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5 Simple Steps To Becoming A Millionaire

Are you on your way to being a millionaire? Have you wondered how to speed up that process? Here are five simple steps that might help you in your journey to becoming a millionaire.

1. Save

Before thinking about what to invest, we should always think about what to save. A good way to start the process is to start creating a budget for yourself. Track your monthly expenses, down to the smallest of things. There are multiple great mobile applications available to help you do that. Once you have the data for a few months, start analysing to see which are the expenses you can cut down on. For example, if you smoke, start thinking about quitting. If you are drinking premium coffee every day, consider switching to a more economical option. A little by little, you will realise how much faster your savings will grow.

2. Save More

Just as you improve your savings rate, start expanding that exercise to your yearly expenses or other family-related expenses. Your insurance, your mortgage payment, your car instalment, your kid’s childcare and your annual holiday. Are there ways to save a little more on that? Are there ways to refinance or restructure your insurance and loans to help you save more? If you go through your expenses systematically, you might be surprised by how much more you can save.

3. Invest, Invest, Reinvest

Invest your excess cash, invest for the long-term and re-invest the dividends you are getting without spending them.

4. Don’t Touch Your Portfolio

You might start seeing some results from your investments at this stage. However, it is important that you do not start cashing out and spending your gains. Have the discipline to endure and just let your portfolio continue to grow.

5. Repeat

The last step is to simply repeat the whole process again. Saving and investing for your future is a dynamic process. Circumstances change, your saving and spending patterns will change over time. Therefore, it is important to review them on a regular basis to make sure you are managing them in the most efficient manner. Continue to invest for the long-term and do not spend your gains prematurely. The magic of compounding is like a snowball rolling downhill. It might start slow, but before you know it, your investment would reach a point where it evolves into a life of its own.

Foolish Summary

If you have a decent job and can save up regularly, it is not difficult to become a millionaire. However, it would still require great discipline to make sure you continue to stay on the right track. This is because as you see your bank and brokerage accounts increase in value, you have to be able to stay the course and not be enticed to start spending your gains too early.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.