Do you have what it takes to be a millionaire? (Part 2)

To recap the previous post, here are the questions you need to ask yourself to determine if you have what it takes to be a millionaire (at least, according to David Bach’s Automatic Millionaire):

1) Do you pay yourself first?

2) Do you have an emergency basket of cash?

3) Do you know what your latte factor is?

Now, on to the remaining 3 questions.

4) Do you own your own home?

According to The Automatic Millionaire, statistics say that most renters have a low net worth (roughly $4000) and home owners have a higher net worth ($140,000 and up). However, this isn’t necessarily true if you have a long-term mortgage you haven’t paid off yet.

If you already own a home, you need to learn why it’s an important asset and investment. According to David Bach, You can leverage the value of your home, especially when real estate values go up. (I’ve seen this happen in Marikina, especially over the last few years.) Also, nothing compares to the sense of security you feel when you’re owning a home. Overall, David Bach says that whether you rent it out or hold on to it, a home is a good investment.

5) Do you give to charity?

Some people give for tax deductions, while others give because they’re feeling guilty. They wait until the end of the year, ask themselves how much of their money is extra, and that’s what they give. David Bach doesn’t recommend this. He suggests that we make giving automatic – just like when you automatically pay yourself part of your income.

This part is all about feeling like you’re coming from a place of abundance. Some people may have multi-millions, but if they don’t give away a single peso to anyone, for a cause larger than themselves, they probably feel cheap inside. From David Bach’s research, most multi-millionaires have one thing in common: they were giving part of their income for charitable causes, even when they weren’t wealthy yet. It’s all about the mindset rather than just the measurement of how much money you have stashed away in the bank.

I can’t say that this is something I do on a personal level (I’m not in the best financial shape), but my business partner and I have agreed that part of our company profits should go to charity. We have yet to decide the beneficiaries, but it’ll probably go to causes that we truly believe in.

6) Is your financial plan automatic?

Wherever your income goes – to the bills, savings, retirement, emergency funds, debt payment, charity – you need to make these payments automatic. Not only will it save you time, but it strengthens your commitment to distribute your income properly. It lessens the spending temptations you may encounter along the way.

Personally, my financial plan isn’t automated. The main reason for this is because I get paid in cash (via remittances, because I’m an online worker). However, several banks offer bill payments (via phone or online). So if it were convenient and possible for me to automate distributing my income, I would. It’ll certainly save me a lot of stress doing personal accounting. Also, it’ll force me to save more.