When you imagine what it’s like to be a millionaire, you may envision luxuries like yachts, sprawling mansions and dream vacations. Yet, becoming a millionaire is about more than a lifestyle. It’s financial security.
Financial security leads to a better quality of life. It allows you to have money on hand to cover emergency expenses, fund your retirement with ease and enjoy some leisure time. If you’re ready to become a millionaire, you don’t need a winning lottery ticket. You just need to consistently follow these specific steps and plan for setbacks.
Here’s what you need to know.
The Best Ways To Become a Millionaire
There’s no shortage of advice on how to become a millionaire, including courses that claim to show you how to become a millionaire. And while it is possible to gain millions of dollars quickly, it’s not probable. You’d have to receive an unexpected inheritance or buy a lucky lottery ticket.
If you’re looking for advice on how to become a millionaire overnight, you won’t find that here. Instead, here are some solid ideas to get you started on your path to riches.
1. Fall in Love With Your Work
To get rich, you’re going to have to work for it. Choosing work that’s deeply meaningful to you is likely to make those long hours as pleasurable as they are lucrative. When you love what you do, you’re more productive, engaged and connected at work. All of this can lead to greater success.
2. Get Out of Debt
Debt is dangerous if you want to be a millionaire. At best, it robs you of opportunities to save and invest. At worst, it can create financial chaos that can take years to escape.
For example, using a credit card to pay for purchases is convenient — and might even earn you a small amount of cash back or reward points that save you money. However, charging $5,000 at 16% APR would cost $3,140 in interest and take you 82 months — or almost seven years — to pay off if you only pay the minimum payment due each month of $100.
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3. Start Saving
The formula for building wealth is simple: Save more and spend less. You can become wealthy over time if you do nothing more than saving diligently and investing wisely. But you have to do it.
Good To Know
It’s important to live within your means, but that doesn’t mean you have to spend all the money you have. As your income grows, avoid the temptation to buy more. Every dollar you spend is one less dollar working for you.
Insured savings accounts through a bank or credit union are safe places to keep — and build — your savings. Choose a traditional savings account, money market account or certificate of deposit with an interest rate that compounds monthly. For best results, shop around to find the highest return on your money.
4. Cut Down on Expenses
Eliminating unnecessary expenses is another way to accumulate the wealth of a millionaire.
The more money you trim from your budget, the more money you have to save and invest. For example, instead of borrowing money to buy a car, you could purchase one with cash. Then you — and not the bank — get to use the monthly payment to make more money.
5. Work With a Financial Advisor
A financial advisor may be just what you need to guide you on the path to becoming a millionaire. These professionals can help you define your financial goals and steer you toward the best investments to reach them.
You should interview potential financial advisors to make sure they’re a good match for you. Choose someone who operates as a fiduciary. This means they must act in your best interest instead of their own or their employers.
Here are a few additional questions to ask potential financial advisors:
How are you compensated?
Are you held to a fiduciary standard at all times?
Do you provide comprehensive financial planning?
6. Invest Early
While you may be interested in how to become a millionaire day trading, that’s not the path to millions for most. It’s extremely risky, time-consuming and stressful. Plus, it can result in catastrophic financial losses.
Instead, the more time you give your investments to work, the more money they can potentially earn. Compound interest — interest earned on the principal plus the interest you’ve already earned — is a powerful tool in your financial toolkit.
If you invest $25,000 in an account that earns 3% interest compounded monthly and don’t invest any additional funds, you’ll have $45,518 in 20 years. Leave that money in the same account for 30 years, and you’ll have $61,421.
7. Invest In Real Estate
For many Americans, real estate is an essential wealth-building tool. Property values tend to increase over time, which boosts equity that you can later use. If you buy a house for $200,000 and sell it for $300,000, you’ve essentially earned $100,000 just by holding on to the property.
Benefits of Owning Real Estate
Owning real estate also has other advantages. Rental property can generate income year-round. Real estate also comes with tax benefits that can add up to significant savings.
8. Generate Multiple Income Streams
Rich people diversify their sources of income. In addition to wages or salary earned from their primary jobs, they also earn money from investments and profit-generating side ventures like rental properties.
Passive income — money you earn without putting in much effort — amplifies your wealth building. It also provides a sense of financial security if one form of income dries up. Here are some ways to generate multiple income streams:
Invest in securities.
Buy real estate.
Start a business.
Offer your services as a consultant.
Create a product you can sell.
Can You Become a Millionaire in a Year, and How Long Does It Take?
Becoming a millionaire in a mere 12 months is possible, but it’s unlikely — unless you receive an unexpected financial windfall. Instead, the path to riches is more of a long-term goal.
Consider the following scenario to understand how long it takes to become a millionaire. You currently have $50,000 invested with an expected rate of return of 7%. If you save an additional $500 per month, it will take you approximately 30 years to reach $1 million. Even with a $150,000 starting investment, it would still take you 22 years to reach the $1 million mark.
Of course, with the use of the steps already mentioned, plus consistent determination, diligence and perseverance, you can reach your goal of becoming a millionaire even more quickly than the previous example.
But no matter how many of these steps you use, your path to wealth is likely to take a detour or two. The secret to getting rich is to anticipate these setbacks. Always plan for possible issues, and if they happen, learn from them. Then, refocus on hitting your goals to get rich.
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Last updated: July 23, 2021