#1 Knowing Your Outflow

Have you been hesitating to invest because of uncertainty, fear or confusion over the myriad investment products? What if I told you there is sure way to be a millionaire that requires less than an hour a year. You must be thinking I'm spewing nonsense and this is just another of those scams that promise quick riches.

Nope, the steps to becoming a millionaire is simple but not easy. It will not make you an instant millionaire overnight but if you follow the evidence-based plan, it should lead you to a comfortable retirement.

Before we start with investments, the very first step is to have funds to invest. For most of us, the salary from your day job provides this inflow of cash. As we spend our salary to pay our bills, spend on food, entertainment etc, money flows out. The difference between our inflow and outflow is the amount which we can invest in. The greater the inflow and smaller the outflow, the more money we get to invest.

The first step is to track your outflow. Ask yourself, do you know how much you are spending monthly? $500, $1000? Well you should start tracking your expenses and you would be in for a surprise. By tracking your spending, it gives you better clarity of where your money is going. After I started tracking my expenses, I was shocked at how much I was spending monthly on fast food and bubble tea. The seemingly small amount of $2/$2.50 McChicken, Filet-O-Fish and >$3 dollars bubble tea added up quickly.

Its Easier Than you Might Think

You must be thinking its a hassle to track my expenses. Well, if you have time to scroll through social media while travelling, you will have enough time to key in your expenses and yet still be able to continue your endless scrolling. There are plenty of spending tracker apps online and its totally free! Choose an app with an interface that its appealing to you so that you would be more inclined to use it. Personally, I'm using Toshl Finance - Clean interface that serves my basic tracking needs.

Budgeting & Dieting

Many people have been saying to have a budget to control your spending. But it doesnt work, at least for me. Its akin to asking someone who is overweight to go on a calorie deficit diet. Exempted from all soda drinks, fried food, carbs etc. How long can someone who is used to eating alot sustain such mental torture. Eventually, most of the people will go back to binge eating and worst still weight heavier that they first started.

Dont hear it just from me; A study in the journal Obesity showed that self monitoring food consumption is the most effective way to lose weight. Participants in the 6 months study who lost the most weight, spent just under 15 minutes a day recording what they ate and drank. In order words, tracking expenses is like someone tracking food intake to lose weight, self monitoring allows us to see the choices we make and make smart choices in the future.

By saving $100 a month (arbitrary number for example) it would equate to $1200 a year! Now that number doesnt seem anymore right, sufficient for a luxurious couple trip to Bangkok. Let's say we invest this $1200 in year 2000, and I recommend a portfolio of low cost diversified funds, it would have grown to $48,125.31. Thats the power of compound interest.

The Bottom Line

I'm not suggesting that we dont spend on stuff that gives us joy but instead look at which spending brings you joy. Different people has different likings, for me I still love my bubble tea and decide to cut back on the weekly McChicken/Filet-O-Fish. By tracking your expenses, you would also be able to find stuff that unnecessary money is spent on and find money to invest that you didn't know you had.

Find a tracking system you're comfortable with and stick with it.

Thanks for Reading!