Whether you have a goal of reaching $ 1 million or $ 10 million, you have to start somewhere.
Thomas C. Corley, a certified accountant and certified financial planner, spent five years studying millionaires and collected his opinions in multiple books, including "Change your habits, change your life".
Corley interviewed 233 people with at least $ 160,000 in gross annual income and $ 3.2 million in net assets, 177 of which self-produced. Through these interviews and analyzes, Corley has discovered dozens of facts about rich people and their daily habits to put together exactly how they came to where they are today.
In his book, Corley writes that 80% of self-made millionaires he studied did not get rich until after age 50, but almost everyone started the same way.
"The millionaires who made themselves in my studio all have the goal of saving 10 to 20 percent of their income during their pre-million years," Corley wrote. The average American has a savings rate of around 8%, according to the Federal Reserve of St. Louis.
More importantly, the pre-millionaires were intentional about where they put their savings. Using a strategy that Corley calls "the bucket system", they have divided their savings into four general categories: retirement savings, specific expenses, unexpected expenses and cyclical expenses.
Retirement savings include IRAs, annuities, 401 (k) and other occupational pension plans, ie money invested for growth and to be spent later in life. Future education costs, marriage costs, a down payment at home and other large costs are part of the second bucket.
The third bucket is more or less an emergency fund, a separate account with cash to fall back on in the event of a sudden job loss or medical emergency. Finally, the cyclical expense bucket contains savings for birthday gifts, holidays and holidays.
This saving strategy proved to be crucial for almost half of the millionaires in his study, which he said followed the path of the saver-investor. In the end they were able to live with 80% or less of the pay to take home, remained consistent and patient and never flaunted their wealth. Above all, they used the time to their advantage.
"The self-produced millionaires take the habit of saving," writes Corley. "The more you can save at an early age, the more wealth you will accumulate."