can take to grow your career and increase your earnings over time:

1. Seek steady progress: Understand that this is a marathon, not a sprint. Aim for consistent growth, which sometimes means taking two steps forward and one step back.
2. Focus on your current job: Excel in the role you currently have while keeping an eye out for better opportunities.
3. Make daily efforts: Even small actions can compound over time and lead to significant improvements in your career and salary.
4. Embrace humility: Learn from your mistakes and be willing to start at the bottom if necessary.
5. Invest in learning: Continuously improve your skills and knowledge to increase your value in the job market.
6. Network: Build relationships within your industry to open doors to new opportunities.
7. Be strategic: Plan your career moves carefully to maximize your income.

By doing this, your income is likely to grow, even if it’s not an immediate promotion. And, let’s be real, it’s always better to earn more for the same effort, right?

Save as Much as You Can

Earning money is only half the battle; you also need to control your spending. It’s pivotal not to try to live like you’re wealthy just because you have a high income. Financial success fundamentally hinges on controlling your expenses. No matter how much you make, you can squander it all if you’re not careful. Conversely, you can make substantial progress with a modest income if you manage your spending wisely.

Having a higher income does make saving easier. For instance, if you earn $50k a year but spend $40k, you save $10k. If you earn $100k and spend $80k, you save $20k. The person with the higher income not only gets to enjoy a more lavish lifestyle but also saves more. Key steps include:

1. Know your spending: Track your expenses to understand where your money goes.
2. Create a budget: A budget isn’t restrictive; it’s a tool that helps you direct your money. Without it, you’re navigating without a map.
3. Save on what matters less: Focus your spending on what brings you joy and cut back on what doesn’t. This way, you can enjoy your life while saving smartly.
4. Evaluate periodically: Regularly review your financial situation to ensure it aligns with your goals.

Start by tracking your spending for 30 days to see if it reflects the life you want. Only then can you direct your money to work for you.

Invest Early and Often

Once you’ve saved money, it’s time to invest it so it can grow on its own. The best way to do this is with low-cost index funds. You can start with as few as three funds. Maximize your investments by consistently funneling your savings into these funds and letting them grow over time. Options like IRAs, 401(k)s, Roth IRAs, and DRiPs are all effective ways to invest directly from your paycheck.

The critical point is to start now. The earlier and more frequently you invest, the better. In 20 to 30 years, you’ll likely wake up very wealthy if you stick to this strategy.

Simple but Not Easy

While these concepts are simple to understand, they are not easy to implement because they require discipline over an extended period. You need to be diligent in earning, saving, and investing for at least a couple of decades. The rewards come from the consistent practice of these principles — something many people cannot sustain.

Unfortunately, many people lack this discipline. Some might hold out for a year or two, but then slack off, which derails their path to wealth.

How to Overcome

The key to overcoming this challenge is having a plan. Set both long-term goals (like your retirement date) and short-term goals (like an annual budget). Consistently work on earning more, saving wisely, and investing prudently. It requires planning and daily execution.

This journey isn’t as grim as it might sound. The pursuit of financial independence can be enjoyable and rewarding. By sticking to these basic principles over time, you will achieve the wealth and financial freedom you desire.