Growing up in the decidedly hardscrabble union town of Pittsburgh, Pennsylvania, becoming a millionaire was nothing but fantasy. Not only was there very little information on how to reach the lofty goal, but neither myself nor any of my friends actually knew a real millionaire.
It was just something we read about in magazines or saw in movies — nearly everyone had the same economic status in our blue collar neighborhood.
But the real turning point for me was being invited to a Charles Givens seminar while in high school.
Charles Givens was one of the first traveling motivational speakers focused on how the average person could build wealth.
I was impressed seeing him pull up in a Rolls Royce with his staff in tow. After the seminar, I was fortunate to chat with Mr. Givens. I had met an actual millionaire!
Fast-forward several decades and being a millionaire is commonplace. Today, with nearly 11 million millionaires in the United States, some pundits claim that being a millionaire is the new middle class.
The Wall Street rally of the past year has been supercharged by the pro-business and low taxation-driven White House of Donald Trump. Surging stock prices and a robust entrepreneurial spirit have gripped America. It takes billionaire status to carry the same cachet that being a millionaire did not so long ago.
Despite living in the best times ever to become a millionaire, only around 3% of Americans can claim the status. The reason why has always perplexed me. Why do some people become wealthy while the majority work just as hard but never seem to gain traction?
I noticed that there are certain things that all millionaire investors do the same way. Remember, I’m not talking about those with large inheritances or those fortunate enough to invent a popular product. I mean regular millionaires without any outside advantages who have built their wealth slowly over time.
My research revealed seven easy-to-follow steps that can be used to reach millionaire status in the financial markets.
1. Save, Save, Save
The most important thing to remember is that making money in the stock market takes time. Saving a percentage of your monthly income is critical to reaching millionaire status. You can’t have your money working for you if you don’t have any money to deploy. The best way to save is always to pay yourself first. This means placing 10% or more of your total income in savings before you pay anyone else, including bills.
2. Delay Gratification
This step is arduous for most people, and I think it’s the number one difference between self-made market millionaires and every other investor. While many can save, it’s hard to keep that money when you can spend it on something. Millionaires understand that by delaying gratification, they will have even greater spending power in the future.
3. Keep Your Expenses Low
While this may seem obvious, you would be surprised at how many high-earning people fail to follow this step. By keeping costs low, you can save even more money to invest in the financial markets.
4. Understand The Power Of Compound Interest
Compound interest works against many people in the form of debt, and especially credit card debt. Carrying a monthly balance on a credit card or credit line means giving up money that should be yours. Do not carry a balance on your credit lines and if you have one now, work to pay it off. The wealthy reinvest the proceeds of their investments to force compound interest to work in their favor.
5. Invest In The Stock Market
The stock market has grown by around 10% per year over the last 90 years. This includes bear markets and other price plunges over time. History has proven that the stock market consistently trends higher. This upward trend cannot be attributed to commodities or currencies. Even bonds, although considered safer than stocks, can’t match stocks in the long run.
6. Reinvest Your Investment Gains
I touched on this crucial factor in the compound interest step. Reinvesting dividend and other investment gains is how millionaires speed up the wealth-building process. Focus on setting up automatic reinvestment to keep yourself from being tempting to spend your gains.
7. Never Short The Stock Market
Shorting the market is a game for professionals trading other people’s money. Trying to time when the market will fall is often an exercise in futility. The long-term upward drift of the stock market makes shorting extremely difficult for everyone but the most skilled investors.
Risks To Consider: There is always a risk when investing in the financial markets. While diversifying and holding for the long term can mitigate much of the risk factors, anything can happen in the markets. Always use stops and position size properly when investing.
Action To Take: Use the above seven steps as a launch pad to reach market millionaire status!
— David Goodboy
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Source: Street Authority