Having a well-built retirement portfolio and a robust income strategy does not insulate it from future risks.

Changes in the economy throw up unforeseen risks which could affect the value and performance of your portfolio. 

When you are younger, navigating, adjusting, and recovering from economic risks is less costly. However, when you are retired and have to depend on your retirement funds, the costs of adjusting could come at a steep price.

This is why it's important to have an idea of potential financial risks you could be facing when you are retired. 

Let's have a look at the post-retirement risks which could affect your portfolio.



5 Risks to Your Retirement Portfolio to Watch Out For

1. Longevity Risk

Advances in medicine and technology have had an impact on life expectancy within our society.

Today's retirees are living longer than ever before. Many people underestimate their life expectancy, which raises the possibility that they may outlive their possessions. Nobody, however, wants their retirement strategy to be hinged on an early death.

Married couples are in a more precarious situation.

They must think through a variety of challenges, such as how their lives will alter if one spouse outlives the other. How will the surviving spouse's income requirements and sources change? Strategies for lifetime income, insured solutions, and a prudent approach to asset allocation are approaches to mitigate this risk.

Depending on your spending flexibility and how much you rely on your portfolio for income, you may want to consider annuities that guarantee an income payment for as long as you live.

You could also do an 'estimate' of how long you would live by looking at the average life expectancy of your country or state. This would give you a benchmark to work with. 


2. Health Care Risk

Inflation on health care costs coupled with living longer in retirement can spell disaster if not properly managed.

Compounding this issue further is the rate of inflation on items such as prescription drugs and preventive care, which have historically exceeded the 3% general rate of inflation mentioned earlier. 

According to a 2022 Fidelity Investments study, a 65-year-old couple would need $315,000 to pay for medical expenses throughout retirement, not including long-term care expenses.

Genworth Financial’s 2021 Cost of Care survey revealed annual long-term care costs were up 4.65% to $54,000 for assisted living facilities and home health care, all the way up to $61,776.

Medicare and Medicaid are the usual go-to solutions, they aren't always sufficient to address a person's requirements.

Luckily the Inflation Reduction Act just signed into law by President Biden could lower healthcare costs for retirees. But it's best that you have a backup plan of your own, like having private insurance coverage and an emergency fund. 


3. Stock market fluctuation

The stock market has historically produced positive returns over the long term, but as you approach retirement, you risk your exposure to market volatility.

This may make avoiding equities a good strategy, but you could be selling yourself short. You have to keep in mind that retirement can last for decades and you may still need to focus on growth. 

Being too conservative may cause you to prematurely run out of money, while being too aggressive increases your exposure to market volatility and potential for losses. A viable solution in this scenario is having a diversified portfolio that still allows for growth without much risk exposure.

You can stay away from volatile stocks or sectors of the market to insulate your portfolio from market volatility.


4. Low-interest rates

The traditional approach to retirement investing is to allocate a higher portion of your portfolio to bonds to help reduce stock market risk.

However, such an approach may be counter-progressive in today’s low-rate environment, as bond investments may not generate sufficient income on their own.

As such, you might consider including equities and real assets, like commodities or real estate, as part of your retirement portfolio to help generate additional income.


5. Inflation

Inflation is the unseen taxman which eats up your income and savings without you realizing it - at least over the short term.

With inflation averaging 3% annually based on historical figures, the cost of retirement is likely to increase over time, which means that your lump-sum savings might not stretch as far as you thought. 

To hedge against inflation, you can consider investing a proportion of your retirement portfolio in equities and real assets. If you choose to purchase an annuity, you can opt for one that offers cost-of-living-adjusted payments to help counteract the risk of inflation.



Final word

The way we prepare for retirement has changed substantially in recent history. Gone are the days of relying solely on employer-provided pension plans and Social Security to fund retirement.

A sound retirement income plan may not have solutions for all of these potential issues and risks, but understanding what might stand in your way and taking action to mitigate their effects will be critical to the long-term sustainability of your plan.

Now more than ever, there is a greater reliance on personal savings and investments to supply the income needed in retirement. 

Photo by Greta Hoffman

One of the stark differences between the rich and the poor is the way they view debt.

For the former, debt is a footstool to climb up the wealth ladder. For the latter, debt is a weight that can weigh their finances down and keep them in perpetual poverty. One way the rich use debt to enrich themselves is the Buy, borrow, die strategy. 

You may be thinking: How come they borrow money when they have a lot?

The answer to that question is Buy, Borrow and Die.

This is a fascinating technique that the wealthy use to control their wealth and pass it down to future generations.



The Buy, Borrow and Die Technique

The wealthy have also become masters at buying, borrowing, and dying while paying minimal taxes or no taxes at all.

A report published on ProPublica showed that the 25 richest Americans (by Forbes’ ranking) paid a “true tax rate” of just 3.4% on wealth growth of $401 billion between 2014 and 2018.

Jeff Bezos — one-time richest man in the world — paid a true tax rate of 0.98% of his wealth from 2016 to 2018.  Tesla founder Elon Musk paid 3.27% of his wealth as federal income taxes within that period.

Billionaire investor Warren Buffett, who saw his wealth grow by more than $24 billion within the same period paid a true tax rate of 0.10%

Some may scoff at the tax system saying that it only favors the rich, but the reality is far from that. Fortunately, this technique applies to anyone willing to learn and put it to use. You do not need to be rich to make a profit from knowing this information.

Let's look at how you can use buy, borrow and die to protect you and transfer your wealth with minimal tax costs. 


How does buy, borrow, and die work?

First step: Buy

First, you buy an asset that you can borrow against.

This could be an asset that appreciates but the two most popular assets are stocks and real estate, with the latter being the more preferred by lenders. This is because real estate prices tend to go up in the long term, and are less volatile than stocks. You can also depreciate real estate and reduce your income tax. 


Second step: Borrow

Next, you borrow against your asset.

The common logic is selling your assets to raise money if you are asset rich and cash poor. But when you do, it triggers capital gains that are taxed. 

To avoid this, you don’t sell your assets to get cash. Rather you collateralize your asset, this implies using your assets as collateral to obtain loans. Since loans are not considered income, they are not taxable. But you do have to pay interest to the bank. 

If you have stocks as assets, you can borrow against your securities through SBLOCs. This is an easy and inexpensive way to access extra cash by borrowing against the assets in your investment portfolio without having to liquidate these securities.

However, in most cases, real estate is used and seems to be the preferred choice for the wealthy. 


Third step: Die

Every good plan needs a decent exit strategy, and this one depends on the best one of all: death.

Your estate belongs to your heirs once you pass away. The assets are used to pay off the debts, and when the assets are passed on to your heirs, their (cost) basis is increased.

Your beneficiaries' current cost basis in those assets when they inherit them is equal to the asset's current market value (at the time of your death). Your heirs might pay much less in taxes thanks to that step-up.

For example, if I bought shares of Apple for $145 and it appreciates 4 times higher than at the time when I passed on ($580), my beneficiaries get the step-up in cost basis.

If they sell those shares today at $580 each, they will pay no capital gains tax because they had no gains. (They may have to pay estate taxes as a result of getting those shares.)

The strategy works because of the step up in cost basis of the asset. I paid $145 per share and if I sold it, I’d owe taxes on the gains. Because they got the shares after I died, they “paid” the higher price and if they sold it that day, they owe $0 because they had no gains. The loan can also be paid off with the proceeds of the sale. 

This strategy is an effective way of ensuring your dependents are well taken care of after you have passed on. 



Benefits of Buy, Borrow and Die Strategy

Assets may keep appreciating.

Because your assets are collateralized and never touched, they continue to appreciate value (see why real estate is the preferred choice for the wealthy?).

A hidden benefit is that your asset's appreciation can offset the interest rates paid on the loan.  As your asset increases in value, its increment may surpass accumulated interest paid on the loan, which technically is a profit for you. 


You don't pay taxes.

Debt is not taxed. When people borrow against vast amounts of valuable assets, they don’t pay tax, because the tax code does not count debt as income.

When you borrow money from the bank instead of selling an asset for cash, you pay the bank some interest and the government doesn’t get its capital gains tax. This is unlike taking a loan from your 401(k) whereby the value of your contribution is reduced. 


You can compound wealth.

You can compound using this strategy.

The loan obtained against your asset can be used to acquire another investment with cash flow that you can borrow against again. This cycle of borrowing and investing in assets that generate cash flow stacks up assets for you and increases your net worth over time.

This strategy works more efficiently if your asset is real estate. Unlike stocks where you may have to pay for the full price, you can lock real estate with down payment. 


Cons of Buy, Borrow, and Die.

One demerit of this strategy as a way to accumulate wealth is that it might not be the most efficient way of acquiring an asset in the first place.

You can typically own real estate by paying a fraction of the cost of buying it. A 20% down payment (sometimes less) can get you a piece of property.

You also need a huge amount of money to benefit from this strategy. It may take time to build your assets and portfolio to a level where you can benefit from this strategy. 


When should you use Buy, Borrow, and die strategy 

Since you are borrowing against your assets, interest rates would affect the total cost of your loan.

As such, you need interest rates on that loan to be relatively low. If interest rates creep up, it makes this strategy less effective and unprofitable. Your best bet is using a fixed-rate loan as this accommodates periods when the interest rate would be higher, and also allows you to plan your repayments.

A variable rate loan may not be appealing, since it would be adjusted according to benchmark rates set by the Fed.



Bottom Line 

Although it appears that the wealthy are the only ones who may benefit from many of these tax avoidance techniques, practically everyone with assets can do so.

Even if you aren't a billionaire yet, you may probably benefit from simple tax planning techniques like making contributions to tax-advantaged accounts (like IRAs and 401ks), taking out loans against taxable assets (such as stocks and real estate), and making sure your estate is properly planned.

You can purchase, borrow, and pass away without paying taxes if you put these fundamental tactics in place.

Photo by Ron Lach

In times past, parents used to admonish their kids for playing video games.

However, thanks to blockchain technology, the notion of a video game being a destructive past-time that adds no value the players to may fast be changing.

A rising number of play-to-earn (P2E) games are allowing gamers to earn real money just by playing. To compensate players for their time and work, these games leverage blockchain technology and non-fungible tokens (NFTs).

In this article, we'll share all you need to know about play-to-earn gaming, including how to get started generating money right away!



What are Play-to-earn (P2E) Games?

Also known as “crypto games”, Play-to-earn games (P2E) are blockchain-based games that redistribute a portion of their revenue to the player base.

Players may earn real money just by playing the game. These games reward players with digital assets like NFTs, character skins, or crypto which are earned by conquering levels, participating in contests, or just simply devoting time to the game.

Players’ assets can be used to unlock further rewards or sold on a digital marketplace. Players may exchange their in-game profits for real money in play-to-earn games.

The adoption of blockchain technology and non-fungible tokens has made this feasible. NFTs may be used to represent in-game assets, and blockchain enables the development of secure digital wallets that can contain actual value.

Play-to-earn games feature their internal economy in which players may purchase, sell, or exchange their game assets for real money.



6 Crypto Games You Can Earn From While Playing

Gods Unchained 

Gods Unchained is a tactical card game where players design decks that can battle a variety of techniques to tactically outwit their opponents.

A player earns experience points after every victory. The player advances to the next level when their experience bar is full, and a new set of cards is added to their collection.

To acquire cards and partake in PVP matches, players require $GODS tokens.

When a player wins, they gain experience points, which increases their experience bar. The player advances to the next level when the experience bar is full, and a new set of cards is added to their collection. These cards are kept on the blockchain and may be exchanged for ETH or other cryptocurrencies.

NFT marketplace Immutable X, has transacted more than $25 million worth of Gods Unchained assets since its inception in March 2021. The game shows no signs of slowing down, with over 13 million NFTs distributed so far and over 65,000 distinct asset holders.


2. Splinterlands

Splinterlands is a popular P2E collectible card game built on the HIVE blockchain in which players battle monsters for prizes.

NFTs symbolize these monsters, and they may be bought or sold for a number of cryptocurrencies. Quests, ranked play, and tournaments are among the several types of games available.

There are over 283 cards in Splinterlands that may be combined to boost stats, acquire strength, and defeat opponents. Water, Life, Death, Dragon, Earth, Fire, and Neutral are the factions that each card belongs to.

The game has two currencies: $SPS and $DEC, with the former serving as the game's governing money and the latter serving as a medium of exchange for in-game assets. Using $DEC, you may buy and sell cards, land, and other game objects as NFTs.


3. CryptoKitties 

It was one of the original play-to-earn games, and it's still popular today.

Players in CryptoKitties may breed and exchange digital cats. Each of these cats is represented by an NFT, which can be exchanged or sold for Ethereum (ETH).


4. Axie Infinity 

In Axie Infinity, players spend NFTs to purchase land, Pokémon-inspired monsters known as Axies, and other in-game stuff.

Users may assemble an army of Axies and engage in turn-based warfare with other players. Axies may also be bred, allowing players to create potentially stronger teams or even sell them. If your side wins, you'll receive $SLP coins, which you may swap for fiat money on a cryptocurrency exchange.


5. Silks

This game takes players to a metaverse where they may immerse themselves in the high-stakes world of thoroughbred racing, akin to The Kentucky Derby.

Horses, land, stables, and avatars are all available for purchase, trade, and interaction. Once a player has created an avatar, they may purchase a horse that is based on a real-life racehorse.

The owner of the metaverse horse receives $STT tokens every time the horse wins a race or produces real-world progeny. A Silks Governance token, $SLK, is also available. Holders can join the Silks DAO and vote on important issues.


6. Alien Worlds

Alien Worlds is the ideal P2E game for everyone who likes NFTs, outer space, and dystopia.

Players travel in space, mining numerous planets for resources (NFTs), collecting Trilium (TLM), and completing tasks. In the game, there are over 2,000 digital land plots, and each player has their plot in the form of an NFT.

TLM grants players access to the DAO that governs the game's six planets. To receive greater rewards, it may also be switched to Binance Smart Chain (BSC).



How To Get Started with Crypto Games

The first thing you need to play a crypto game is to create a cryptocurrency wallet. This is where you will store your earnings from play-to-earn games. There are a variety of wallets available, so make sure to do your research to find the best one for you.

Once you have a wallet, then you fund it depending on the game you are interested in. While some crypto games are free, others aren't. You can start looking for play-to-earn games to play to see which suits your budget or interest. 



A Few Warnings About Playing Crypto Games

1. Could be addictive

Just like normal video games, crypto games can be highly addictive. So you must make sure to set limits for yourself and don’t lose yourself in the hustle.


2. Targeted by hackers

Play-to-earn games are still a new and emerging industry which means that there are a lot of risks involved.

One of such risks is its attractiveness to hackers. This is because Play-to-earn games often hold large amounts of cryptocurrency. As such, it is important to play on reputable platforms and never reveal your private keys to anyone.


3. Volatility of tokens

Because they are crypto-based, the prices of assets are extremely volatile.

This means the fluctuations in the price of cryptocurrencies affect the value of the assets and tokens used in these games. This could lead to potential losses especially when the price of cryptocurrencies plummets. 



Final Thoughts on Playing Crypto Games

As the crypto market continues to tank, the value of the game's tokens is following suit, making 2022 a tough year for P2E gamers.

However, this has done little to dampen the enthusiasm for these P2E games. While they can be a veritable source to earn income, it is important that you put strategies in place to check your game time lest you become addicted. 

Play-to-earn games can be a great way to earn some extra money, but they should never come at the expense of your wellbeing.

Overall, remember to have fun and don’t take risks that you’re not comfortable with.

Photo by RODNAE Productions

Net operating income (NOI) is a calculation used to determine profitability.

It’s a metric that is often used in corporate finance to determine profit for all shareholders. In real estate, NOI is used to calculate how profitable a rent-generating property will be for the investor.

If you are considering investing in real estate, you can get ahead by understanding how NOI works, how you can calculate it, and what a good NOI looks like. 



How Do You Calculate NOI in Real Estate?

Net operating income is equal to all revenue from the property, minus operating expenses.

You don’t include taxes in net operating income, as it’s a pre-tax figure.

The reason for that is that NOI appears on a property’s income and cash flow statement. So, it excludes:

NOI is used to precisely determine the value of any income-producing property. Typically, rental income is the primary income-generating activity, so we will start with rental properties. Then, we will explore other factors that may make it into a net operating income calculation.


How do you calculate net income on a rental property?

NOI = r - oe

In the above case, “r” represents revenue, and “oe” represents operating expenses.

On the surface, this is a very basic formula. But there are almost always many different operating expenses. So, let’s start with other forms of revenue besides rent that a property may produce.


What forms of revenue can a property produce?

Besides rent, a property can produce revenue for the owner or other stakeholders through a number of means.

Some of the most common and significant examples include:

To calculate a property’s NOI, add up the totals for all sources of revenue.

Do not calculate for maintenance or any form of expenditure. That part comes later.

For now, just find out your “r” value for the formula.


Property expenses

Operating expenses for a property typically include some mix of the following:

While not relevant to NOI, it’s worth noting that many property expenses are tax-deductible.

Now, add up all of the expenses of the property. Subtract the expenses from the revenues, and you have the property’s NOI.



What is a Good NOI for a Rental Property?

It’s not abnormal for a property’s NOI to be in the negative for some time.

However, you want to aim to get to at least a decent NOI as soon as you reasonably can.

In its original form, it’s hard to provide a benchmark for a “good” NOI. After all, a “good” NOI will vary greatly by location and the market value of the property.

An NOI of $30,000 may be excellent for one property, but awful for another.

Net operating income is a stepping stone to another important figure in real estate: capitalization rate.


Capitalization Rate

A property’s capitalization (cap) rate makes it possible to compare one property’s profitability to other properties’, even when they differ greatly in terms of market value.

Cap rates are an annualized, percentage-based figure for profitability.

The only caveat is that cap rates assume the property was bought without a loan (all cash).

The formula is:

(NOI / Market Value) x 100

In words, you divide the home’s NOI by its market value, then multiply the value by 100.

Now, what is a good cap rate?

A good cap rate and a safe cap rate are two different things. While a high cap rate can be associated with a better investment, it may also be associated with instability.

Overall, a cap rate falling anywhere between 4% and 12% can be considered good in most places.

In competitive housing markets, cap rates can often be lower. When the cap rate goes higher, it is often taken as a sign of risk. The same can be said when it’s lower, but you also run a risk of losing money in the shorter term.

The average cap rate also serves as a metric to show when the property will produce its invested amount. For example, a 10% cap rate property will take about 10 years to recover from the investment. At that point, you’ve made all your money back and can sell the property with its market value in profit.



Is Net Operating Income the Same as Profit?

No, net income does not equal profit.

Simply put, your profit is all the money you make.

Your operating income is all the money you make, MINUS everything you have to pay.

NOI is a specific pre-tax measurement of profitability for your income and cash flow statements. It includes all sources of income and subtracts from them all costs incurred during the same period.




Net operating income is a very specific measurement.

It is relevant primarily to professional real estate investors. So, if you are considering getting into real estate investing, you will want to learn more about all the other metrics used to determine profitability and risk.

Some of them will be useful in helping you make investment decisions. Others are presented during closing and have other purposes.

Photo by RODNAE Productions

Recession is no longer a buzzword, and may soon be a reality for Americans.

Signs that the U.S. economy may be going into one are becoming more ominous. Inflation is at its highest level in 40 years, the Fed is hiking interest rates, and the occurrence of an inverted yield curve are all considered by many as a bellwether for an economic recession. 

A recent Reuters poll showed that 40% of economists believe the U.S. economy will fall into a recession within the next 24 months. 81% of adults believe that the U.S. economy will slip into a recession this year according to a survey carried out by CNBC.

Corporate America is issuing warnings. Elon Musk has decided to lay off 10% of Tesla's workforce based on a 'super bad feeling' about the economy. This action came days after JP Morgan CEO, Jamie Dimon warned that an economic hurricane is headed our way. 

Perhaps the recession fears couldn't have been more pronounced when retail stores announced slower sales, a shift in consumer buying, and lowered their forecast for the coming quarter.

Retail stalwarts like Walmart, Target, and Home Depot all lowered their outlook for the coming quarter, citing inflationary concerns. 

Given the macroeconomic scenario, it is obvious that investors should be prepared for the worst. This means now's the best possible time to prepare your money.

But to know how best to deploy your money, you need to understand what a recession is, and how best to navigate its murky waters. 



What is a Recession?

A recession means a significant decline in general economic activity.

The macroeconomic term has traditionally been recognized as two consecutive quarters of decline, as reflected by gross domestic product (GDP) and other indicators such as unemployment, real income, employment, and manufacturing activity. 

Recessions are inevitable, but they aren’t necessarily predictable. It’s impossible to know in advance exactly when they’ll hit or how bad they’ll get. Some recessions are mild, others are prolonged.

The crux of the matter is that an economic downturn would wreak havoc on millions of people’s financial lives. Many people may not be able to recover to normalcy from the economic growth that comes thereafter.



6 Ways to Prepare For a Recession

While you can’t control what happens to the wider economy, you can take a few steps to help you survive the financial headwinds.

Here are my tips to get ahead of the gloomy economic tide and recession-proof your cash.  


1. Cut back on spending.

Basic necessities have gotten more expensive recently — groceries, gas, transportation, homes — which means it's time to reevaluate your budget and look for areas to cut back.

The easiest items to scrap are services or purchases you can live without — dining out, recurring subscription services, or going to games of your favorite teams.

You may find yourself in a dilemma trying to select which areas cut spending. It's all about weighing your current priorities with your long-term goals.


2. Stack up for rainy-day.

A recession is characterized by a tighter money flow, which means many people will not be able to afford their current lifestyle.

A recent survey showed that nearly half of people earning $100k annually are living paycheck to paycheck. As such, every dollar note should be properly utilized. 

One area you can put your money to good use is using it to stack up on foodstuffs and other items you may need. You can buy groceries in excess, provided you know you would need them in the long term. 

Perishables can be sliced and stored in a refrigerator. This also makes sense as the price of consumables and other necessities is skyrocketing. So stacking up saves you money that you would desperately need going into a recession. 


3. Build emergency reserves.

Recession or not, you should have an emergency fund.

These savings help you avoid borrowing money to cover unforeseen costs like repairs, medical treatments, or job loss.

Job layoffs usually accompany a recession. So you have to prepare yourself for a potential furlough or outright sack - that's if your company does not wind down its operations and close shop. 

Yet many people seem to be unprepared for this economic hurricane. About 25% of Americans say they have no emergency savings at all. If you're just starting out, give yourself a target of six months' worth of expenses, then you increase your war chest as time goes by.

Make provisions for necessary items like rent, utilities, and groceries.

Make sure to store your emergency money in a liquid account (like a high-yield savings account) to easily access it when you need it.


4. Pay off high-interest debt.

The last thing you want to deal with during a recession is high-interest debt weighing your finances down.

Any loan above student loan or mortgage interest rates is usually regarded as high-interest debt. Debts like personal loans and credit card debts have much higher interest rates ranging from 9% to 20% or more.

In a recession, you may be fighting for survival or taking on more responsibilities like contributing more to the home front if your spouse loses his/her job. As such, paying a high-interest debt during a recession sets you back from optimizing whatever money you have left. 

With the Federal Reserve set to issue more rate hikes later this year, you will want to reduce your debt burden as fast as possible, as your interest rate would increase.

Once you pay off your debt, you'll have room in your budget to put towards other things, like growing your emergency fund or making up for rising consumer prices. 


5. Keep calm and carry on.

Recessions can be an emotional and stressful time, especially when it comes to your investments.

Watching your portfolio fall into the red can be worrisome, but it's important to avoid making a knee-jerk reaction. 

You have to understand that the economy operates in cycles, and a recession is one of those cycles. However, in the long run, the economy always rebounds stronger.

So changing your investment strategy could hurt you in the long run. A recent example is the way the stock market rebounded from a 30% drop in March 2020 due to the pandemic.

If you really want to take action before any future recession, then rebalancing some of your investments is the way to go. Having a diversified portfolio can help you minimize your losses during a volatile market. 


6. Have some cash handy.

Cash Is King in a recession.

The reduction in money supply will see people selling off assets and businesses to raise money. Those with money can buy assets cheaply and sell them at a premium when the economy begins to grow again.

This is why the wealthy consolidate their wealth during a recession. So, if you can afford it, keep some cash handy. Be on the lookout for the best bargains in town. Be opportunistic. 



Key Takeaway 

There's no denying that the prospect of a recession can be frightening.

However, developing a plan ahead of time and taking the necessary actions to prepare yourself might lessen stress, helping you feel more in control of your situation. 

There's never a terrible moment to take a look at your finances and make the necessary changes.

There are a number of everyday behaviors that the typical person may adopt to protect oneself from the impacts of a recession before they occur, or even to prevent them from occurring at all.

Photo by Mikhail Nilov

A lot of us dream about making our first million dollars, and breaking away from the rat race.

But how many are willing to put in the work required? To many, getting to the one million dollar net worth looks far-fetched. That is unless you win a lottery, inherit a financial windfall, or participate in get-rich-quick schemes. 

But on the contrary, it is a realistic target if you allocate your funds diligently. Careful planning, patience, disciplined spending, and consistent investing strategies can grow your wealth to one million dollars over time.

There is no guaranteed formula for becoming a millionaire. But there are certain principles that can help you on your journey towards achieving such a financial milestone. 



8 Financial Principles That Can Put You on a Million Dollar Path

1. Start early.

Nothing beats time when you are trying to accumulate wealth, especially if you are aiming for a million dollars.

The more time you have, the more you can achieve in terms of investing and compounding. As such, it is better to start early and work towards achieving your first one million dollars. 


2. Pay yourself first.

Paying yourself means setting aside money to save or invest in your future or goals.

This is the golden rule of accumulating wealth. At first, this may seem like the most logical step, but when you realize that a lot of people are living paycheck to paycheck, even those in the high-income bracket, then you realize it is not as simple as it seems.

For most people when money hits the account, the default thinking is geared towards what to buy or spend on, rather than what to invest in or save. 


3. Automate savings. 

Many people have a hard time building a habit of savings due to bills and other necessities.

This is why it is good to automate your savings. This does not only save you the hassle of having to remind yourself monthly or weekly to set aside some money, but it also ensures that you stick to your savings goals regardless of whatever financial needs you may be faced with. 


4. Convert savings to assets.

Very few people get rich by saving alone.

Cash has historically offered the poorest returns to investors. Over the long term, returns from cash barely keep up with inflation in most economies. So rather than sitting on a pile of cash, while not converting it to assets that would yield returns.

This can be done through investments such as stocks, acquiring real estate, or starting a business. The key factor is using your cash to generate more cash flow

Albeit, the amount of money you need to invest to become a millionaire is determined by your age. Because you have more time to create wealth and can handle greater risk while you're younger, you can invest less money.

If you wait until you're older to start producing cash flow from your savings, you'll have to save more money each month.


5. Don't interrupt the compounding cycle.

Albert Einstein once called compound interest the 8th wonder of the world.

Through compound interest, you can grow your savings and investments exponentially. However, most people tend to break the cycle of compound interest when they save a substantial amount. 

Doing this sets you back and delays the achievement of your goal because you have rolled back the time used to compound your gains.  

To circumvent this, it is important to set aside money you do not need to compound over time. Also, keep some emergency savings so that you do not need to dip into your compounded savings if any emergency or need arises. 


6. Aim for the first 100k

Famed investor Charlie Munger opined that making the first $100,000 is difficult.

After that, every other thing looks pretty much easy. The first $100k is such a pain because most of it is purely based on how much you save. When you have less than $100k, you have very little investment returns helping propel your net worth higher. It’s all about how much money you can throw in your bank account each month.

However, though this may be the most difficult part of your journey, it comes with huge benefits, which would help you to hit your first million.

Achieving the first $100k is where you make mistakes and learn from them, imbibe the principles of wealth creation and build the character and values needed to make you a millionaire and keep being one. 


7. Avoid (or minimize) debt

Because the cost of debt is typically far higher than the returns on investments, you should try to pay off debt first before saving or investing more.

Take out credit or debt only when necessary, and be extremely cautious of the interest rate charged.


8. Diversify your income streams

Diversify your businesses and holdings into a variety of non-correlated residual income streams so that you are never dependent on a single source.

If you establish a portfolio of non-correlated streams of income and lower your risk, your wealth will be more stable and safe.


Are You Ready to Make Your First Million? 

Making the first million dollars is akin to making your first $100k or $10k.

The principles of wealth creation are the same, whether it is making your first $10,000 or $1,000,000.

However, when you are young, you can leverage your time to achieve this financial milestone at a much faster pace. Nonetheless, it never hurts to begin now.

Avoid buying things you don't need, getting into debt, or putting your money in high-risk investments. With small consistent baby steps, you will get to your goal of being a millionaire. 

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