Becoming a millionaire is something I think all of us dream about. It has a certain power to it. An allure that can drive some people to reach for, and achieve that goal. Though for most of us, it’s more of a pipedream. We say things like “yeah, maybe if I was rich I could buy that” or “If only I were a millionaire, I could quit my job and live by the ocean”. That’s a lot of ‘if’s’ , and it’s the first problem we need to address. You need to first convince yourself that it’s possible to become wealthy, otherwise you likely won’t ever be. More than that, we need to make it an inevitability. In other words, we need to change from saying ‘if’, to instead saying ‘when’. Then you can start saying things like ‘When i’m a millionaire... I’ll have a second house on the beach’ or ‘When I’m a millionaire... I’ll quit my job and do what I love every day’. You need to fill in the blank for yourself. What’s your biggest dream? When I’m a millionaire… (fill in the blank).
Listen, It’s a different scenario for everyone, but the key point is that wealth provides choices and opportunities. It gives us the choice to work because we enjoy our jobs, instead of working because we must. It gives us the opportunity to travel, to eat out at fancy restaurants, to visit friends and family, and see the world. It gives us the opportunity to pay for a great education for our kids, to not have any debt, and to live the life we want. What will it be like for you?
That’s really what financial freedom is all about, and it’s exciting to me. The most exciting part is, it’s actually quite simple to do. But as I’ve said before, Simple doesn’t mean easy. Just because anyone can achieve financial freedom, doesn't mean everyone will. It takes meaningful effort, and that’s what will set you apart. You’re willing to put in the effort to make those dreams a reality, while the majority of people simply won’t.
So, now that you’re ready to be financially free, the question is:
HOW?!
Your path to financial freedom
There are obviously multiple paths to wealth. You could:
Start a successful company
Become a professional athlete
Get an extremely high paying job
Sell your organs on the black market (do you really need two kidneys?)
Invest in the Stock Market
The answer to this is probably clear by now, the simplest way that I know to become wealthy is by:
Investing!
Yup, Investing is the simplest, and most passive way that I know that can make you a millionaire. All you really need is some basic understanding of the stock market, and the proper ingredients and commitment to your goal. Think of it like this: Investing is a machine, but it’s not just any machine, it’s something I call a compounding machine.
The compounding Machine
This machine is very special, because every time you put money into it, the more money it will give you. You see, each and every dollar put into this machine increases by a certain percentage and is spat out the other side. Not only will it give you more money each time you put money in, but the machine continues to suck in the money it just spat out, spitting out even more money. In other words, it’s a money making feedback loop. This cycle continues until more and more wealth is created.
This compounding machine works on three basic principles.
Dollars in
Rate of growth
Time
Each one of these metrics is dependant on the other. What I mean is that they all work off one another. If you’re low on money, then you must either increase the amount of time, or your rate of growth to make up the difference. If you’re growth rate is low, then you need to increase the amount of money you invest or the time your invested.
Remember: You’re the one controlling the machine. You decide how much money to put in, and how long you will let it run. You also have a direct influence on the rate of growth, depending how far you want to take your education, but we’ll get to that.
Regardless of which you may be short on, there’s always a way to achieve your goals. You just have to do the calculation, find your magic number, and work towards that in any way you can.
Each of these can be extremely powerful tools if you learn how to utilize them properly, but it takes effort. Remember, I said investing was the simplest way to become a millionaire, I never said it was the easiest.
Dollars in: Feed the machine
Save Save save!
This is the element that is simultaneously the easiest to control, and sometimes the most difficult. As I mentioned above, you need to feed the investment machine, and to do that you need to have excess cash flow. In other words, you need to save your money. This is the most important to understand early on; you have the control over how much money you save. It’s all about living below your means; Not spending all your money each month. This is done through discipline. You want to save money now, so you can truly enjoy financial freedom later in your life. It’s what’s called delayed gratification. The more strict you are with this, the richer you will be. It’s completely up to you.
Here’s one way to look at spending. If you plan to learn to invest the way Buffett, Munger, and all the other Next Level Investors do it than spending takes on a whole different light. That $1,000 you want to spend on some new toy is worth a lot more than you think. In fact, each time you spend $1,000 you’re really spending $32,918.95 of your future money. Imagine how much more fun you could have with $32,918! Quite a bit I think… Remember that the next time you want to buy something. How can this be true you ask? Well, remember compounding from the last post? This is what you’re missing out on when you spend those extra dollars, the more we can manage to save and put to work in our investments, the more wealthy we will be.
Here’s a book to get you started in your money saving adventures:
Rate of Growth: learn to turn up the dial
The growth rate you are able to set the machine to is the most powerful of all the principle. The higher this number is, the more money it will spit out during each cycle of the machine This will have a huge impact on what you end up with when you finally turn the machine off.
This is the most powerful metric, but it’s also the most difficult to effect. To turn up the growth rate dial on the machine you’ll need to really educate yourself on exactly how this machine works. This is where I come in, I’ll teach you exactly how this machine works and how to properly use it. It will take time, discipline, and effort and it won’t be for everyone. But don’t worry, if you don’t want to take it to the Next Level, I’ll still teach you all the basics you need to be successful. You’ll learn the most important aspects of how this machine works and still be very successful over time. With even a little bit of knowledge, you’ll be able to increase the output of this machine. Not only that, but you’ll learn the best methods of how to do so consistently over time.
Time: How much do you have?
This is the easy one. We really only have one control when we are looking at time. Time is the friend of an investor. It will help us achieve our goals without us doing anything. The more time you can manage to allow the machine to run for, the more money you’ll collect when you finally turn the machine off. So the question you have to ask yourself is: How long can I let this machine run? The longer it runs, the more money you will have. The more time we have, the better. Time takes care of itself. It can’t be stopped or changed. If you’re starting to invest later in life then you may need to turn up the amount of money you add to the machine, and/or turn up the growth rate dial. If you have lots of time, then you can use the passive investing methods I’ll teach you.
The most important thing you do is define how many years you have to leave the machine on. If you're lucky enough to be 20, you can leave the machine running for 45 years and see a tremendous result when you finally turn it off. If you want to retire at a younger age then you’ll likely have to adjust a couple of the nobs on the machine to reach your goals. If you’re starting later in life that’s great too! But if you want to reach your goals you may have to put in the extra time and effort it takes and invest in yourself to help you reach your retirement goal.
Conclusion: Learn, save, feed, repeat.
We learned that investing is a way to utilize something I call the Compounding Machine. It has three different factors that affect its output to us:
The amount of money we feed it
The rate at which this money grows
The time we allow the machine to work it’s magic
We now know that if we’re short on one of these, we can always increase the other, to make up the difference. Two of these factors require only discipline (#1 & #3), while the other requires knowledge and discipline (#2). Thanks to the last post, we understand just how powerful it can be to use the compounding machine. Now we just have to learn exactly how to use it.
No matter what anyone tells you, investing is not a get rich quick scheme. It’s a definitive plan to getting rich slowly. Anyone who tells you differently you should turn the other direction, and don’t walk, but run from. Investing is a proven method of creating wealth, it will not only help you retire above your basic needs, but will lead to an extraordinary life. But it’s still going to be up to you just how extraordinary you want it to be. I’ll give you the roadmap to success, you’re the one who has to follow it.
Continue reading the next post to find out at what age you’ll become a Millionaire (calculator included).
Thanks for reading,
We’ll talk again soon.
~Ryan Chudyk~
PS.
If you really want to learn more about investing and how to turn up that growth rate dial, sign-up to my newsletter. I’ll send you weekly investing lessons on how to become a true Next Level Investor. And i’ll give you my NLI checklist. If that sounds good sign-up here:
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