On your way to your first £1million

Less than 0.7% of the population according to research organisation Tulip Financial Research have a net asset value greater than £665 000 not including their home. So when we speak of millionaires do we mean people that live millionaire lifestyles but do not have assets to match? I can remember paying myself my first six figure salary out of my business some years ago and on that basis it would take just ten years to have accumulated £1 million. It was some years ago that my business hit turnover of £1 million in one year. These measures though pleasant experiences and maybe steps along the way, but they don’t make you a millionaire.

You will have heard me say before, “It is not what you earn but what you invest that makes you rich.” It’s not what passes through your coffer that is going to make you wealthy but what you are able to keep. Sales are vanity, profit is sanity but cash is reality is the mantra for business owners to recount.

Well how do you do it I hear you asking impatiently? How do I make my first £1million? Before I explain let me get rid of some of the myths.

• You don’t have to be frugal and a miser to yourself to be rich.
• You don’t have to earn six figure salaries to be rich
• You don’t have to win the lottery to be rich
• You don’t have to be clever to be rich
• You don’t have to own a large or very successful business to be rich
• You don’t have to fake it until you make it to be rich
• You don’t need to have multiple streams of income to be rich
• You don’t have to dress a particular way, own a particular car, or live in a particular neighbourhood to be rich.
• You don’t have to know the right people, be born to the right family to be rich.

I have worked with and for many millionaires over the last two decades in my accounting practice and the research that I have done is backed up by the experiences that I have had with these clients over that time.

Some of the suggestions above may supercharge your income or accelerate your wealth making strategy but if you get your philosophy around money wrong they can also accelerate your level of debt.

You will all be familiar with get rich quick schemes. They invariably lead to misery and financial ruin. The first thing to understand about accumulating wealth is that it is a get rich slow scheme by and large. By practising certain principles and investing wisely over the long-term then wealth creation becomes a certainty rather than a wish.

I am going to keep it simple and share just two ideas with you. Yes there are just two things you need to do.

1. Spend less than you earn and as you earn more increase the gap between what you earn and what you spend. Use the difference to invest wisely. A common human trait is to spend beyond our means and each salary increase is matched by an increase in monthly expenditures. The first thing we have to re-learn is that we should not spend everything that we earn. The power of compound interest on a regular amount saved over your working life can quite easily accumulate to well over £1 million.
2. The next one is to pay yourself first and make it automatic. This concept is not new but it just isn’t carried out by the vast majority of the population. If you could ensure that before you deal with your every day expenditures that you could took care of the longer –term then your financial future could be secured. There is a way to do this and once set up you don’t have to think about it. All you have to do is work out what you will commit to on a regular basis and get it taken out of your account as soon as you get paid. Do it so that you never see that element of your pay. Before you get your salary allocate through standing orders or direct debits for your pension provisions and other investments for the future.

I conclude by referring back to the research by Tulip Financial Research. It took the average millionaire twenty years to accumulate £1million in assets. Don’t think get rich quick, think what I can do now, today to start that journey.

Like I always say. DO IT NOW.