A journey of a thousand miles…

…begins with a single step. There might be twists and turns, ups and downs, but once we start walking and frequently check our compass, step by step we get closer to the finishing line.

Reaching the goal of financial independence requires a substantial amount of money in savings and investments. Getting there is not easy and requires time, perseverance and patience. But no matter how hard it may seem, it’s not impossible.

Many of us are top-line millionaires

If you are blessed living in a thriving economy, you are most probably a millionaire – stretched over your lifetime. The math? It’s not too complicated. Let’s say you earn 2.000 Euros a month which is really not a high salary.

Not accounting for any bonus or extra payments, this comes up to 24.000 Euros a year. Put this into a context of 40 years of work and you have 960.000 Euros right there. Almost a million. No salary increases, no bonuses, nothing added to that.

Of course, there are taxes to be paid, living expenses, medical bills. Whatever. Your total income over those 40 years in this scenario is almost a Million Euros. In business, we call this the “Top Line”.

The deciding question is how we approach this top-line and what we do with it. All the expenses that we have along the way will reduce our top-line. The money that is left over is called “the bottom line” and this is basically the amount that we have to save and to invest.

It’s not about how much we earn

Having a high salary can help us to reach financial independence more quickly. And yet, during my short career in a bank, I observed that most people with high salaries were seldom the ones with the highest numbers on their bank accounts.

It was usually the quiet, medium-salary people who had the best credit scores and whose accounts would show the occasional million Euros. And I always wondered how that could be. How could someone with a very regular income of only 2.000 or 3.000 Euros a month amass a Million in their late 40s or early 50s?

The answer: They controlled their spendings, they invested regularly in the stock market or real estate, and they kept a comfortable but modest living standard.

  • When they got their first salaries and started to develop their careers, they would immediately start saving and investing.
  • When they got salary increases, they would increase their savings and investments first, before thinking of buying non-assets.
  • They wouldn’t succumb to peer pressure and buying shiny things or branded clothes just to show everyone that they can afford it. They would rather buy just another asset to watch their portfolio grow.
  • They would seldom use credit cards or take loans for anything.

Some might live very frugally, trying to find hacks and get creative about how and where money could be saved or re-gained. Some might push for a stellar career and higher salaries. And there is nothing wrong with any of that. They might reach their goals earlier on.

But the point is that even with modest salaries, it is possible to save, to invest and to take our future in our own hands. The first step to get there is to learn to control our spendings.

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