It seems like everyone wants to know how to become rich. Short of winning the lottery or receiving an inheritance, it’s rare to become a millionaire overnight. Even though it is difficult in practice and often takes years to achieve, the process of becoming a millionaire is easy: earn extra money, spend less than you earn, save, and invest. The final step is to add time and repeat the process. With time and dedication, many people can become rich. But sometimes the number one thing standing in the way of reaching your dreams is you!
How NOT to Become Rich
Sometimes the best way to learn to do something is to learn what NOT to do. It can be easier to avoid certain practices when you learn why they are harmful for you. If you want to become rich, then take a look at some of the things not to do – then take action accordingly.
Don’t earn money. You can’t write a book if you never write page one and you can’t become a millionaire if you don’t earn any money. There is still hope of getting ahead even if every cent you earn through your day job goes to pay your bills and living expenses. Think outside of normal 8-5 jobs and try to find alternative sources of income. This can include things such as working a part time job, earning money through investments, consulting, owning a rental property, etc. Earning multiple streams of income is a part of my long term financial plan, in part because alternative income can be a form of insurance against losing your job or other sudden decreases in income.
Spend more than you earn. The quickest way to get yourself into financial trouble is to spend more than you earn. You will never amass wealth or financial freedom when you are running a personal deficit. Spending less than you earn is the most important step in becoming financially free.
Don’t budget. Do you know where your money goes? It’s difficult to get ahead financially when you don’t have a list of your income and expenses. You can keep track with something as simple a pen and paper, or you can use a software program. Here is a list of free money management software to help you track your income and expenses.
Don’t save money. Living for today is great, but if you aren’t putting anything away for the future then you may find yourself in big financial trouble if you don’t have any money saved to cover large expenses. I recommend starting an emergency fund where you can have some cash savings for emergency situations. Here is a list of the top online savings accounts to get you started.
Don’t invest. Investing is insanely complicated and unless you have a ton of money, it won’t make a difference. Right? Wrong! Getting started is easy. It only takes 5 minutes to open a Roth IRA and you can invest with as little as $50. Here is some information about how to start an IRA, and a list of the best Roth IRA brokerages. You can also start an investment account through your employer’s 401k plan, or by opening an investment account with a brokerage or mutual fund company. Wherever and however you decide to invest, start now. The sooner you being investing, the longer you have for your investments to work for you.
Don’t take advantage of free money. Do you have a 401k at work? Then make sure you invest at least the minimum to receive the employer match. Not doing so is leaving free money on the table. Here are more tips to maximize your 401k plan and more ways to earn Free Money by opening accounts and taking advantage of sign up bonuses. These can make you several hundred, or even several thousand dollars a year!
Pay the minimums on your credit card debt. Interest rates on credit cards are often in the 20% range. The best way to manage credit cards is to pay them off in full each month. But if you can’t do that or if you already have credit card debt, then consider using a 0% balance transfer to move your credit card debt to a new credit card with 0% interest. Here is a lost of the best 0% balance transfer credit cards.
Don’t improve yourself. Your ability to earn income is your greatest asset, and you should nurture your ability to earn income. Work to obtain a promotion, earn professional certifications, and improve your soft skills to advance in your profession. No one looks after your interests the way you do, so be proactive!
Becoming a Rich Isn’t Easy…
…but you don’t have to sabotage your chances of getting there by exhibiting poor financial habits. Even if you never become a millionaire, the tips listed above can help you on your way to financial freedom – which is much more important than any number anyway.