Regardless of whether your goal is to make a million or ten million euros, you have to start somewhere.
Thomas C. Corley, auditor and certified financial planner, has interviewed millionaires for five years and compiled his experiences in several books, including “Change Your Habits, Change Your Life”.
The right savings strategy is crucial
Corley surveyed 233 people with at least $ 160,000 gross annual income and $ 3.2 million net worth, of whom 177 are self-made millionaires. Through these interviews and analysis, Corley has revealed dozens of facts about rich people and their daily habits in order to find out exactly how they came to be wealthy.
In his book, Corley writes that 80 percent of the self-made millionaires he researched didn’t get rich until after age fifty, but almost all of them started out the same way.
“The self-made millionaires in my study all set themselves the same goal, namely to save 10 to 20 percent of their income,” Corley writes. According to statistics, the average savings rate in Germany is around ten percent – a start.
More importantly, before people became millionaires, they made a conscious mindful of where they put their savings. Using a strategy Corley calls “the bucket system,” they have divided their savings into four general categories: retirement savings, specific expenses, unexpected expenses, and cyclical expenses.
“The bucket system”
The first bucket, retirement planning, includes retirement plans, pensions, and other company retirement plans – that is, money invested in growth and spent later in life.
Savings on education, for a potential wedding, a house down payment, and other large anticipated expenses are part of the second bucket.
The third bucket is more or less an emergency fund – a separate account of cash that can be accessed in the event of sudden job loss or a medical emergency.
Finally, the last bucket contains savings for cyclical expenses like birthday gifts and vacations.
This savings strategy was found to be crucial in nearly half of the millionaires in his study whom he says followed the path of saving and investing. They were ultimately able to live on 80 percent or less of their salary, have been persistent and patient, and never bragged about their fortune. But above all, they used the time to their advantage.
“Self-made millionaires make a habit of saving,” Corley explains. “The more you can save at a young age, the more wealth you will accumulate.”
This article was published by NewsABC.net in October 2019. It has now been reviewed and updated.