It’s easy to get caught up in flashy depictions of wealth, but just because someone drives a nice car or wears expensive clothes doesn’t mean that they’re actually wealthy.
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Perhaps these people racked up debt to look rich. Or maybe they earn a high income, but because they spend so much of their earnings, they won’t have the safety net to make it through leaner times in the future. Think of celebrities who earned millions of dollars per year only to go broke.
On a recent episode of the BiggerPockets Money podcast, financial YouTuber Tae Kim discussed how he grew up thinking that being financially successful meant things like driving luxury cars and taking tons of vacations, and he fell into this trap in his 20s.
However, as he learned about personal finance, he realized that if you’re spending everything you make, if not more, you can’t build real wealth in terms of savings and investments that set you up for the future. So, instead of trying to get rich quickly and show off wealth, Kim started focusing on building wealth slowly and quietly.
The upside is that you can still use your money to build the life you want, he said, yet you can find more self-fulfillment and not feel like you have to spend to impress others.
And you don’t have to do anything dramatic to become a quiet millionaire. The whole point is that you can focus on the fundamentals and build a secure financial foundation. Getting there involves some of the following steps.
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Get Control of Your Spending
After taking Dave Ramsey’s Financial Peace University course, Kim realized that he and his wife weren’t tracking their expenses. Once they started to do so — and realized how much they were spending, they could regain control. Steps such as packing lunch and realizing that they should keep their cars as long as possible, rather than swapping them out for new ones, were key.
Increase the Gap Between Income and Expenses
Once you have control of your spending, you can set a cap and then watch the gap between your income and expenses grow as you progress in your career. In Kim’s case, he and his wife were able to keep their expenses fixed while their income increased, which then gave them extra money to pay off student loan debt and increase the amount they could save and invest to build wealth.
Be Patient
Lastly, be patient as you walk the path toward becoming a quiet millionaire. Building wealth takes time, but you can get there without earning a huge salary.
Suppose you’re earning a net of $5,000 per month now and also spend $5,000 per month. If you get a handle on your spending and make sure you don’t go over $5,000 per month, then if you start earning a net of $6,000 per month, you’d have an extra $1,000 to invest. If you invest $1,000 per month for 30 years at an 8% annual return, you’d end up with more than $1 million.
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This article originally appeared on GOBankingRates.com: Financial YouTuber Tae Kim: How To Become a ‘Quiet Millionaire’
