In this article I will be sharing with you six simple ways to manage your money like a millionaire. It doesn’t matter how much money you make. What matters is that you have put in hours in working, you are networking, you are building up your career, you are working harder and your revenue reflects that. Which means it is increasing! So how do you manage your money like a millionaire after paying your taxes, employee expenses and bills?
So if you have no idea where your money goes or why you feel scared, unsure, or frustrated with your finances. Don’t worry because in this article I will show you six simple ways on how you can manage your money like a millionaire.
1. Create a Financial Inventory
The first step to managing your money like a millionaire is to figure out how much money you have. This could probably be the scariest part of the entire process because this is where you figure out if you have a $0 net worth, you have a positive net worth or you have a negative net worth. A net worth is a snapshot of your financial position at a specific period in time.
This could be a negative net worth, a $0 net worth, or a positive net worth. If you are creating your net worth statement for the first time, it is so important to be brutally honest with yourself. Your net worth statement will be the foundation you need to build the path toward financial independence. The most important thing here is to write down your current financial situation, don’t just let it sit in your head.
2. Develop Your Financial Blueprint
You can’t expect to manage your money like a millionaire if you don’t have a plan. If you don’t have a plan, you could fall victim to old habits, you could fail to follow healthy habits and you could Lose sight of your financial vision. If you find yourself to be the person who easily forgets or tends to slack off on things (be honest with yourself here), then believe me 100% that you need a budget. It is very simple to create a budget for yourself, because it will make you look like the Chief Financial Officer of your own household expenses.
Some things to remember when creating a budget is to take note of your basic living expenses, take note of any unnecessary expenses and make a true effort to stop spending on unnecessary costs. If you are new to budgeting, I would highly suggest to track every penny of your expenses for the last 2 to 3 months. Get an idea of how much you are spending over a period of time.
3. Understand Your “Why”
I think this step understanding your “why” is extremely underrated when it comes to managing money like a millionaire. Here is my question for you. How can you go through your financial life without knowing why you are saving and investing? For me the reason why I am saving and investing is to take care of my family, build a life I love, leave a lasting legacy and create lasting memories. My ultimate “why” is my family.
I know that my family is the reason why I am where I am now. It is time I repay them the favor and build a lasting legacy, that’s why I am not going to allow myself to fall into debt again or spend more than I earn. When you know your “why” and the reason behind why you are saving, investing and paying off debt, it will be 1,000 times easier to keep going instead of giving up. On the contrary, if you are just saving to save and just investing to invest without a real purpose then giving up will be much easier and possibly permanent.
4. Build Your Emergency Savings Fund
If COVID has taught you one thing it should be keeping an emergency savings fund. An emergency savings fund can make or break your financial future. Typically speaking, you would want your emergency savings fund to encompass cash, readily accessible, 3 to 6 months’ worth of living expenses and just like the name says an emergency savings fund should be used only for emergencies, which could include a flat tire, a leaky roof and a health emergency.
The goal should be for starters, try saving $1,000 in your emergency savings fund. If you feel like saving 3 to 6 months’ worth of living expenses is too complicated at this point, given your income, then it might make sense to simply aim for $1,000 of emergency savings. Sometimes it is best to physically separate your emergency savings fund account from your regular checking or savings account. It would make sense to keep your emergency savings fund in a high-yield savings account to earn a little extra money.
Let’s say you are stashing about $1,000 in your high-yield emergency savings fund. Check out how much money you can earn without moving a finger on a high-yield savings account. Given the current interest rate environment (early to mid-February 2022), a good high yield rate would be around 0.61%, which is exactly what Axos Bank is offering.
Axos Bank would be my Number 1 recommendation for a high-yield savings account. Some of the Axos Bank features include free ATM cards, $0 maintenance fees, competitive APY rates, no monthly minimum required balances, $250 minimum balance to open an account and the best part is that opening an account with Axos Bank is free.
5. Purchase Cost-Efficient Life Insurance
Life insurance can be expensive and necessary. If you haven’t taken the time to review your life insurance situation and you are currently in similar situations like you have or plan to have a family, you have a spouse who earns less than you, or you have someone who is depending on your income. Then it is certainly the time to consider purchasing life insurance.
My favorite life insurance especially for young professionals is term life insurance. Term life insurance is the cheapest and simplest form of life insurance. Term life insurance can cover you for a specific term, typically between 10 to 30 years, after which your term expires and your insurance coverage evaporates.
However, if you are a young professional and are considering forming a family in the future then I highly recommend for you to choose term life insurance. You could obtain term life coverage of $1 million for example, which may only cost you around $60 per month depending on your health status and several other factors. My go-to term life insurance marketplace is Policygenius.
Policygenius is a marketplace which means that they don’t just represent one life insurance company. Instead, when you request a quote from Policygenius, you can receive quotes from several different and high-quality life insurance companies, including (but not limited to) Lincoln, Prudential, Principal, etc.
6. Open Investment Accounts
If your ultimate goal is to build and maintain wealth well into your retirement, it is very important to understand the importance and power of investing. Investing, thanks to compound interest and dollars cost averaging, is how you can help your money grow over decades. The point is not how much money you earn currently, I don’t care if you are earning $30,000 or $300,000 per year to build long-term wealth, you have to start.
You can start investing with $5 a day, $10 a week or $500 a month. It doesn’t matter how much you use to begin your investing journey, what matters is that you start and continue investing. Don’t ever stop investing (or withdraw your invested money, which would defeat the purpose of this step). If you are a beginner investor and don’t necessarily have $100s to invest yet, then Acorns may make the most sense for your situation.
If you are a serious investor and intend to invest $100’s of dollars over a certain period of time, then it might make sense to consider opening an account with M1 Finance. M1 Finance is an investment app for the investor who is looking to grow their investments substantially. In the end, what matters is simply starting the investing journey. Although investing $5 per day may not sound like much, in 4 decades from now, you will be thankful you started when you did.
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