The first step to becoming a millionaire

How much did you used to get for pocket money? From that glorious moment you receive your first lump sum in the form of a few dollars, you begin to make financial decisions. 

At that point, these decisions may involve choosing between saving that exciting gold coin in your piggy bank, or using it to buy some lollies, a ball, or (very slowly) save up for a new iPhone. If only our financial decisions could remain so simple throughout our lives!

Fast forward to adolescence, and a regular paycheck may be coming in, increasing the complexity of your financial decisions. Add a university degree to the mix, and now we have debt. Include our savings account, and we’re now making choices between saving to accrue a low interest rate, versus the opportunity cost of investing that cash elsewhere.

And it’s at this point – the addition of opportunity cost – that suddenly our financial decisions are as infinitely complex as the number of investment products and assets that exist.

So, becoming a millionaire by 2020 is a realistic goal?!

#1 Managing the complexity
When it comes to financial planning, many of us think that seeking professional help is only needed once you’ve already accrued vast sums of wealth, have a complex financial set up, or are old enough to have to (yawn) begin planning for retirement.

But often, the greatest wealth is built by developing a mindset from the very beginning that you will be wealthy, so a proactive approach is a great idea from the outset. And seeing a financial planner for a single session at this early stage can be worth considering to set you off on the right track.

As the saying goes, “Whether you think you can or whether you think you can’t, you’re probably right” (thanks, Henry Ford). So, deciding you will be wealthy means you should begin planning for this inevitability – now.

Here are three more reasons why you could benefit from seeing a financial planner early.

#2 It sets you up for success
Yeah we know, right? But it’s true! It’s impossible to achieve goals you haven’t actually set for yourself. And you may be surprised to find that “being really, really rich” isn’t actually a goal!

The earlier you can work out what you want out of life, the earlier you can develop short and long term goals that will help you to achieve this. This will also give you confidence that each financial decision you make along the way each day is contributing to you achieving your goals.

As an example, if your end goal is to retire at 50 with a dozen investment properties, your current priority might be to enter the market as soon as possible. This would mean delaying repaying your university HELP debt, as the interest rate on this debt is probably lower than the current rate of property market growth – even though intuitively you may have thought repaying debt should have been your first priority.

If you have no interest in property, on the other hand, paying off your HELP debt may be far more important. It’s all about working out what you personally want to achieve.

I just want to have enough money to never work, go out every night and shop every day….

#3 The experts want you to start early
It was Albert Einstein who apparently said that “the power of compound interest is the most powerful force in the universe.”  Because the benefits of compound interest increase over time, it goes without saying that the earlier you can begin tapping into this super power, the more wealth you will be able to create.

But this approach isn’t just limited to compound interest. It can apply to all types of investing. The world’s most successful investor, Warren Buffet, said that it’s “the investing you do systematically and consistently over time will make you wealthy”.

The experts say to start early, take a long-term approach, they say. And set yourself up to succeed.

#4 You don’t have enough time not to
These days, in a world of information overload and seemingly unending choices, we are faced with almost never-ending demands on our time.

So, it’s becoming increasingly important to outsource as much as possible of our non-core tasks that we can’t complete efficiently or with confidence.

As an example, if it will take you days – or even weeks – of research to make a certain decision, doesn’t it make more sense to outsource that decision to someone who already has the answer? This is basically what a financial planner can do for you.

Working smarter not harder may be an overused saying, but that doesn’t make it any less true. 

Katrina Haskew is Managing Director of Leading Advice, a family-run financial advisory firm that helps its clients and their families build and protect their wealth.

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