In 2020, one of the most tumultuous years in decades, the number of millionaires in the world grew by 6 percent to 20 million, according to a study by Capgemini. A millionaire is defined as someone with more than US$1 million in investable assets. This means that one in every 350 people in the world is a millionaire. It is easy to look at these people in awe, and think that their level of wealth is unattainable. Nothing could be further from the truth. Anyone, with average physical and mental ability, can become a millionaire. All they need to do is learn three simple millionaire skills.
Skill 1: Learn How to Earn
You are a money-making machine. Human beings are mobile creatures – our bodies are designed to wrestle saber-tooth tigers and our minds are hardwired to be active, solving problems and finding solutions. Our bodies were not designed to be sat in front of television screens binge-watching Netflix. It was designed to be out in the world, hunting, and gathering. Our minds cannot handle long lapses of idleness – it needs goals, challenges, and responsibilities. We need to first find our mission in life and secondly learn how to monetize it/get paid for doing it.
We are not born with passion. Elon Musk was not born with passion. He acquired an interest in renewable energy and electric vehicles and then converted that little flame into a raging inferno. If you already have burning passions, that is great. If not, make a list of a few interests and then rank them from the highest to the lowest level of interest. You know if something is of interest to you by filling out this sentence: I lose track of time when I………Then find ways to monetize these interests.
Our interests need to solve a need. The bigger the need it solves, the more profitable the monetization. Electric vehicles save the planet by polluting less. Tesla found a solution to harness the power of the sun to electrify houses and vehicles, and this has made Elon Musk very rich. Monetization is finding a way to make money from solving a need. How do you find the need? What better place to start than the person you have known your entire life – YOURSELF.
You need to dig deep and be honest about what pisses you off, what frustrates you, and what causes anxiety. You only need to look at great businesses to understand the needs they were solving. Facebook solves the need for companionship and social connection. Uber, Lyft, Didi, and Bolt solve the challenge of finding a safe, clean, and reliable taxi on your telephone. Tinder plays on our fear of loneliness and the difficulty of meeting single people in coffee shops. Airbnb taps into the need for new and unique travel experiences.
Many great businesses were set up to address basic human needs. Everyone is neurotic. We all experience anxiety, worry, fear, anger, frustration, envy, jealousy, guilt, depression, and loneliness. You want to monetize solutions to these modern maladies. The bigger and more original the problem you are trying to fix, the more successful you are going to be.
Skill 2: Learn How to Save
Before learning how to save, you need to learn how you spend. Your spending patterns are formed by numerous factors: the influence of your parents (children of baby boomers are spenders, children of generation X are savers), society and culture (Americans are spenders, the Chinese are savers), religion and spiritual beliefs (tithing, giving alms, donating to charity), and social media (equating happiness with physical possessions and lavish experiences).
To understand how you spend, you need to track your spending, and know how much you spend in the following categories:
1) COMMUNICATION – cellphone, internet, fixed-line telephone
2) EDUCATION
3) ENTERTAINMENT – alcohol, digital subscriptions, going out, and movies
4) FEES
5) FOOD – groceries, takeaways
6) HOUSEHOLD – electricity, furniture & appliances, garden, gas, home improvements, housekeeping, levies & taxes, municipal bill, other household, rent, security, water
7) INSURANCE – funeral cover, home insurance, life insurance, other insurance, vehicle insurance
8) LOANS & ACCOUNTS – credit card payments, home loan payments, loan payments, car payments
9) MEDICAL – doctors & therapists, medical aid, pharmacy, other medical
10) PERSONAL & FAMILY – activities, children & dependents, clothing & shoes, donations, gadgets, gifts, holidays, personal care, pets, sports, hobbies, tax
11) SAVINGS & INVESTMENTS
12) TRANSPORT – fuel, license, parking, public transport, tolls, vehicle maintenance, vehicle tracking
Now we can start saving. Saving is hard, but remember that money saved is money earned. By saving, you are investing in your future self. When you decide not to buy that pair of Italian leather boots and invest that money, that small sacrifice will compound into riches over the years and will make you rich. Here are a few tips.
Tip 1: Budget for Savings
Once you have an idea of what you spend in a month, you can begin to organize your expenses into a workable budget. Your budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance. Here you need to calculate what you spend in a year and then divide that by 12. Be on the lookout for other expenses that you pay quarterly, semi-annually, or annually – like school tuition and insurance. If the expense is paid quarterly, divide by 3, divide by 6 if semi-annually and 12 if annually.
Tip 2: Include a Savings Category in Your Budget
If we held the Olympic Games for the world's greatest savers, Singapore takes gold, Suriname (the smallest country in South America) silver, and China the bronze. I would suggest you aim to save between 15 and 30 percent of your income.
Tip 3: Find Ways to Cut your Spending
Learn to say NO to your friends who want to go out partying every night. Identify non-essentials that you can spend less on, such as entertainment and dining out. Look for ways to save on your fixed monthly expenses like television and your cell phone. You can also downgrade on the brands that you consume – instead of Johnnie Walker Black, buy Red. You may also want to grow your hair and beard – imagine the savings in razor blades, shaving cream, and barbershop visits! Talking about barbers, here are some ideas for trimming everyday expenses:
1) Use resources such as community event listings to find free or low-cost events to reduce entertainment spending.
2) Cancel subscriptions and memberships you don’t use—especially if they renew automatically.
3) Commit to eating out only once a month and trying places that fall into the “cheap eats” category.
4) Give yourself a “cooling off period”: When tempted by a nonessential purchase, wait a few days to see if the urge passes.
Tip 4: Do it for the Planet
Many of the products we buy are exceptionally damaging to the planet. Consider how many liters of water are required to produce 1kg of the following foods:
Chocolate: 17,196
Beef: 15,415
Sheep meat: 10,412
Pork: 5,988
Butter: 5,553
Chicken meat: 4,325
Cheese: 3,178
Olives: 3,025
Rice: 2,497
Pasta: 1,849
Pizza: 1,239
Apple: 822
Banana: 790
Potatoes: 287
Tomato: 214
Egg: 196
Lesson 1: cut out red meat and each chicken – not only is red meat twice the price, but it uses substantially more water (a scarce and precious resource). Lesson 2: reduce your chocolate intake – it is expensive, makes you fat, and at the same time skrews up the planet. Lesson 3: consider adopting a vegetarian diet half the week – again veggies and pasta are cheaper than meat and pollute less.
Tip 5: Consider becoming a Minimalist
Have you ever noticed how you use the same shirts, pants, and shoes all the time? Get rid of (sell or donate) that stuff you have not used in the past 6 months and do not plan on using in the next six months. This exercise is liberating and potentially profitable,
Skill 3: Learn to Invest
Many learn the first two skills but fall short on the third. You want to invest your hard-earned/saved money into high-quality and quality assets that provide reliable cash flows. There are many places to invest: in your own business, in real estate and in cryptocurrencies. In this section, however, I want to focus on the stock market for two reasons. Firstly, it is very accessible, and secondly, it is one of the greatest generators of wealth on the planet, yet only a small percentage of people exploit it.
Let me share with you a simple investment strategy you can implement TODAY.
Step 1: Relax
We are terrified of the stock market because of its wild and volatile swings. In the short term (days and weeks), the market can be crazy. Over the long term (months and years), it is more predictable and benign. Your first step is to relax, be patient and take a long-term view of the stock market.
Step 2: Monthly Contributions – Annual Consultations
Every month, you need to commit to investing a minimum amount of cash into the stock market and you are only allowed to check your account statement once per year.
Step 3: Choose a Low-Cost ETF
An ETF is a powerful financial tool. It is a share that owns many shares. One of the world's most popular ETFs is the Invesco QQQ. If you buy one share in the QQQ, you become the owner of 100 of the world's biggest technology companies - including Apple, Microsoft, Amazon, Tesla, Facebook, Google, etc,
Step 4: At Least $100 a Month
All you need to do is invest $100 per month. To understand how extremely attainable $100 per month is. I did a quick Google search on what $100 can buy you these days: Eight or ten movie tickets, 10 months of Netflix, four or five new movies on DVD, fifteen used DVDs at a yard sale, lunch for four at a fairly nice restaurant, 40 cheap burgers or 90 candy bars.
Over the past 30 years, the Standard and Poor's 500 Index has delivered compounded returns of approximately 10 percent. So how much would your 30-year religious investment in this broad-based US stock index yield? The answer is $226,048. That is a lot better than investing in a savings account or Treasury bonds.
How much would you need to invest every month to be a millionaire in 30 years, 20 years, 10 years, and 5 years? Assuming the same total returns as the Standard and Poors 500 index, here are the monthly investments that will yield $1 million after the stipulated period
30 years: $442
20 years: $1,316
10 years: $4,881
5 years: $12,913
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