In this episode, we discuss the simple strategy of becoming a millionaire.
Full Transcript
Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons on how to grow yourself physically, mentally, emotionally, and spiritually so you can have better careers, better relationships, and better personal finances.
I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
In today’s episode, we’re are going to talk about the blueprint to becoming a millionaire and that is to start saving 20% of your income as fast as you can. There is a book out there called the millionaire next door and the authors studied what caused people to become millionaires and they found out that millionaires saved 20% of their income and they didn’t keep up with the Jones. One reason why I’m moving to Latin America soon is it is so cheap to live there. If I live in Colombia, I can live like a king for about $1,500 a month. I could probably even make it on $1,000 per month.
I went to Medellin Colombia for a week and I fell in love with the place. The weather was amazing, the food was good, it was cheap, the people were friendly, Spanish improved tremendously there, and they like reggaeton there. I can run my business from there and save a lot of money. I get everything from a big city but at a quarter of the price. This will definitely help me save 20% when I’m in Colombia. So if you want to start saving 20% of your income, you have to be okay with living on 50% of your income since 30% will be dedicated to taxes anyways.
So if you look at your budget and you realize that you can’t live off of 50% of your income, then you either need to make more money or just accept a lower standard of living. The fastest way though is to accept the lower standard of living. Right now I’m living with my parents until January 2020. I want to save as much money as possible before I head off to Latin America and to keep my expenses low while I start my Grow With Joe business.
When I was living in DC, it was really easy to live outside your means because it’s such an expensive place to live. Rents were high and entertainment cost could wipe out your monthly budget in one night if you let it. DC is a fun place to live but I believe you can make any place you’re living in, a great place to live but I’m starting my own financial planning business and I don’t have enough revenue to live in a place like DC yet so I moved back to Oregon to live with my parents. I have some clients now. Not enough to live in DC but definitely I have enough to live in Medellin, Colombia.
If you want your dollars to go even farther, I would recommend you look into creating a career that you can do online. If you’re a computer programmer that can work from home, then I would highly recommend you look into living abroad so you can save a lot of money. This is something that Tim Ferriss wrote about in his book, “The Four Work Week” which is to live abroad so you don’t have to spend so much money. This can be a way to save 20%.
Now to become a millionaire, it won’t happen overnight, it will come slowly. If you save 20% of your income or more, this is a great strategy for wealth accumulation. When it comes to investing, it takes time, money, and a rate of return. You can’t control the rate of return you get, but you can control how much money you put away and how long you stay invested. A dollar saved in your twenties is like saving forty dollars in your 70s. That’s forty years though and you have to save enough. Most people are not saving enough because they spend their money on other things. If your income is not enough to pay for all of your living expenses, then take a look at the career you’re in or your living choices.
I know there are circumstances that some people need to take care of that causes them not to save 20% but if you look at the average person, they’re making choices that benefit them the most right now. It’s a lot more fun to spend money now than to wait forty years to get that money back. I would say distract yourself with something that doesn’t cost a lot of money. I spend a lot of time working on my business and I love doing it. It’s easy for me to spend a lot of time on this business and causes me not to spend a lot of time on things that cost money.
The world is not a fair place if you play by the rules of the majority. If you don’t choose certain things to be important, then you can have more freedom. It when you need to have things certain, then it becomes expensive. You’re a price taker and will take any price that is given. You need to be a price setter and sometimes that requires you not take the deal or find a deal somewhere else. This is what I’m doing and it’s working out for me. I’m so happy now because I’m doing things for me and I’m just following my process.
If you want to have a higher standard of living, you most likely need to raise your skills in order to get a higher paying job but that could come with trade-offs as well like working for someone that you don’t like or on something that you’re not very passionate on. Or you can just accept a lower standard of living where you’re not getting a new car every other year and not having the finest of everything. It’s like what Ryan Holiday wrote, the two ways to become wealthy is to get everything you want or to be satisfied with everything you have. But to make sure you have a future where don’t have to worry about your standard of living, it’s wise to start saving 20% of your income as fast as you can.
That’s it for today’s episode, to summarize it, the blueprint to become a millionaire is to save 20% of your income and not to keep up with the Jones. I’ve met people who lived in a place like DC and were saving 20% of their income and they did it because of their lifestyle. They lived in a reasonable place and didn’t spend a lot of money on a car payment and going out. I remember this one guy didn’t drink and just joined a pool league. He was saving so much money. So it’s possible, you just have to make some lifestyle choices. And that is the key, they are choices we make and we choose to live that lifestyle for the most part. You have to realize that a million dollars in retirement will roughly generate $3,300 per month in today’s dollars. So how many millions of dollars will you need in retirement to live? There are some caveats to this claim, but it’s a good benchmark for what you need to up for in retirement.
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Thanks for joining me today and remember if you go with Joe, you can grow with Joe, cause Joe knows Dough.
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