A lot of us want to have lots of money in life, money allows us to be financially free and not stress about most things. Most of our problems in life are rooted in money, having a few million Rands will help most of us to live comfortably. This is a guide on how to become a millionaire in South Africa.
Reasons to become a millionaire
Our reasons for wanting to become millionaires are different, some want to retire comfortably. Others want to live in a beautiful house and buy luxury things and some want to provide their families with a good quality of life. Your reasons for wanting to become a millionaire will affect the path that you choose to take when building your wealth.
You need at least R70million to live the “millionaire lifestyle” that is portrayed on tv and social media. You will find yourself broke very quickly if you go on a luxury shopping spree with only R5million. Yet R5million is a lot of money for someone that wants to retire comfortably in South Africa.
Understanding the mathematics
Wealth building is a game of mathematics, predicting where you will end up in life is easier than most people think. The only thing you have to do is pay attention to the maths, there are too main ways of building wealth, the slow way and the fast way. The vast majority of people build wealth the slow way, these are the people that retire comfortably with millions of Rands.
People that build wealth the fast way are your 26-year olds that are millionaires. This article will focus on the underlying mathematics of building wealth and not promote any pyramid schemes or courses. We will focus on building wealth the slow way and the fast way.
Becoming a millionaire: the slow way
This is the path to take if you want to become a millionaire in your 50s. You won’t be a millionaire in your 30s or 40s while traveling this path. A lot of “smart” people that follow advice from gurus travel this path.
This is a financial path that emphasizes the importance of making smart financial decisions. It emphasizes the importance of saving, investing and living frugally. People traveling this path tend to be your “Millionaire next door”. They lead simple lives, drive simple cars and wear simple clothes. Their source of income is mainly their job and investments.
Let’s say you have a monthly income of R25 000 and invest 15% (R3 750) of your income every month and earn 8% compounding interest. Do this for a period of 30 years and you will have R5.3 million at the end of the period. Your total contributions would be R1.3 million and you would have earned R4million in total interest. You will hit your first million after 13 years if you followed this formular.
Let’s assume that this is something you start doing at age 28, you will become a millionaire at age 41 and will reach the R5.3million mark at age 58. This is the main problem with building wealth the slow way, you don’t get to enjoy it until the majority of your life has passed.
There are a lot of investment assets that support building wealth the slow way. There are mutual funds, government bonds, fixed deposit accounts, annuities and so on. These are financial instruments that are already there and all you have to do is invest in them and you will be a millionaire in your 50s.
Time is leveraged
The main component of building wealth in this path is time, you just have to wait. You have to keep doing what you are doing and wait, the main problem is that you can pass on without having enjoyed your wealth. Most gurus teach people how to win in this path, they teach you to stay out of debt, live frugally and invest your money.
This is a path that you should use if you just want to be a millionaire at some point in your life and are not really concerned about the timeframe. Follow this path if you don’t like taking risks and prefer tried and tested methods.
The main downside to this is that your time is not something that you completely have control over. You can lose your job and be unemployed for a period of 3 years, that will affect your financial plans. An emergency may come up that requires you to withdraw some of the money that you have already invested. Your time is limited and you only have 24 hours in a day, it’s very hard to trick the system when operating in this path.
Becoming a millionaire: the fast way
These are the millionaires that we commonly see on social media and tv, they operate on the fast way. The rules are very different, they didn’t make their money by living frugally and investing for 30 years. In fact, they buy expensive cars and luxury items and still have a lot of money remaining.
They all have one thing in common; they provide value. The only way to operate in the first way is to provide value, or be valuable. As long as you are able to impact millions of people, you will make millions. It doesn’t matter what you do, you can be an athlete, artist, motivational speaker, author, pastor, entrepreneur. As long as you are able to provide value to millions of people, you will be a millionaire.
The reason why your famous rappers are millionaires is because their music is listened to by millions of people. Same goes for soccer players, they are watched by millions of people. An author that sells 10 000 copies of their book for R100 will be a millionaire.
Scale is leveraged
Most self-employed individuals are operating on the slow way, they leverage their time to make money. This means that they are just like people who are employed, it might take them 30 years to become millionaires. Businesses and people that leverage scale always become successful.
Even gurus that teach you about being financially smart are operating on the fast way. Same goes for the guys that are selling “get rich quick seminars”. Let’s do some simple maths again. A self-proclaimed guru tells you to join his course and you will be a millionaire in no time.
This guru goes around hosting seminars and sells the course for R5 000, he hosts seminars all around the country and even goes abroad to do the same. It might look like the guru is leveraging time but in reality, he is leveraging scale. He prepared the course and is done with it, he knows that the more people he reaches, the more money he will make. He gets a total of 2 000 people to buy the course after he has been in all 9 provinces. That means he made R10million, his course however, will teach you to invest for 30 years. While he might have done all this in just 6 months.
Do you know why Youtubers with over 500k followers are millionaires? It’s because they are able to reach millions of people in a month. If you can’t reach millions of people then you have to provide value, a lot of it. This means that you will be paid more, soccer players provide a lot of value to their clubs, that’s why they earn millions.
Why does Facebook make the most money out of all social networks? Because it has the most reach, simple. The reason why famous people get constant sponsorships is because they have reach. This blog makes an average of R10 per visitor, all that’s needed is for it to reach 100k people a month and it will make a million.
Competition
If you choose to do something that has a low barrier to entry; you have to be exceptional. The only way to be successful at most things with a low barrier to entry is to be exceptional. That’s because things with a low barrier to entry have a lot of competition, you have to work extra hard to stand out.
However, you don’t need to be exceptional if you enter a field with a high barrier to entry. You just need to be average and you will still be a millionaire. Let’s say you decide to manufacture cars as a South African. Your cars don’t have to stand out, they just have to be average and you will have thousands of people buying them. That’s because car manufacturing has such a high barrier to entry that most people will be awed by your achievement and buy into your vision. Another thing with doing things that have a high barrier to entry is that people will automatically market your business or products for you.
Another great advantage about doing things with a high barrier to entry is that you can charge more for your products or services. The same goes for being exceptional, the most exceptional artists get paid the most money, same goes for athletes.
Bottom line
A lot of people will not become millionaires because they don’t do travel in any of the paths written above. I personally recommend using the slow way if you are just saving for retirement and use the fast way if you want to reach financial freedom soon. Scale plays a huge role when it comes to making money fast. A coffee shop that is just in one town may not make millions for the owner, because its reach is limited. Same goes for businesses that are only targeting people at a certain geographical location.
Choose a business or hustle that has unlimited reach. This article was not meant to tell you which field to go to in order to be a millionaire. We realize that people are different and not the same thing will work for everyone. However, whatever field you go into, make sure it’s one that will allow you to scale up rather quickly.
Conclusion
This was a guide on how to become a millionaire in South Africa. Do you have any thoughts or questions? Comment below
