So you want to know how to become a millionaire, huh? Well, welcome to the club. Millionaire status is something most of us only dream of, but does it have to be just a dream? I certainly don’t think so. In fact, most of us are very capable of becoming a millionaire; we just need some direction. Becoming a millionaire isn’t going to happen overnight. Could you win the lottery? Sure, but don’t count on it. Accumulating over a million dollars in assets is going to take time, effort, and a plan. Here’s is my plan on how to become a millionaire.
Have the Right Mindset
First and foremost, to become a millionaire, you have to have the right mindset, financially speaking that is. Millionaires don’t get to be millionaires by following the crowd and keeping up with the Joneses. If you continue to try to look like you’re wealthy by going on lavish vacations, buying luxury cars, or spending money on things you more or less want but not necessarily need, then you’ll never achieve millionaire status. Most millionaires are pretty basic in what they buy; they buy based on value, not for show.
Next on the how to become a millionaire list, unless you are lucky enough to be born into money, win your millions one way or another or get lucky in some other way, you’ll have to work hard for your millions. Most people want the easy way, but 99% of millionaires need to do it the hard way. For most millionaires, their source of income is a regular 9-5 job. However, they are the ones that show up early, get their work done, and then some. Get yourself noticed, and when it comes time for reviews, promotions, or bonuses, you can be sure you’ll be first in line over your co-workers.
Working hard is great, but it’s not the only piece of the puzzle regarding our careers. Who you know can play a huge role in your success as well. If you skip all the work functions, outings, and other events, you could be passed over when it matters most. Plus, you never know who will leave your current company and go on to do bigger and better things. By networking inside and outside of your company, you’ll have that many more opportunities for someone to think of you when it comes time for a big payday.
So what’s all the hard work and networking for? To increase your income, of course! You don’t necessarily need a six-figure salary to become a millionaire, but having a higher income certainly speeds things up a bit. The more money you can earn from your 9-5, the more money you have at your disposal to start doing what is necessary to become a millionaire, more on that later.
Max out Your 401k
Maxing out your 401k has a few advantages. For one, you’ll be putting away the most money possible, at least through this avenue, to put towards your retirement. Second, the sooner you start putting money into your 401k, the more money you’ll have when it’s time to retire. This will also give you a more significant tax break when it comes time to pay Uncle Sam, so it’s a win\win for you. More money now and more money later.
Have a Side Hustle or Two
In today’s world, it’s easier than ever to have a side hustle or two. With the “gig economy” in full swing, there is something for everyone to create a second source of income. In addition, there is a way for everyone to make money from surveys, uber, dog sitting, personal shopping, focus groups, you name it. So take an hour or two a day to devote to whatever hustle works best for you and start creating additional sources of income.
Don’t Carry Any Bad Debt
Notice the word “bad” in that title? That’s because not all debt is bad. When debt is associated with liability or something that will decrease in value over time, it’s bad. On the other hand, when the debt is related to an asset, something that will make money over time, like a house, the debt can be considered good. You’ll need to rid yourself of any bad debt like credit card debt, loans, or anything else that is charging you interest and not making you money. Being debt-free is crucial when it comes to becoming wealthy and achieving financial freedom.
Live Within Your Means
Maybe one of the biggest checkboxes on the how to become a millionaire list is living within your means. Living within your means is a simple concept, but it’s surprisingly challenging to do for many. This can be related to having the right mindset and looking wealthy instead of being wealthy. Simply put, you need to spend less money than you make. Sounds simple enough, but going back to the Keeping Up With the Joneses mindset, many people will outspend their income just to look like they are keeping up with or ahead of their peers. The funny part is that, in reality, everyone is drowning in debt then. So be different and simply put an end to unnecessary spending. Be smarter with your money, keep your living expenses down, and don’t let anyone else dictate how you spend (or invest) your money.
Beware of Lifestyle Inflation
One of the sneakiest wealth killers is lifestyle inflation. When we start in the working world, we’re not making much, and we live accordingly. As we begin to make more and more money, we inevitably start buying more things and nicer things. To an extent, it’s okay, but once you start getting into the habit of “spending because you can,” it’s time to take a step back and think about what you’re doing. The sneaky part is many of us are doing it without even realizing it. It happens slowly, a minor upgrade here, another minor upgrade there, and bam! Before you know it, you have hundreds of dollars in unnecessary spending a month. Don’t fall victim; it’s okay to want nicer things, but once you get to a certain point, it’s not needed, and it’s hurting your quest to become a millionaire.
Track Your Spending
Millionaires aren’t getting rich by simply assuming as is well and not keeping track of their finances, just the opposite. Many will pour over their spending to find different ways of budgeting in the right places or saving a few extra bucks. Make sure you do the same. Setup and budget and stick to it. This will also help with the aforementioned “Lifestyle Creep” problem.
Invest Early and Often
Okay, this is where the rubber meets the road. Up until now, you’re simply earning an income and possibly saving some money. Guess what, though, you don’t become a millionaire by stashing your cash in the bank. You absolutely need to invest if you want to become a millionaire. It’s all about the compounding gains. No matter what analogy you use, the fact of the matter is that the longer you are investing and investing consistently, the more money you will have in the end. Investing in traditional stock-market options like stocks, mutual funds, index funds, ETFs, and bonds are all great. You have alternatives as well, but the fact of the matter is you need to invest in something. Building wealth won’t happen overnight but keep at it, and you’ll be sure to see your net worth picking up speed as the years go by.
Do Your Investing Research
There are a ton of investing theories and strategies out there that aim to maximize your earnings or minimize your losses. Do your research, figure out which fits your investing style and goals. Maybe you want to be really aggressive and don’t mind significant losses as long as they come with bigger gains. Perhaps you want a blended approach with a split of risky and safe investments. Maybe you want old reliable, safe investing and have no problem with continuous small returns. And hey, nothing is saying you can’t switch strategies every so often. No matter what path you take, make sure you understand all the risks and rewards before investing any of your money.
Remember that paragraph about good and bad debt? Well, property is excellent wealth-building debt. You should aim to own your primary residence as soon as possible. That doesn’t mean rush into something and being house poor, no. What I mean is to have the money for a downpayment as soon as possible and buy a house you can afford and then some. With your primary residence, you’ll be gaining equity in the home. Real estate investing can also be a great way to boost your net worth. Yes, you’re taking on more debt, but you’ll have a cash-generating asset that is also appreciating in value.
Invest in Yourself
Finally, if nothing else, invest in yourself. Earn a higher degree, certificate, or learn a valuable trade skill. There are tons of ways to improve yourself that will, in turn, increase your income. Your return on investment might be a few years, but in the end, you’ll be miles ahead of your former self.
Do Something Innovative
Okay, I’ll admit, this is by far the most challenging “tip” on the how to become a millionaire list here, but it’s still worth noting. Some of the wealthiest people in the world took a concept and flipped it on its head. The world is constantly changing, and the next big idea can come from you. Okay, it doesn’t have to be world-changing; that is quite the lofty goal. But, don’t be afraid to do something because it’s hard. If becoming a millionaire was easy, everyone would do it. Open a unique business or see an opportunity for the expansion of an existing one. Take a few hours a week to create something unique to you. There are so many ways to sell our creations these days, no matter what they are, but you have to get out there and do it!
Learn From Your Mistakes
Some of the greatest inventions of all time took years or even decades to perfect, with the inventor making countless mistakes along the way. They figured out what worked, what didn’t, and how to improve themselves or their product. You’ll need to do the same. It doesn’t need to be from a creation, business, or anything along those lines. Simply learn from any and all mistakes you make, or else you’ll be bound to repeat them.
Don’t Be Afraid to Ask for Help
We always think of self-made millionaires as being on their own, them against the world and coming through despite all odds. That’s likely not the case though, in fact, most millionaires are where they are because they asked for help. Nobody knows everything, and asking for help is the best way to ensure you don’t make too many mistakes. Having a financial advisor or financial planner is an excellent idea for those accumulating wealth. There are experts out there in basically everything and anything, so you don’t need to be. Don’t be proud; ask for help!
Set Goals and Everything You Do Works Toward Them
The last item on this list, but certainly not the least important, is setting goals and working toward them. If you don’t have a goal for your money or yourself, you’ll be more likely to wander around in too many directions, which ultimately won’t get you anywhere. Give yourself specific goals to hit along the way to make sure you are on track for your most prominent dream, being a millionaire. It’s not enough to simply have goals, but your actions need to be geared towards achieving them. If your goal is to become a millionaire, but your actions do help you get there, then you’ll likely get discouraged and quit. After setting goals, write down the steps you’ll take to achieve them with the best results.
Now you know how to become a millionaire, but can you do it? Building a net worth of at least one million dollars takes time and dedication. Still, if you are willing to do what it takes, anyone can achieve it given enough time. The sooner you start taking action, the sooner you’ll be able to fulfill your dreams. Spend wisely, invest, and do everything you can to get to your goals.
Jeff is a fan of all things finance. When he’s not out there changing the world with his blog, you can find him on a run, a Mets game, playing video games, or just playing around with his kids.