So many people want to know the “life secrets” to retire a millionaire. It seems like an impossible feat unless you are a successful business owner, receive a nice inheritance, hit it big in the stock market, or are a CEO of a company with nice stock options.
But here’s a real secret….ANYONE can retire a millionaire. Yes, anyone. It doesn’t matter what your income is. You can retire wealthy if you want and if you follow principles that are really quite painless now for a “financially pain-free retirement.”
It’s just that you have to follow these 9 simple financial life principles throughout your life. Then no matter what your income is, you can retire a millionaire. This is true for those making $30,000 a year or $300,000 a year.
In fact, it if often interesting to discover the true net worth of others. Being in the financial industry, you learn things about people that make life interesting. We have met many small income families that are much further ahead financially than those that make six figures a year. Many of these six-figure persons are deep in debt and their net worth is far less than the person making 1/3 of the income. It’s all relative and it all depends on what you do with the money you have. It is so easy to just “spend money” but it takes a bit more work to have the money work for you. But we want to simplify it for you.
Before we start sharing this list of 9 Simple Financial Life Principles to Live By, we also encourage you to read our previous article titled, Stop Thinking of It As Spending Money. It helps to get a more correct attitude towards money.
We want to share these secret life steps with you. Just follow these basic principles throughout your life, and you can end up with a net worth of over 1 million or MORE by retirement and retire with ease.
Retire a Millionaire with these
9 Simple Financial Life Principles
1. Own a Home
Being a homeowner is one of the easiest and surefire ways to reach that $1 million mark. The value of your home, plus the fact that you can be mortgage-free in retirement means you have much financial freedom. Even with a lower income, you can be a home owner.
Make sure you are owning a home you can afford. Don’t forget to start small and “upgrade” as the years move on, growing your net worth over time in a home, while not becoming “house bankrupt” either.
2. Buy Gently Used Cars and Drive To The Ground
If you can buy a car with cash, AWESOME! But don’t get super stressed about it. Buy a car you can afford that is gently used. Also, look for makes and models that traditionally cost less to repair.
A gently used car means not a brand new car, but not a car with too many miles to be a car repair guzzler. Unfortunately you can’t ever guarantee that you won’t have car repairs. But one of our philosophies is to by a car with less than 60,000 miles, negotiate a good deal, pay cash if you can, and drive it to the ground. When those repairs arise, pay cash to get it fixed and keep driving it.
Then repeat the process several years later.
A gently used car will often mean less car repairs.
Owning cars you cannot afford is one of the biggest ways to keep you poor throughout life. On the outside, you may look like you have it all with a new fancy car, but when it comes to the details, you may be driving yourself poor. If you can afford newer, fancier cars and stick with these principles, then by all means, drive a newer car. But we would still encourage you to drive them into the ground.
3. Stay Out of Debt for Everything that is Unsecured Debt
Theoretically speaking, debt makes you poor. When you owe someone else money, plus interest on top of it, it is making you poorer each month.
Debt is not a joke and debt costs a lot of money (and we share those scary numbers in our book, The 2% Rule To Get Debt Free Fast. Unsecured debt is for the poorest of all. Unsecured debt is expensive, and a person generally doesn’t have any assets to show for it.
Ideally, it would be great to be 100% debt free. But let’s be honest, most everyone has had to obtain debt to buy a home, make major home improvements, buy a car, or fund a business. It’s very difficult for most to pay cash. It can be a continual goal, or pay for part of it with cash and not get debt for the full amount, but debt can move you ahead in business, home ownership assets, etc. BUT even then, proceed with extreme caution when obtaining debt for those reasons. Never hold a loan on secured debt for the intended term, pay it off faster. Read on our philosophies for the homeowner. Most of these are “secured” debts, meaning there is an asset attached. These secured items can add to your overall wealth.
Unsecured debt on the other hand, generally does not. Unsecured debt takes away from your actual assets. Avoid unsecured debt. Unsecured debt are things like credit cards, personal loans, payday loans, etc.
You can actually use a credit card to reap the profitable rewards, as long as you treat it like a debit card and pay it off each month. That can be a smart way to use unsecured debt, but don’t play the credit card rewards game if you are actually in debt with any unsecured debt.
4. Save 10% of Paycheck for Retirement
This tip comes straight out of David Bach’s book, The Automatic Millionaire. His primary and intended purpose in this book is to prove that anyone can retire a millionaire by paying themselves first. Pay yourself BEFORE you do ANYTHING.
And he suggests 10%.
This is such an incredibly easy and smart idea. In fact, we shared it in our 8 Ways To Set Yourself Up for Automatic Success article (plus podcast episode).
Essentially, a little bit over a lot of time grows by a lot!
How do you pay yourself first? It is in the form of 10% of your gross income into your retirement account. Have your company take it out of your paycheck before you even get or see your paycheck. Just make this a part of your life and you can retire with quite a nice retirement account. If you are self-employed, just implement the same strategy of paying yourself 10% first.
5. Put 10% in Savings
The next step is to just get into the habit of setting aside 10% of your paycheck or take home pay to just place in your savings account. Then you will be preparing yourself for that millionaire lifestyle even more by creating this simple habit of saving and creating the habit to not spend every penny that comes in the door.
This is another place where we encourage you to put it in savings before you get use to actually see it in your account. We shared a tip earlier to use a high-yield savings account to actually earn much, much more than you can in your normal savings account (like 10x’s more!).
6. Avoid Student Loan Debt As Much As Possible
Student loan debt is like a giant slap in the face after you have achieved the big goal of earning your degree. We cannot even begin to tell you how many people we have talked to that the student loan debt has been some of the most debilitating debt a person has had.
If you have student loan debt, you need to make some major financial changes to get it paid off and actually feel like you are working for life and not working for your degree. The biggest way is to refinance for lower rates.
But if you are reading this and don’t have the student loan debt yet, or know someone who is considering student loans to pay for school, then this is where you need to encourage them to find ways to pay for school differently.
This can be in the form of:
- working while going to school
- living at home while going to school
- living like a pauper while in school (knowing the big rewards are coming later)
- finding as many scholarships as possible (read our previous article on How Anyone Can Find and Get Scholarships for School)
- attending a cheaper school, including online
- and any of the other ideas we have shared in our 7 Alternatives to Student Loans series
Student loan debt just puts you behind further on any goals. Rarely does the wage gap between non-degree and degree jobs (especially in Tech) make a big difference in pay. In fact, if you are barely making more than your non-degree peer, but you have loads of student loan debt, you are actually further behind than your peers without a degree. Of course, there are some careers that you cannot do without a degree, and that is where finding as many alternative ways to pay is that much more important.
You really need to try hard in this short time of life to find alternatives. Don’t start your adult life behind right out of the gate. Even if the ideas above at least eliminate the need for as much student loan debt, that is further ahead that you would have been.
7. Take Advantage of Roth IRA Throughout Life
Another super smart habit is to invest in and eventually max out a Roth IRA each year. As of the writing of this post, the annual contribution is $5,500 per person or $11,000 per married couple each year.
We talk about the Roth IRA in depth in our our book, “The 2% Rule To Get Debt Free Fast.”
8. Be very conscious about every purchase and run it through the “purchase test.”
Make a deliberate and intentional decision to each purchase you make, whether “big” or “small.” Each purchase you make now cuts into your millionaire lifestyle later.
Many people make so many daily frivolous purchases that these could alternatively add up to quite a nest egg.
Run your purchases through a “purchase test:”
- What would I use this item for?
- Do I already own an acceptable alternative?
- Will this enhance our lives to the point that it is worth the cost?
- How often will I use this item?
- Is there a cheaper option?
9. Learn to live without
At the end of the day, simply learning to live without many items will mean that you have a lot more freedom to live with what you want later and your choices don’t become stressful and life doesn’t becoming daunting.
All of these can be implemented right away, or at least begin working through the list and make it happen! You won’t regret it.
There you have it. We hope that this list of simple financial life principles will help you realize that saving enough to retire a millionaire will be possible with a few changes in your lifestyle and habits now. It is worth taking these semi-painless steps to enjoy retirement and to be able to live a financially free life in retirement.
Pin this “Retire A Millionaire” chart to help you remember these steps!
I wish I had read this advice when I was starting out… now I am in my 40’s and working off paying debt I wish I never had. 🙁
It’s never too late to get started. Pay off the debt first (using the 2% rule) and then you can continue to use the 2% rule to build a nest egg. The point of this article is to show you what’s possible. Even if you don’t retire a millionaire, by applying these principles now, you will be much further ahead. 🙂
Our now grown children have finished or are completing college online. It was a natural transition from home education. They have complained that it is a lot harder (they think) than attending school away from home. However, as we have looked at the actual cost of the brick-n-mortar school, and the fact that they will all enter marriage without any debt whatsoever, the picture looks entirely different to them. When you can (not spend) an extra $18,000+ a year x 4 years, look at how much you are ahead. It’s made a huge difference in all of our financial futures!
We LOVE this! It can be done and it is so smart to be on a financially free fast track. We actually just wrote this article on 8 Alternatives to Student Loans to help others find as many non-debt ways as possible to pay for college. Online college is one of the 8.
Question: Do you have a trustworthy resource which recommends, ranks and/or compares Roth IRAs? We’ve often wondered if ours was a good one – or if there might be a better one somewhere else.
Di – That is a GREAT question. It is causing us to research this topic and see if there is such a resource. Hopefully watch for an article soon on this topic!
Thanks for the recommendation. 🙂
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