Ten Tips on How Not to Become a Millionaire

Although everyone is interested in becoming a millionaire or in preparing financially for retirement, it turns out that most people are really more interested in how not to become a millionaire. In other words, they wanted explanations in financial terms about why people don’t accumulate wealth.

  • Ignore the fact that you can build wealth by investing in ownership investments and earning average returns. You can build surprising wealth just by investing in ownership investments that produce average returns. Ownership investments are basically stocks and maybe real estate.

    • Just by earning the stock market’s average inflated adjusted return of around 6 percent, a 25-year-old saving $150 per month can build as much as $300,000 by age 65.

    • Just by earning the stock market’s average inflated adjusted return of around 6 percent, a 35-year-old saving $300 per month can build as much as $300,000 by age 65.

    • Just by earning the stock market’s average inflated adjusted return of around 6 percent, a 50-year-old saving $850 per month can build as much as $300,000 by age 65.

    An important truth here is that, sadly, most people miss this information. Consider what this means: You don’t have to get fancy. You don’t have to spend a bunch of time worrying. You don’t need to spend a bunch of money on advisors, newsletters, or commissions.

  • Ignore the fact that you can get much, and maybe most, of the money from tax savings and employer matching. Because of the way that employer-matching provisions work in things like 401(k) and Simple-IRA plans and because of the way our progressive income tax system works, you can get a lot of money from your employer and from the government in the form of tax-deduction savings.

    You may even be able to get most of the money you need for your retirement savings from these sources.

Ways to Come Up with $300 Monthly
IRA 401(k) Simple-IRA
What you want to save $300 $300 $300
What you can get from employer $0 $100 $150
What you can get from tax man $90 $60 $45
What you come up with yourself $210 $140 $105
  • Don’t tap your computer’s power to develop wealth-building insights. This is hard to describe in general terms because by definition, what the computer lets you do is get very specific.

    When you use your computer to make better personal financial decisions, you develop powerful, wealth-building insights that often supply the rest of the money you need for your investing.

    The Internet provides a ton of tools, many helpful, for doing personal financial planning. Use these sorts of computer-based financial tools to make wiser decisions. A little extra money here, a little there — and pretty soon, you’ve found that last bit of money you need to save for a comfortable retirement.

  • Give up, because it’s too late to start anyway. Another common trap that prevents people from saving money for retirement is they give up, thinking that it’s too late to start. No matter what your age, if you make five or six or seven — maybe even ten — good decisions, you can still build substantial wealth by the time you stop working.

    You possess more life experience and, I daresay, more wisdom, than someone who’s 25. You can use your experience and wisdom to make a greater number of good decisions, and that can produce the wealth you need.

  • Get entangled in at least one “get-rich-quick” scheme. Get-rich-quick schemes don’t work except for the person selling the scheme. And, in fact, they drain off energy and money you really should be using to build your investments.

    If you have some small percentage of your investment money chasing speculative returns, that’s okay, but only as long as this iffy investing doesn’t foul up your other, more important, boring-but-predictable wealth building for retirement.

  • Fake it with false affluence. When people spend all their money trying to look rich, they don’t have any money left over to save and invest. That means that most people have to decide — either explicitly or implicitly — whether they want to be rich or look rich. Weird, right?

  • Give in to the first big temptation of wealth building. If you really do use Quicken in a disciplined way to manage your financial affairs, you’ll find yourself freeing up money. When you find some extra money, you need to have the discipline to save and invest those funds. And if you do start to do this, you’ll rather quickly amass thousands of dollars.

  • Give in to the second big temptation of wealth building. After you collect an extra $5,000 or $25,000 or $50,000 in your portfolio, you need to have the commitment necessary to let that money grow. A lot of people, after they amass a nice little pot of money, decide it’s time to abandon a strategy that has worked wonderfully.

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