Business philosopher Jim Rohn once wrote,
Becoming a millionaire is not that difficult, but it is not the most important thing. The most important part of becoming a millionaire is the person that you have to become to accumulate a million dollars in the first place.
This is a wonderful insight. In order to become wealthy, you must develop a completely different mindset from the average person who worries about money most of his life. You must develop a completely different character, personality, and set of habits if you are to achieve your financial goals and then hold onto the money.
My financial advisor once told me, "The first millionaire is extremely difficult to acquire, but the second million is almost inevitable."
When you become the kind of person who can earn and accumulate a million dollars or more, you will also be the kind of person who can earn the second and third million as well. Even if something unfortunate happens, and you lose all your money, you could make it back again fairly quickly because you would have become the kind of person who can become a millionaire. And once you become that kind of person, you never lose the ability.
The First Habit of Millionaires
Perhaps the most easily identifiable habit of self-made millionaires is the habit of frugality. Wealthy people are careful with every penny and every dollar. They allocate their funds carefully and with great deliberation. They never buy new when they can buy used. They never buy if they can lease, and they never lease if they can rent. They never rent or lease if your can borrow. They know that, as the English saying goes, "If you take care of your pennies, the pounds will take care of themselves."
For example, most self-made millionaires do not buy new cars. They wait until a good quality car is about two years old before they buy it. Even then, they have the car thoroughly checked out by a reputable mechanic. Once they feel confident that it is an excellent buy, in good condition, they buy the car and then drive it for five or ten years before replacing it.
Most new cars drop 20 percent in value as soon as you drive them off the lot. After two years, many cars have lost 30 to 50 percent of their value. They are still in excellent condition and often still covered by factory warranties. When you buy a good-quality car, you can save many thousands of dollars, all of which can be invested and allowed to grow at compounded interest toward your ultimate goal of financial independence.
Save your Money
Self-made millionaires develop the habit of regular saving and investment from an early age. As multimillionaire W. Clement Stone once wrote, "If you cannot save money, the seeds of greatness are not in you."
George Classon, in his best seller, The Richest Man in Babylon (Signet reissue, 2002), wrote that the key to financial success is to "pay yourself first." He recommends that you save at least 10 percent of your income, off the top, before any expenditure, for the entirety of your working life.
Human beings are creatures of habit. We very quickly adapt to almost any external condition or circumstance. If you save 10 percent off the top of your paycheck and discipline yourself to live on the other 90 percent, you will soon adjust your lifestyle downward slightly so that you are quite comfortable on the lesser amount. In no time at all, living at this level becomes a habit, and you stop thinking about it.
Many people are deeply in debt, and the idea of saving 10 percent of their income, off the top of each paycheck, is too difficult for them even to consider. In this case, which is quite common, I recommend a gradual process where you begin by saving 1 percent of your income and living on the other 99 percent.
For example, if you are earning $2,000 a month, make a decision today to save $20 a month, or 67 cents per day. You can then live on the other $1,980.
Go down to the bank and open up a separate account, your "financial independence" account. Money that goes into this account flows only one way - inward. Once you put money into this savings / investment account, you never, ever take it out or spend it for any reason. It has only one purpose: to enable you to achieve financial independence as soon as possible.
Once you become comfortable living on 99 percent of your income, increase your monthly savings rate to 2 percent off the top. Within one year, you will find yourself living quite comfortably on 10 percent of your current income. Continue this process until you are saving 15 percent and then 20 percent of your income, off the top. You will not even notice the different in your standard of living because it will be so gradual. But the difference in your financial life will be absolutely extraordinary.