Baby steps for future millionaires (part 2)

baby-walkingHere are 10 more potential baby steps on the path to becoming a millionaire…

Remember: a journey of a thousand miles starts with a first step.

Re-programming our habits eventually creates incredible results. The magic is in the aggregation of marginal gains.

 

1. Imagine you are rich

OK, imagine you are rich.  You have no debts, no money worries, good health, a beautiful spouse etc etc. You are sitting in a garden on a summer day with a cold beer or glass of wine. The sun is shining, the birds are tweeting and everything is marvelous.

To achieve this actually doesn’t take much money at all.  So now I want you to think bigger and imagine what you could do if you were really rich.  Be as specific as possible…what would you do and how would it feel?

Congratulations! You have just completed a visualisation exercise.  Visualisation is a powerful technique used by top performers from sportsman to chief executives.  Top athletes use visualisation to prepare for the feeling of lining up on the start line, hearing the gun, starting to sprint and then powering across the line first.

The Escape Artist is already past the point where I’m probably not going to starve.  But I can visualise the benefits of having a lot more money. If I had $quillions, I could use this to buy rainforest to protect it from logging or green belt land to protect it from development or give it to projects that promoted family planning or child literacy in the third world.

Money is power and power can be used for good.

2. Skip a meal

Back in 2014, I wrote Get Rich…Fast about the benefits of occasional fasting.  I recently did another full days fast and it was much easier this time.  I didn’t even notice I was hungry until about 5pm and by that time the finish line was in sight. I went to bed early and burnt fat the easy way…whilst sleeping.

The stoics of ancient Greece and Rome deliberately created the experience of poverty by occasionally sleeping on the floor or skipping the odd meal. Seneca then used to ask himself: Was this the condition that I so feared?

In other words, is that it??  We may fear poverty, but for most of us in the pampered West it’s healthy to skip the odd meal.  Experiencing this helps take the sting out of our fears.  And what doesn’t kill you makes you stronger.

Food tastes better when you are genuinely hungry. It’s not about deprivation so enjoy a slap-up meal after your fast.

3. Imagine you got fired

If you are in full time employment, run the following thought experiment. Imagine that your boss calls you into their office. The lady from HR is there looking awkward, but this time it’s nothing to do with that unfortunate incident with the photocopier at the Christmas Party last year.  You are being fired.

Now what would you do?  Who would you call and go and see? Make a list and then call them now whilst you still have your job.

Dig a well before you are thirsty and build the connections that will help sustain you in the future…maybe years from now.   Reaching out and building relationships for the long term is valuable…even where there is no obvious immediate payback.

No one at work will suggest you do this. The Man likes you being dependent on your current job. It suits a drug dealer for the clients to be hooked.  This is another reason they try to keep you busy in the Prison Camp.

4. Read a book

Reading the right books is like having a super-power.  There is no investment that can you give a return like you get from a great book.

Here’s the deal : someone spends years working hard, experimenting and learning tough lessons to achieve mastery of their subject and demonstrate a track record of success.  They then spend another couple of years locked in a room writing, boiling down all that experience into a book.

We can then read their book in a couple of days…benefiting from all their hard work and their entire life experience….all for less than the cost of a novelty iphone cover.

Now you might be thinking that you don’t need to read any self help books because there is nothing wrong with you. But there doesn’t need to be anything “wrong” to want to get better.

And don’t worry, you are among friends.  The Escape Artist is not going to report you to the Self Improvement Police and have you sent to a compulsory Feng Shui workshop if you admit there might be room for improvement.

Now if only someone had compiled a helpful list of some life changing books to help you achieve financial freedom…hold on, what’s this?

5. Get a raise

First make sure you know what other people at your work get paid.  What’s the purpose of after work drinks other than to swap intel on who gets paid what?

Then make an appointment to see your boss.  Ask them what it is going to take for you to get a pay rise / promoted to the next level.

If it sounds even vaguely possible, throw yourself at the task.  If it’s impossible, see point 3 above.

Then go back a few months later and ask for the promotion.   Even if you missed the targets. If you do this with another job offer in your back pocket (see point 3 above), it will be a slam dunk.  Even without an alternative offer, what have you got to lose?

I know…Duh!  But what % of people do this?

6.  Pay yourself first

Try throwing a juicy steak to a dog and asking it to save 10% for a rainy day.  Let me know how you get on with that.

The same thing applies to people. If you wait until the end of the month and try to save whatever is left over, guess how much that will be?

A better approach is to pay yourself first. Set up a direct debit so your savings leave your bank account immediately after you get paid.  Just like work tasks often expand to fill the time available, so spending often increases to use the cash available. So make less available for ridiculous spending. You can set up your monthly saving to be invested into shares / index trackers automatically so your money gets to work immediately.

Then print a list of all subscriptions, direct debits and standing orders that come out of your bank account. If you don’t recognise or need any, cancel them. And fire any financial adviser where you don’t know exactly how much you are paying them.

The aim is to automate things so that money flows into your life easily yet takes more effort to leave.

7. Trade in your SUV

Financial independenceI think of cars as Money Incineration Units.  The bigger the car, the more money it can burn.

OK, I know some people like the elevated driving position of SUVs, the space in the boot for champagne and the ability to withstand a Rocket Propelled Grenade attack.

But let’s be honest, most of us don’t really need an SUV for the school run. Can someone please tell The People of Surrey this?

It’s not actually necessary to buy an SUV.  Similar handling can be achieved in a normal car by draining the brake fluid, letting half the air out of the tyres and filling the boot with bricks.  Oh and then sitting on a baby booster cushion.

The Escape Artist does not believe in banning things.  But perhaps every SUV could have a large sticker on it saying something like:

Money is for burning!

or

Does not contain a Hard Pressed Working Family.

….just a thought.

8. Invest in yourself

The problem with a lot of conventional education is that you end up rote learning boring stuff to parrot it back, pass a test and get a certificate.

The best education involves learning how to solve real world problems.  I wish someone had taught me, aged 13 or 14, the power of compounding using the example of Kate.

Education shouldn’t finish when you get out of college. The best education is self-directed and provides a huge return on investment. As we discussed last week, Warren Buffett invested in Dale Carnegie’s class on How to Win Friends and Influence People.  Which doesn’t seem to have done him any harm moneywise.

But where can we go now to learn the important things that schools and universities can’t teach us? Things like how to find a job you love, how to think like an entrepreneur and how to get better with money?

One suggestion is to check out The School of Life.  TSOL started in London but now has schools all over the world.  It was founded by Alain de Botton, author of Status Anxiety. I have been to a couple of the classes and I think they’re fantastic.

9. Experiment with a new breakfast

The Official Breakfast of The Prison Camp is branded cereal served with milk and sugar.

Breakfast cereal represents the triumph of consumerism over real food.  If you are a running a large multinational food company, selling cereal is a fantastic money spinner.  It’s cheap to produce, there are huge economies of scale and its habit forming for the customers.

Financial independence

Full of natural goodness?

Breakfast cereal is processed carbohydrate, which your body quickly breaks down into simple sugars.  A bowl of breakfast cereal is a bowl of sugar in 2 hours time.  Sugar makes you fat.

Note the huge marketing input behind the product…from TV advertising to free plastic toys to packaging saying things like NOW WITH ADDED URANIUM!

In The 4 Hour Body, Tim Ferriss recommends scrambled eggs and spinach as his goto breakfast for fat loss and muscle gain. As this fits with my own thoughts on diet, The Escape Artist has shamelessly stolen this idea.  Tim who?

Why not see if it works for you.  What’s the worst that could happen?

10. Rent a room

The number one cost for most people is living accommodation. An alien from another planet would wonder why we borrow vast amounts of money to pay bankers and estate agent’s bonuses whilst enslaving ourselves for life with mortgages.

At the same time, people living alone make up ~33% of UK households.  Many people are rattling around in houses or large flats with spare rooms.  And often these those same people don’t have enough money in their pensions.

What if more of those people wanting extra income in retirement let a spare room to some of those people looking for affordable housing?

It’s not just retirees though. Younger people with a house who want to pay off the mortgage and get to financial freedom quicker can also let out the spare room.

From April, you can earn £7,500 a year tax free in the UK by renting a room out and its never been easier, thanks to sites like spareroom.co.uk.

 

Liked this?  Check out the original Baby Steps for Future Millionaires 

 

Cereal image credit: Evan Amos

21 comments

  1. Thanks for the tips! I concur with your observations of The People of Surrey and their SUVs…how about all the extra services The PoS also require, i.e., rubbish bin hoser-outers (following the bin men), as well as specialized cleaners of ovens, cars, and windows– all in addition to the nannies, housecleaners, dogwalkers and gardeners which were standard in our ‘ middle class’ Surrey neighborhood. I come from a simpler country (Germany) and was blown away. Must confess I miss those lovely people of Surrey now that I am back to DIY Deutschland.

  2. Haleshine · · Reply

    I am in my 20s and have been considering many of life’s choices. The more I think about mortgages and buying houses, the more I think I should not have to borrow and pay a fee to banks for them to own a house to sell it to me. Cost of housing may rise and fall in the future and there is not a sure way of predicting its course. And the mortgage would just be another chain that locks me to the Prison Camp prolonging my stay in there. My conclusion is that ‘right’ choice would be to buy my freedom from the Prison Camp a la The Escape Artist as quick as I can before thinking of buying any property. That way, the escape can be less stressful and more flexible and I like flexibility!

    Many Thanks to The Escape Artist for your wonderful posts. They are very inspiring and motivational for those of us still in the Prison Camp.

    1. Thank you Haleshine and Dorf. Its great to get feedback like that.

      Re buying a house, I think that if someone is in doubt where they’ll end up (and who in their 20s isn’t in some doubt?), then it may be better to rent a bit longer and keep your options open. When interest rates eventually go back up there may be bargains to be had. Until then, keep stashing the cash!

      1. Can’t see interest rates going up, the longer they stay low the more likely they are to continue to stay low as we as a nation become more and more indebted. However, on the positive side I think the recent historical trend for house prices to rise in real terms is at or very close to its natural end due to capital repayment becoming the dominant part of mortgage repayments, which means that in future renting will not be as poor a financial decision as it has been over the past couple of decades, it will basically be the equivalent of taking out an Interest Only mortgage in terms of its impact on your wealth (assuming inflation stays very low as looks to be the case, and you would of course not be taking a leveraged gamble if renting). This is good news in a way as it means people will be relieved of the financial pressure to buy giving them much greater freedom of choice over where to live and when. However, I do say ‘in a way’, it would of course be preferable for society as a whole for prices to come down significantly, and in fact the scenario I just described may just be the trigger for that with or without an IR rise.

    2. Haleshine · · Reply

      Only thing I don’t like about renting is the thought that I am paying someone’s else mortgage for them. Grrrr

  3. those bumper stickers would work well in large parts of West London too. Some of the cars i see on the school run whilst cycling to my employ just amaze me…. they probably spend more in £ running those cars for a week of school run than i spend all year on my commuting.

    that said, we’re soon to make our first long distance drive in our family estate for a holiday…. much along the lines of your trip to Croatia, only we’re going to Scotland lol.

  4. As a representative of the “People of Surrey”, I think I should point out that my the boot in my SUV is not just for champagne, but also crates of Châteauneuf-du-Pape from our recent holiday in the Rhône valley😉

  5. Great post. I’m going to try the breakfast idea and the fasting one soon. Doubt I could convince Mrs Earl on the fasting but I’ve heard a lot of good things about it over the past few months so time to give it a try. Will take your advice and begin by planning my ‘end of fast slap-up-meal’ first. Congrats on the TSOL gig, anything that improves the financial knowledge of the average joe is great.

  6. Hi TEA. Following up on a comment I made last year, my wife and I are now FI.

    Almost as soon as we hit balance point I stopped working, and we’ve been travelling Europe since (ourtour.co.uk records the experience, cost etc). Our situation is this: we have no children, we own and let out three properties (via a local manager we’ve used for 10 years), one mortgage but overall low leverage. Two of the properties have solar PV for FIT payments. We have a broad range of Vanguard ETFs inside ISAs as a test, since we knew nothing about the stock market before we started all of this. Eventually we’ll build these up as we dispense with bricks and mortar/access pension funds.

    We travel in a motorhome, and have done in the past for 2 years straight. Very good exercise in resource stoicism. We’re retained access to an annex in one of the houses at home, so we can return to the UK at any point and as needs be, placing the motorhome back into storage.

    Our yearly budget is £15k (well proven to be enough for our needs), until we can access private pensions in 12 years (we’re 43). We have cash and bonds which would cover us for 2 or 3 years in the event of loss of all other income, although we could potentially also sell the ETFs in a dire emergency for another 3 year’s income.

    Theoretically, assuming the capital value of our houses at home increases by anything at all, our nett worth is actually going up as we travel. The sensation we feel is one of this all being surreal. Can this actually be possible? It’s Monday morning, 8am UK time, and we’re parked close to Maranello, home of Ferrari. We’re waiting for rush hour here to die down, then we’ll drive an hour or so closer to the Adriatic. Later in the year we’ll hit the Arctic circle for a wander around Scandinavia. And we never need work again. Surreal.

    Keep up the good work on the blog, cheers, Jay

    1. Wow….I love to hear stuff like this. You are living proof that it is possible! And I hear similar stories of cheap travel / geographic arbitrage from other readers.

      Please email me if you’d like to write up your story for a guest post feature on the site!

    2. Haleshine · · Reply

      Ohhh… What a dream! Can I ask if the yearly 15K budget is fully covered by the rental income? That is actually a decent portfolio, although i would say overly weighted to the housing/rental market. But if you can get a steady stream of tenants, you are sorted for life! Well done for getting there. I am sure it has been hard graft but well deserved and greatly admired!

  7. Couldn’t agree more with #9 – scrambled eggs in the microwave takes me LESS time to prepare than pouring a bowl of cereal for a child. True story.

    And costs me less!

    For #3, I keep imagining that I get laid off. This sounds better to me, and comes with the hope of some lump sum to combine with my savings to design an ideal life. Either way, the networking is key.

  8. I am a champ at #1. I visualize what FIRE looks like all the time. Sometimes I wonder if it do this too much but it does help to keep me motivated.

    1. Thanks…sounds like its working for you…and if it ain’t broke…

  9. moneycounselor · · Reply

    I’m a big proponent of visualization. This exercise would precede the one you suggest, but I think visualizing being debt free can be helpful in motivation. How would it feel if all my debts were gone? Or even all the debts except the mortgage, to get started? I think if a person can truly get a sense of the freedom and stress relief–not to mention the benefit of channeling former debt & interest payments to savings–really can help to stick to a debt repayment plan.

  10. Great list of tips! Visualizing our future is always good for a little extra motivation to continue hustling our way out of debt.

  11. Love the article! College age is the best time to get in the right spending habits for life. It will carry you through your working years. monotto is working to give college students a great way to start saving and investing. Both of which are crucial to becoming a millionaire!

    1. CollegeMoney! This is Jared from Monotto, send me an email at jared@monotto.com

      Thank you for the shout out!

  12. […] 1. 10 Baby Steps for Future Millionaires — The Escape Artist […]

  13. Patty · · Reply

    #6 = Automating savings – I did this long ago. But, I also sweep out the wallet & checking account at the end of every month too. Some months there is just money left over. I equate it with cleaning out the condiment jar. Take it to savings. The up coming’s month budget doesn’t need it, so off it goes to work! Left in checking it used to somehow disappear.

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