Have you ever come across an amazing piece of news where a seemingly normal person has left millions and donated it to organisations and other institutes focused on helping the needy?
Often, people who are not vocal about their financial status are also the ones with a good bit of money stashed away. It leaves the neighbours, relatives, and acquaintances in shock when their real accounts are revealed. It leaves people wondering what the secret to their secret success was.
Here are a few tips based on their general practices of these ‘Closet Millionaires’.
Bonus Read: Investments For Young Professionals
Step 1: Keep your expenditure to a minimum
The best way to save money is to not spend it on unnecessary things. Most of the people who have a hefty amount in their bank accounts make it a habit of spending little and keeping their expenditure to the minimum.
Make a list of things that you need and the things that you want. Draw a clear line between the two so that you do not end up merging them and consequently lose cash. Do not opt for an extravagant lifestyle if you want a comfortable future. Working individuals, earning a regular salary, take the stability for granted and unknowingly increases their expenses. Sticking to your list will help you stay grounded and not over exceed your budget.
You will be surprised to find how closet millionaires actually live on a day-to-day basis. They have a basic lifestyle which does not reflect their heavy bank account but provides a comfortable way of life. So remember, learn to do more with less if you want to create a legacy.
Step 2: Keep your money where it can double itself – Invest it
Along with living a basic lifestyle, it helps if you know how to work with the money you already have. The best option here is to invest it. Look out for lucrative investment plans and opt for the one which appeals the most to you. Conduct extensive research on companies and their stocks, their prospect of growth and the risk factors associated with the deal. After you have explored all the possible avenues you can go ahead and choose the one which promises the highest returns. Do not be afraid to invest in long-term plans. Often, these are the ones which keep your money secure and help you maintain finances through the downhill market battle as well. Some people hold on to their stock certificates for decades before cashing them in. It will not only lock-in your money but will also provide a life boat for the future. Look for the right companies to put your money and just go for it.
If the stock market isn’t quite your thing, then you should consider Mutual Funds. They’re a good means for rookie investors to get their feet wet.
Additional Reading: Your First Steps To Investing In The Stock Market
Step 3: The most crucial key to becoming rich is being patient
There are no short cuts and fast-track methods to becoming rich. Unless you win a lottery or inherit a huge amount of money, you aren’t going to get rich overnight. When it comes to building a corpus, patience is the key. This applies to saving money or even in terms of your investment plans.
When you decide to put your money out on the market, you should study the time frame it would require to mature. Things conducted in haste do not yield favourable results. For instance, when you plant a seed you do not expect it to grow over the weekend. It takes time for the seed to mature and grow into a sapling to finally become a plant. A tree takes years before it bears fruits.
Similarly, investing money will take the time to get you the returns that you seek. Sometimes people get impatient and sell their stocks for easy money or completely stop buying market shares. The hard part- the waiting period- can sometimes be difficult. So, prepare yourself for the long haul if you choose to invest your money somewhere.
One lady who left millions after her death did so by buying stocks of the company that she worked for and continued to invest in the dividend instead of cashing it out in a few decades. She used a nominal amount and turned it into a million. So, the point to remember here is: patience is what will get you to the finishing line.
Bonus Read: Introduction To Debt Funds
Step 4: Seek professional help, get a financial advisor
We are often not as equipped to deal with our money as we’d like to think. What is the first thought that enters your mind when you get your hands on a large sum of money? Your first instincts might be to invest it. However, it is not a given fact that every rich person is a good or seasoned investor.
This is where the financial advisor comes in like a hero wearing a red cape. They have a job and it is to make you rich. They have the professional training to manage financial accounts in order to ensure their health and oversee their eventual growth. For instance, when you have a good amount of money you may not know the best way or the best place to invest it in. Professional knowledge will help you here. A professional will have all the data and the numbers to help you make an informed decision. Hiring an advisor is not a waste of money.
Think of it this way- the money you spend today on his / her fee will automatically be refunded once you put their skill set to use. They are trained to study the market and calculate the risks. Trust your advisor but also do your own research.
Do not be afraid to change course if you do not feel comfortable. Explore your choices till you think you have hit the jackpot. It is your money and you have full authority to decide who will manage it for you.
Step 5: Live within your means
It might sound strange but one of the most effective ways to create an empire is to live simply. It is a dedicated task and may not necessarily be everyone’s cup of tea. However, its effectiveness cannot be challenged. Do not go overboard with your expenses. If you can make do with general store goods then steer clear of the imported and gourmet section. Only buy things which are absolutely necessary for your survival. This advice might seem rather harsh but it is also the cold hard truth.
However, this totally depends on your own personal policy. Different people have different belief systems. Think of it this way, when you first join a gym you almost give up on your first day of back breaking exercises. Remember, what your trainer told you, ‘No pain, No gain’. Similarly, you will not get a huge bank account if you are not ready to make some hard sacrifices. Train yourself to adjust to the bare minimum. Do not seek a lavish lifestyle which might get difficult for you to maintain. Instead, opt for a more frugal way of life. Bargain wherever you can, look for discounts and splurge only during the heavy sale season.
Step 6: Have a goal to focus on. Keep your eye on the horizon
In your quest to leave a legacy, it will be essential to have a clear goal in sight. Having a target and aspiring towards it will give you the added motivation to continue the journey even after you feel you have no strength left.
Do some soul searching and discover what appeals the most to you. It can be your family and the dream to provide for them even after when you’re long gone. Children are a great motivation to procure extra money on the side. Or, it may even be a cause that you relate to the most. Today the world needs people who are willingly selfless and believe in collective growth.
Many closet millionaires donate their money to hospitals or clinics focused on fighting life-threatening diseases. They make an impact and leave an imprint on the minds of many. This generosity makes them immortal after they pass away. Therefore, keep something which is close to your heart in sight. Work every day towards reaching that objective and it will guide you through the most difficult of times. As they say, a man with a motive is a force to be reckoned with! Be that force and make your way towards your goal.
Additional Reading: Everything You Need to Know About The Sovereign Gold Bond Scheme
Step 7: Avoid incurring debt
It is a no-brainer that in order to become rich you must avoid incurring debt. A debt will take up most of your financial savings and wring it out of your hands. Hefty expenditure is the bane of your long-term course. So the golden rule is to avoid getting in debt at all costs. The reason is transparent behind this advice and does not take rocket science to come to the conclusion that loans and debts bleed you dry and do not support savings.
Additional Reading: Value Investing
If you want to be remembered for your generosity and your smart life decisions then these tips will help you achieve that goal. Remember, resilience may not be for everyone but it surely gets the work done. Focus and stay focused, that the only advice which you need to pull through and make it big! So, start by making a smart investment today.