Brian Preston was in high school when his economics teacher changed his life.
“He told us, ‘every one of you can be a millionaire by the time you retire if you start investing $100 a month,’” Preston, a certified financial planner and author of the new book “Millionaire Mission: A 9-Step System to Level-Up Your Finances and Build Wealth,” writes.
There is something sweet about that simplicity. But surely there is more to it. Here’s what Preston recently told Yahoo Finance about how it is possible to become a millionaire with the right mindset and financial focus, edited for length and clarity:
Why is this the greatest time to build significant wealth in history?
Twenty years ago, it was much harder to invest. There were a lot of gatekeepers. Now we have open access to do it yourself, as well as this expanding economy. It’s just an incredibly optimistic time to start building wealth and take action.
What is the “financial mutant” mindset you refer to in your book, and how is it my superpower?
It’s understanding to be purposeful with every dollar that comes into your possession as early in life as you can. You don’t have to be born with it. For a 20-year-old, a dollar has the opportunity to become $88 by retirement. For a 30-year-old, it has the opportunity to become $23 for a 40-year-old that has the opportunity to be around $7. So you can quickly see that your money has a lot of opportunity, but you have to give it the time to grow on itself. That compounding growth can be your best friend. When you are in your 20s, your money has so much exponential power than somebody who’s in their forties and fifties.
A little goes a long way — I don’t care if it’s $50 a month, or $100 a month, as my high school teacher told me. It might also be more of lifestyle decisions that set you up for your seven-figure success in the future, but it always comes back to your intentional-focused mindset.
Why is automatic investing the key?
You have to make the good habits as easy as possible because if they’re easy, you’ll stick to them. When you do an automated process, it makes the bad habits like getting distracted or letting your emotions get the best of you that much harder. It’s not hard to get people excited about investing, or to start the process. It’s getting them to stick with it.
When you create an automatic investment or savings plan, it’s going to build your wealth and make it inevitable.
Brian, why is understanding your relationship to money so important?
I’ve been on my financial mutant journey for a long time and it started off probably in a little unhealthy place of being a tightwad. As I’ve gotten older and a little wiser, I understand that there are things that money can do for you and things money can’t do for you. I’ve learned through this wisdom of age that you’ve got to build memories by every decade. You have to be purposeful to make sure you enjoy every season of your life, in scarcity but also in abundance. A lot of financial advice gets to the math but leaves out the mindset.
You write that giving back is fundamental. Could you elaborate on that a little bit?
If you’re generous even when you have little and it’s volunteering by giving of your time, it lets you get outside of focusing on the money to pay it forward. You’ll never be punished for being generous. That makes you a better person. It’s an amplifier of who you are as an individual when you have that generosity built into how you’re living your life.
If I want to be a millionaire, what should my baseline savings and investing rate be?
You ought to be focusing on 20% to 25% of your gross income. It is quite high. These are unique times, especially for our younger investors. Social Security’s not exactly the most well-funded program out there. Pensions don’t really exist, unless you work for the government or in education. More and more the responsibility falls upon the individual to save and invest. If you have household income less than $200,000, you can count your employer’s contribution in this amount. The younger you start, though, the less you need to save. In your 20s that can be more of a goal to reach by the time you are in your 30s.
I’m a big index fund investor and I love that you write about how index investing can change your financial life. Can you elaborate?
There are so many benefits to index investing. First of all, they outperform the majority of managed investment funds. They’re also very tax-efficient because they don’t have a lot of turnover. If you’re paying less money going out to fees, more money is working for you in your investments. Instead of trying to pick the winners with all the innovation and technology changes and everything moving so fast, you buy the market through an index fund and the innovation gets built into it because it’s automatically adjusting every year as they update those index holdings.
How do you divide it up in index funds? Is there a certain percentage you would put in equities versus bonds or versus international?
I like index target retirement funds. These aren’t boring, and they set the allocation for you based on when you expect to retire.
You advise people to not prioritize wealth over living. That’s kind of crazy for a book about how to become a millionaire. Can you explain your thinking?
Sometimes when someone is a hard-charging achiever, they feel this desire to do what’s next in life, and they never take enough time to take a deep breath, slow down, and enjoy the season that they’re in. Make sure you’re actually balancing your life with making good financial decisions. Enjoy every decade that you’re on this planet because it goes quick.
What is the role of optimism in the mindset of becoming a millionaire?
The optimism trait shows up in a lot of research on success. That’s important because it’s going to be the optimism that gets you through the news cycles, the volatility of the market, all the life distractions. You have to feel like there is a better tomorrow, so you don’t get distracted.
What is the one biggest mistake that people make that stops them from becoming a millionaire?
The majority of Americans say they want to be millionaires, but they never start the journey. The biggest mistake is they never create the habit of automatic investing. Getting out of the gates is the majority of Americans’ problem.
On the other side, there are the people who hyper-focus on the money, who are disappointed when they get to that $3 million or whatever amount because they haven’t done the soft research on what makes money meaningful in your life. That’s a big mistake too.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.
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