Let’s face it: if she (and her husband) can, you can, too! While acknowledging that a million bucks ain’t what it used to be, Liz, a columnist for MSN Money, shared her secrets about how her family’s net worth climbed to $1,000,000.
There were no game shows or “reality” TV appearances. According to Liz, here are the elements of her strategy:
You’ve got to want it — and plan for it. “There are few accidental millionaires in the world. People who achieve financial independence, however they define it, make getting there a priority in their lives.” She started investing in her company’s 401(k) in her mid-twenties and chose cheaper trips rather than expensive vacations.
Live within your means. Spend less than you earn, pay yourself first, and set up automatic transfers and investments.
Invest regularly and don’t stop. If you react to market movements, you end up buying high and selling low.
Be smart about debt. Avoid high-rate debt and use low-rate debt to your advantage. “We chose an old-fashioned, 30-year, fixed-rate mortgage because the low payments allowed us to invest more for retirement while still allowing us to gradually pay off our debt. I’m not saying it’s the best mortgage for everybody, but it’s working for us.”
Own a house — and don’t waste it. “There’s no question that owning a home in Southern California got us to the million-dollar mark a few years earlier than I’d projected.” Bingo. Most millionaires have reached that level due to home ownership. It’s one thing to be a millionaire “on paper,” and another to have $1,000,000 of cash at your disposal at any time. “Homeownership isn’t a no-brainer. You can always mess up by buying more home than you can afford, draining your wealth away with home-equity loans or trying to speculate in an unstable market.”
Invest in yourself. “WeÃ¢â‚¬â„¢ve discovered (duh) that it’s easier to meet your goals, and have money for fun, if your income is rising. So we’ve invested in education, launched our own businesses and looked for new ways to generate cash. In today’s ever-changing economy, you have to be ready to learn new skills and take new directions.” As you can see, income plays a very important role in building your net worth. Keep that in mind when someone tells you, “It’s not what you earn, it’s what you spend.” It’s both. It may be hard to change your income if you believe it is already maximized, but chances are, it’s not.
Updated April 8, 2009 and originally published April 3, 2006.