Becoming a millionaire at the age of 26 is my goal which I’ve set when I was at the age of 19.
In fact, I was so determined to reach my goal that I’ve decided that the only way to do that is to build a business.
Is that the only way to be a millionaire?
Now at the age of 24, as I’ve looked back at it, I’ve a complete different mindset to become a millionaire. I’m still far from my goal but I think I have the means and capabilities to reach it soon.
The first step to become a millionaire is by understand this concept:
The difference between active and passive income.
Active income – When we talk about active income, it’s all about exchanging our time for money. Most people that have a job and getting a paycheck for the time spent is considered an active income.
If you are capable, you can probably make 10k, 20k or even 50k every month, depending on what kind of job you have and what you are responsible for.
Unfortunately, not many people can make this kind of money because there are just too many capable people who can accept a job with a lesser pay. This is essentially a supply and demand game.
Most people averaged around $2,000-$5,000 every month. If you do the calculations, assuming you can save around $3,000 every month, you can only have $36,000 at the end of a year.
And it would take you 27 years for you to save $1,000,000. What a long journey…
Most people don’t become a millionaire simply because it’s a tough journey. Why do you want to save so much after working so hard everyday? You want to enjoy too right?
So they usually spend a lot too!
For those who make 10k, 20k, or even 50k a month, they may spend and enjoy themselves so much that they don’t save that much every month.
You can see that if you are going to follow this path of working for someone and getting a job, then your only way to become a millionaire is by saving.
The more you can save, the more likely you’ll become a millionaire…
And it usually takes a long long time…
Passive income – According to Wikipedia, it is an income received on a regular basis, with little effort required to maintain it.
Passive income is completely different from active income in the sense that it doesn’t exchange your time with the money you make. Instead, you are building an ‘asset’ that exchanges with money.
Some people think that passive income is derived from a source which requires no work to generate your income, but this can be misleading and the only passive income that falls under this definition would only be investing.
In order to have some meaningful purpose behind passive income, I would define working on passive income is like building an asset that can generate income automatically in the future.
For example, you build a business that can bring in automated income in the future. It may require you to work 24/7 to get your business running, but once it is automated, you don’t have to care too much about it.
Even you build a poor business that can bring you $1,000 a month later on (passive and automated), it still can make a lot of difference to your income later on. To make $1,000, maybe you would need to spend 3 months to do so. But after the 3 months, you don’t have to touch the business at all.
So you simply have $1,000 residual income every month to add to your savings without the need to spend your time on it.
You can then spend your time working on another business which is going to make you another $1,000 every month.
After one year, you will have 4 business that will bring you a total of $4,000 of passive income every month.
And you don’t have to spend much time on it. How good is that?
If you truly understand this concept, you will move towards the direction of creating passive income instead of sticking to your job and working on your active income.
And that’s what we are going to talk about in the next section!