Paul Rawson is not your typical millionaire. He has a roommate, never graduated from college, and slaves for hours as an employee for someone else. But he’s a millionaire – with a net worth of $ 1.6 million, the 32-year-old, who is the author’s brother, is clearly doing something right.
Rawson has long been passionate about computers, from building his own devices in old turntables to tricking his school’s administrative controls. His interest in technology and ultimately set him on a career path that began repairing his family’s personal computers. Now he is employed in an aerospace company, lives frugally and earns more than six figures a year by pursuing his passion.
But how did he become a millionaire? His financial records show that it’s a combination of several things: making the right investment decisions, smart savings strategies, and a sensible approach to budgeting, debt, and managing returns.
1. Invest early and often
Paul’s journey began like many others – with a low-paying job in customer service. Except that instead of frying burgers, he repaired computers and instead of being burned on the deep fryer, he was occasionally electrocuted. But even as a minimum wage recipient, he had an idea in mind: to invest. This idea followed him until his next job, where his employer offered a generous contribution to his retirement provision. He has kept it to this day, as his company rewards high-performing employees with shares.
You should invest early, says Paul. And you should invest often. The younger you are, the better; You can take a lot more risks in your 20s and 30s than you will later in life. Because later you do not always have the time to recover from possible falls in the stock market.
Paul’s investments vary: he owns three properties in California and bought a sizeable amount of Tesla stock when the stocks collapsed due to controversy. He divides his shares between a tech index fund (40 percent), a small-cap fund (40 percent) and a 20 percent stake, which he uses to choose stocks that he likes. He prefers Fidelity and recommends index funds as an inexpensive, low-risk investment for those who are not very knowledgeable about the stock market.
As a result of his investments, including his retirement savings, he is sitting on a pretty sizable amount of money: $ 328,000 in his retirement plan, $ 360,000 in employer stocks, and $ 275,200 in personal investments. His real estate investments have also paid off. Although he shares two of his properties with others, the total value of his California real estate interests is $ 654,500.
2. Productive debt is good
Many shy away from the idea of running into debt, but Paul uses it to his advantage. In 2014, he took out a loan at the expense of his pension insurance to buy a property – something many experts advise against because it means they forego tax-privileged growth. However, at the time, the stock market wasn’t growing fast, so Paul used the money instead to buy a rental home with a partner.
Since 2014, its share of the house’s value has more than doubled, from $ 63,500 to $ 165,000. And while he still owes $ 44,500 on his loan, he is making a profit on his rental property. His tenants pay $ 700 a month. $ 367 goes into the mortgage and the rest in a savings account.
The key is profitability. Therefore, Paul strongly recommends avoiding credit card debt. These high-interest loans eat up your income with interest rates of up to 25 percent.
3. Abandoned a budget
It may sound strange, but it works for Paul. He believes that the idea of a budget encourages spending until the monthly budget is reached. Much like a school making sure it spends every penny it is given to receive future money, a budget clearly dictates how much you can spend, not how much you should spend. Paul is by nature unwilling to spend, so foregoing a budget doesn’t mean going overboard.
Instead, he only spends his money on what he really needs: groceries, electricity and cell phones. Everything else is the exception, not the rule. That doesn’t mean he’s not having fun; he enjoys going out with friends and traveling like everyone else. He simply avoids scheduling his leisure expenses so that they only occur occasionally and are not an integral part.
4. Hard work
His company is known for its high fluctuation and long working hours. With its startup mentality, the company expects the best from its employees – but it also rewards them abundantly for it. Since joining the company a year and a half ago, Paul has been promoted three times and has received more than $ 350,000 in bonuses. He works hard and it pays off. And at 32, he’s not ready to retire. After all, his job is his passion. But since his financial future is secure, he is considering reducing his working hours – to “whenever I feel like it” – as long as his employer cooperates.
This article was translated from English and edited by Ilona Tomić. You can read the original here.