Who doesn’t want to be a millionaire?
There will be an estimated 22 billionaires in the US in 2023, making the US the country with the most billionaires in the world, according to a UBS report.
In other words, becoming a billionaire is rare, but not at all rare. This milestone may be more attainable than you think.
The truth is, if you develop the right financial habits and mindset from a young age, a seven-figure net worth is within your reach. And given the rise in inflation in 2021 and 2022, $1 million in assets isn’t as much as it used to be.
How to become a millionaire: 7 steps
Jason Fleury, a certified financial planner and founder of Legacy Partners Financial Group in Woodstock, says that “true millionaires,” those who have earned and kept their wealth, are He says he sees the role of money in life in a completely different way than people who focus on what money can buy. , Georgia.
“Having money for the sake of having money or ‘getting rich’ will never make you feel fulfilled,” he says. “Ironically, that can actually create another set of problems that many people haven’t really thought about in their pursuit of more.”
Here are 7 tips to become a millionaire, with insights from financial experts.
1. Create a written financial plan
Even if you say you want to be rich, you won’t get there. You need to come up with a workable plan to get rich, put it down on paper, and put it into action.
“A written plan forces you to do something, calculate what you need to earn, and how to invest it,” says Roberts, a certified financial planner and property manager in Birmingham, Alabama. says Stewart Welch, founder of management company The Welch Group.
Key elements of a financial plan include:
Income and Expenses: Track your income and expenses.
Debt: List all your debts, including credit card balances, student loans, and mortgages.
Savings and Investments: Evaluate your current savings and investment portfolio, including contribution rates and average return on investments.
Goals: Set clear, measurable financial goals, such as saving for retirement, buying a home, or starting a business.
Budget: Create a budget that aligns with your goals and helps you track your spending.
“A plan is more than just a goal; it’s everything,” Welch says. “Dreams, goals, choices.”
2. Get into the habit of saving money
Mark Hamrick, senior economic analyst at Bankrate, says that to achieve millionaire status, you first need to prioritize your own finances.
“Think of saving money as a way to pay yourself first,” he says. “By making saving money a priority, you increase the likelihood that your financial future will be stronger than it is now or in the past.”
Start by building an emergency fund in a savings account so you don’t have to take out investments or take on high-interest credit card debt when a big unexpected expense arises.
Try to save at least half of every raise. Consider a high-yield savings account to make the most of your cash. Online banks tend to offer much higher APYs than traditional banks, and some robo-advisors offer attractive interest rates on cash management accounts with no annual fees.
“Don’t join the many Americans who say their biggest financial regret is not being able to save for emergencies or retirement,” Hamrick says.
3. Living below your means
One of the most effective ways to build wealth is to spend less than you earn. However, this may be easier said than done. Lifestyle changes can be tricky, and you may be tempted to buy a bigger house or an expensive car to show off your ever-increasing net worth.
“Too many people think, or are conditioned to think, that their worth is somehow tied to what they own,” Hamrick says.
Experts stress the importance of resisting temptation. Long-term millionaires are less likely to spend money on themselves now and more likely to save and invest for the future. For example, I don’t plan on buying a house that will cost me money.
Hamrick offers a different way of thinking.
“Don’t we really want others to admire our resourcefulness and wealth-building, rather than our own spending?” he says.
4. Stay out of debt
Paying yourself is cheaper than paying your bank or credit card company. Debt, especially high-interest credit card debt, is your enemy.
“When you’re in debt, it’s very difficult to make progress toward future financial security because you have to pay taxes and debt before you can use your money for yourself,” Legacy Partners says Mr. Flurry.
If your credit card bills are piling up, pay them all and keep just one or two. Don’t leave anything on your card that you can’t pay off by the end of the month.
“Debt inhibits people from taking action,” Fleury said. “They buy the debt and keep paying it off forever.”
If you already have debt, make a detailed plan to pay it off as efficiently as possible. Prioritize high-interest debts and spend at least 20% of your take-home pay on them.
5. Invest
You don’t need a lot of money to start investing. And if your employer offers a 401(k) or similar tax-advantaged retirement plan, you can build wealth by automatically investing each paycheck. There may also be a 401(k) match.
“Employer retirement plans are often a good place to start,” says Dana Twight, a certified financial planner and founder of Twight Financial Education in Seattle. “With automatic contributions, you can invest without worrying about today’s news.”
The number of millionaires with retirement accounts is also increasing. Fidelity reported that billionaires once again hit a record high in retirement accounts in the second quarter of 2024, with the number reaching 497,000 accounts, up 2.5% from the previous quarter.
Experts recommend contributing at least 10 percent of your salary to your 401(k) and increasing your contributions after a raise. If you can max out your annual 401(k) contributions, or if your employer doesn’t offer a retirement plan, put additional funds into a traditional or Roth IRA.
Diversifying your investments is important to get the most out of your investments. If you have a long time until retirement, look for growth investments like stocks to grow your nest egg over time. Bankrate’s investment calculator can also show you how much money you need to contribute and earn over time to reach your goals.
Online brokers like Fidelity and E-Trade allow you to invest outside of your retirement account. There are no fees for stocks or ETFs. If you build a diversified stock portfolio, you can expect to earn a 10% annual return on your stock investments over the long term.
If you have the funds to buy real estate, consider investing in real estate. Alternatively, if you want to diversify further, you can consider passive income opportunities such as rental real estate or peer-to-peer lending.
“By investing in a variety of asset classes, you can weather all the storms, floods, and calm moments in between,” Twight says.
6. Start your own business
Owning a company has the potential to reap all the benefits and can significantly increase your net worth. If your business takes off, you could become a millionaire or even a multi-millionaire.
In their book, The Millionaire Next Door: The Surprising Secrets of America’s Richest, authors Thomas Stanley and William Danko state that two-thirds of millionaires are self-employed, and that The majority are said to be entrepreneurs.
The authors point out that many millionaires have worked for long periods of time, lived on less than they earned, saved money, and invested wisely.
However, entrepreneurship is not a guaranteed path to wealth. It’s important to be realistic and understand the key risks involved, such as unexpected costs, personal liability, and competition.
7. Get expert advice
A paid financial advisor guides you to the right investments and strategies to help you build and maintain wealth. Their advice will be a valuable asset on your way to making $1 million.
But don’t sit back and leave everything to your advisor. Take an active interest in where and why your money is being invested.
“We’re all lifelong learners when it comes to personal finance,” Twight says. “Try to update your knowledge regularly.”
If you can’t afford to hire a financial planner to manage your money, look for one who will review your portfolio and make recommendations for a one-time fee. Bankrate’s Million Dollar Savings Calculator can also show you how long it will take to reach your goal.
⭐️Need an advisor?
Need expert advice on managing your investments or planning for retirement? Bankrate’s AdvisorMatch connects you with CFP® professionals to help you achieve your financial goals.
conclusion
Becoming a millionaire isn’t just about making a lot of money. It’s all about having a solid financial plan and sticking to it. As you progress through your wealth creation journey, think about your goals. Reaching a net worth of $1 million is not easy. It requires patience, discipline, and long-term planning. But the payoff is worth it.
“When you no longer have to worry about money to meet your needs and support your lifestyle, you’re free to think bigger and focus on what’s most important in life,” says Fleury. Masu.
— Libby Wells contributed to an earlier version of this article.
