“Millionaire” feels like a huge, unattainable word, but being one is actually more realistic than you think. Nowadays, becoming a millionaire is not necessarily a butler, a private jet, or a luxury. It can mean ensuring that you are comfortable (or early) to retire. It can provide you with professional freedom to pursue passion, rather than tied to salary. The public perception of “millionaires” may be rooted in consumerism, but this is not necessarily your goal. How easy is it to become a millionaire? Well, “easy” is not the right word, it requires a lot of intention, discipline, and patience. A better word is “simple”. By studying the common practices of millionaires, we can identify patterns and follow their steps to become millionaires. Let’s learn more about how to become a millionaire in a simple way!
Table of contents
1. Develop a millionaire’s mindset
Don’t worry, I won’t force you to start a vision board (unless you would like to). But most importantly, wealth is a mental game. If you don’t start with a solid money mindset, it may be difficult for you to adopt the millionaire habits and practices you need…
Some mindset characteristics that will help you:
- Plan ahead—consider your short, medium, and long-term financial plans in advance, as well as your response in emergency situations.
- Resolve—know you will face challenges, but be prepared to overcome them.
- Patience and delayed gratification-willingness to delay current needs for future goals.
- Confidence-Believe that you can pay off seemingly insurmountable debts, reach the next number in your savings account, or start your dream business. If you start with a negative mindset that I can’t, you may not…
- Open-willing to learn, sometimes make mistakes or even fail, and then learn more. Seek knowledge and allow yourself to be positively influenced.
Of course, not all millionaires have these characteristics, but I am not talking about lottery winners, celebrities, or trust fund heirs. I’m talking about ordinary people who decide to accumulate wealth and continue to do it. They are not super-humans!
2. Carefully watch your expenses (big and small)
One of the fastest ways to hinder financial progress is to buy too many houses or too many cars. You may have heard the term “slum”, and this is what it means. Too many people fall into the trap of overly expensive mortgages and auto loans, which account for most of their income, leaving them with little or no savings. Although big purchase decisions only occur occasionally, your financial plan should also take small expenses into consideration. These may be “a thousand cuts” of your saving goal. Look for opportunities to reduce costs, such as mobile phone bills, cable TV or subscription services, dining out, purchasing non-essential items, etc. A great goal is to see if you can live on only half of your income and save the other half. Try it as a one-year experiment, if you can, go ahead! This will enable you to earn millions of dollars faster.
3. Try to max out retirement investment accounts
The two most common types of retirement accounts are the personal account IRA and the 401(k), which is usually provided through work. You can have both types at the same time, and they both allow you to save tax while investing in the stock market. Learn more about types of retirement accounts. If you contribute to these accounts as much as possible, it’s like a fast track to how to become a millionaire. In 2019, the number of “401(k) millionaires” and “IRA millionaires” both hit a record high, which means that people only need to invest in these accounts to become millionaires. This is encouraging because everyone’s contribution limit is the same. According to the IRS, in 2020, you can contribute up to $19,500 to a 401(k) and $6,000 to an IRA.
The conclusion here is that those “Irish Republican Millionaires” did not get there because they were already rich and could contribute hundreds of thousands of dollars at a time. This means that they are achieved through slow and steady investment and growth.
Let’s run some example numbers, based on an average historical return of 10%. Use the investment calculator to clearly understand your goals and their feasibility.
- If you only maximize your IRA by contributing $500 a month, it will take you about 29 years to become a millionaire…
- If you only make the most of your 401(k) by contributing $1,625 per month, it will take approximately 19 years…
- If you increase the total monthly amount of the two accounts to 2125 USD, you can speed up up to 16 years…
Like I said before: simple, not necessarily easy!
Of course, no one knows what the stock market will look like in the next few years. It may have negative returns for several years before it recovers and grows again. But if you stop investing for fear of collapse, you may find yourself missing years of incredible growth
4. Seize any opportunity to increase your income
You stare at the numbers above and think “Yes, well, like I have two extra jackpots every month” – I am with you! Even if you have cut down your expenses as much as possible, sometimes there is no more room for maneuver.
Then it’s time to look at the other side of the equation: increase revenue
This can come in several forms. For instance, you could:
1. Ask your current boss about career development and promotion opportunities…
2. Find a job and see if you can get a higher salary for similar positions in the new company…..
3. Learn new skills to improve your market competitiveness, and change your career across the board to enter a higher-paying industry…
4. Work part-time or take a second job, such as these work from home…
5. Start a business and work hard to expand…
Clever Girl founder Bola is a good example of revenue growth. She saved $100,000 in 3.5 years and lived a frugal life. While working full-time, she started her own wedding photography business. She then launched this blog and developed it into a full-time business. Evaluate your skills, interests, and strengths, and try to brainstorm how to monetize them.
5. Use your money to make money
Most wealthy people don’t sit on the vault like a dragon—they spend their money working for themselves. Using your money to make money with very little active effort is called “passive income.” The easiest way to generate passive income is to invest in stocks or deposit savings in a high-interest bank account.
If you manage to maximize your retirement account for that year, you can continue to invest your funds in a brokerage account or HSA to pay for medical expenses. Many millionaires attribute their success to real estate investment, depending on how you invest, which can be active income or passive income.
There are also some unique ways to earn passive income, such as buying an ATM and earning it through fees, or having a vending machine in a suitable location.
6. Avoid “lifestyle creep”
As you increase your revenue, it is pretty obvious that your lifestyle will change. When items that you once thought of luxury are now part of your new normal routine, lifestyle changes. This can be as small as buying expensive coffee every morning, or as large as buying a beach house or a boat.
Another common trap that people fall into is “keep up with Jones.” If your neighbors, friends, and family are buying cars, going out to eat every day, and upgrading their houses, then a little bit of jealousy is normal, but keep in mind that the average American debt is about $38,000, excluding their mortgages. You don’t want to keep up with Jones, because Jones is emphasizing how they will repay that BMW. It may sound strange, but to become a millionaire, you should live like your opponent.
Summary
Becoming a millionaire will not happen overnight, but as long as you work hard, dedicate time and give all you got you will achieve your goal, It is completely within your grasp. Remember, there are many examples of current millionaires to learn from, they can be used as a roadmap. The challenge you face now is to start and build the mindset and habits needed to create meaningful wealth and a 7-figure future.
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