How to move from high income earner to millionaire!

Self made millionaire, it is possible for all of us whilst living rich and retiring rich. A recent survey looked at self made millionaires and found that are two types – those who took a ‘risk’ and those who displayed good ‘saving’ habits over time.

Group 1 – Self made millionaire ‘Risk Takers’, are the richest and tend to be bold and courageous, requiring courage, persistence, cunning and a hard core work ethic.

Group 2 – Self made millionaire ‘Savers’, accumulate their wealth by living below their means, saving money and then investing that money prudently. They tend to be risk adverse, but are disciplined and diligence.

The Key ingredients for group 2 are –

Establish a saving goal – watch my video 1 hour per day at www.planreview.ie to show how this can be achieved by using the 1 hour per day theory.

Be frugal, seeking quality and value, spending wisely. No budgeting, just set priorities- watch my 2nd video, creating an emergency fund and retirement fund.

Avoid life style creep, is your standard of living matching or beating your increasing income then you need to protect yourself from yourself and automate your saving.

One of the hardest concepts that I see my clients deal with is the need to spend just a little less and a little save more. As their incomes have grown so has their lifestyle and spending habits, and therefore increasing their savings can be seen as having to sacrifice part of their lifestyle.

For some, saving more money on a monthly basis is going to be the only way they can ensure they can maintain their lifestyle indefinitely, rather than a rude awakening when something changes – like retirement, or losing their job.

So if you think you can’t save more money as you are worried about the impact to your lifestyle, I’d like you to take a moment to reflect on how fortunate you are when comparing yourself to the rest of Ireland. If you can be humble enough to do this, then you can start from an objective base on which to build long lasting wealth that will outlive you and possibly future generations.

Just how well paid are you really?

I’m sure most of us have at one point or another wondered how our annual income compares to those around us and the rest of the country. But where we fall on the income scale is not something we tend to discuss openly.

It’s human nature to compare ourselves to people around us but more often than not we will look upwards, rather than downwards. No matter what our level of income, many of us will feel we can do with a bit more in our pocket by the end of the month.

The truth is that people on high salaries are only in the top few percentile of wealth in Ireland and your position might come as a surprise to you.

So where do you sit on the income scale?

Earn 25 grand and you are ahead of 30 per cent of the workforce. If you make €50,000 you are bang in the middle, and if you earn €100,000 you are in the top 5 per cent.

Being ‘rich’ is very subjective term. But hard numbers can make it easier to determine where you stand compared to the rest of Ireland.

People living in Dublin will almost certainly not call themselves rich on €70,000 a year, while people in other areas of the country will be able to stretch €70,000 much further and feel better-off.

On a global scale, if your earn €79,000 that would put you in the top 0.09 percentile of the world’s population.

When we think about our annual income, many of us have either no idea or the wrong idea of how we compare to the rest of the nation. What is clear though from the above data is that people who earn a high annual income fall in the very top few percentile of the population.

The tax reality for PAYE earners.

The below figures are from the Revenue Commissioners figures are based on “ taxpayer units” which can be either single people, couples with one earner or couples who are jointly assessed for tax. They show that there are almost 850,000 taxpayers who earn between €30,000 and €70,000 and account for around 30 per cent of all taxes raised.

Some 140,000 taxpayers with incomes over €100,000 earn over one quarter of all the personal income declared for tax, according to new Revenue figures. The data shows that this group is expected to pay over 45 per cent of total income tax and USC (Universal Social Charge) this year.

Within this group, there are 28,000 taxpayers earning over €200,000, which represents almost 11 per cent of total income earned in the State. This group pays around 20 per cent of total income tax and USC.

Whilst it can feel great to have large disposable incomes, and feel proud of your career achievements, make sure you’re aren’t spending it all and you are making appropriate provisions for the future. This can be done tax efficiently ensuring you are not giving more than you need to the Tax man (read my blog Beating the Tax man).

If you aren’t sure what steps you should be taking, send me a private email, Kevin at info@planreview.ie.

Watch my video to show how by saving just 1 hour per day of your income can have a huge impact on you financial future. The video is only 2 minutes long and part of a series of 3 videos which outlines some simple steps you should be taking to ensure you are on your way to living rich and retiring rich, visit www.planreview.ie