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The post How to Become a Millionaire: A Step by Step Guide appeared first on Millennial Money.
Many dream of becoming a millionaire, but few people ever achieve that status.
That’s because if you want to make a lot of money, you have to work very hard for it and have a tremendous amount of discipline.
Yet by following the right strategy and making the right investment decisions, anyone can become a millionaire—yourself included. Let’s find out how!
Top Ways to Become a Millionaire
- Diversify your income streams
- Minimize taxes
- Invest, invest, invest
- Avoid bad debt
- Slash your expenses
- Save every month
- Invest in real estate
- Stick to a budget
- Get paid more at work
- Figure out your X factor
- Travel wisely
- Keep your eye on the crypto market
1. Diversify your income streams
Unless you come from a wealthy family, you’re going to have to hustle harder than the rest to become a millionaire. There’s no easy way around it.
Take a look at how many hours you’re currently putting into the average workweek and how many of those hours are genuinely productive. If you want to become a millionaire, you’ll have to work harder and smarter than the rest. It’s that simple. If you’re only working the standard 40-hour workweek, you may want to consider upping your production for a certain period of time.
One of the best ways to get more for your time each week is to start a side hustle. If your only income is from your day job, you will always be reliant upon your employer’s paycheck. By starting a side hustle or launching your own business, you’ll add another valuable income stream and gain valuable skills along the way.
Although launching your business might take significant work upfront, the benefits are exponential. Once revenue starts to pick up, you can start to outsource the daily operations and scale yourself out of the business.
Every additional income stream you create will significantly help your journey to become a millionaire.
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2. Minimize taxes
One key to becoming a millionaire is protecting your wealth, and this requires minimizing taxes. Take a look at most wealthy people and you’ll see this is a strategy by which they live and breathe.
As soon as you start making money, your best bet is to hire a tax consultant or certified financial planner. This professional can then identify opportunities for you to claim tax credits and reduce what you owe without causing any IRS issues.
The goal is to get your taxable income as close to zero as possible through qualified deductions. The more deductions you can legitimately itemize (e.g., phone, internet, transportation, and office expenses), the more your taxes go down.
Depositing money into your retirement accounts is another proven method for minimizing your taxable income.
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3. Invest, invest, invest
If you want to make real strides, you have to invest in the stock market and take advantage of compound interest. This means opening an investment account and investing in stocks, index funds, mutual funds, exchange-traded funds (ETFs), and bonds.
There are two ways to do this. You can open a brokerage account for short-term and medium-term growth, but you’ll have to pay taxes on any capital gains and dividend yields you bring in each year.
The other method is to open a tax-friendly retirement plan like a traditional individual retirement account (IRA), Roth IRA, 401(k), Roth 401(k), or a Solo 401(k) or SEP IRA if you’re self-employed. You won’t be able to touch the money in these accounts until retirement age without penalty, but retirement plans are the best way to maximize long-term tax advantages.
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4. Avoid bad debt
There are two types of debt: positive (good) debt and negative (bad) debt.
If there’s one thing the average millionaire is good at, it’s avoiding bad debt and capitalizing on good debt.
An example of good debt is real estate, as it allows you to own your own home (or investment properties) and add to your own net worth over time. Student loan debt could also be considered positive because it can help you advance your career and bring in more money. (Student loans can be bad though, if, for example, you don’t land a high-paying job after school or you have a large, high interest rate loan.)
Even credit card debt can be positive if you pay down your balances every month. Not only does this boost your credit score, but you can also collect cash back and travel rewards points just for making everyday purchases.
What you want to avoid at all costs is bad debt like high-interest credit card balances that you can’t afford to pay off. Bad debt can also include high-interest car loans or personal loans that set you back hundreds of dollars each month.
Making matters worse, high-interest debt can spiral out of control if an unforeseen financial obstacle pops up (e.g., you need expensive surgery that costs thousands out of pocket).
If you want to become a millionaire, you have to avoid bad debt, plain and simple. Once you’re free and clear from bad debt, you can start saving and investing, which is the only way to reach your financial goals.
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5. Slash your expenses
When you think of a millionaire, you may envision a lavish lifestyle of yacht parties and popping bottles. But these are the types of shenanigans you shouldn’t even consider until after you have several million saved in liquid assets. And even then, you have to be very careful about blowing your riches away, which can happen all too easily.
The truth is that most millionaires are great at being frugal. Myself included! Even after achieving success with Millennial Money and my book, I still drive the same car I did eight years ago. (Billionaire Warren Buffett is also famous for driving affordable cars.)
If you want to become a millionaire, it’s vital to slash unnecessary expenses and avoid waste so that you can pump those dollars into high-yield investments or into starting your own businesses.
Cut the monthly subscription services you’re not using, like video streaming or food delivery. If you live somewhere with solid public transportation, may also want to ditch your car, so you can cut out all of the monthly expenses car ownership entails (e.g., paying for gas, car loans, parking, and maintenance).
By trimming your basic expenses, you may be able to put between $50 to $200 each month back into your pocket. You can make this process even easier by checking out sites like Trim and Truebill.
If you can avoid car ownership, you could save even more. Then, the trick is to invest that money so it multiplies on your journey to seven figures.
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6. Save money every month
As you might expect, most millionaires have access to cash whenever they need it. That’s because they’ve saved it up.
You don’t have to be a millionaire to save money every month. Each month, try to stash away a few hundred dollars into your high yield savings accounts (HYSAs) and health savings accounts (HSAs) for qualified medical expenses if you have them.
The best part about having an emergency fund built up is that you will be able to cover unexpected expenses that might throw other people into bad debt. Your savings should also be earning a small interest rate.
A good rule is to have at least six months’ worth of expenses accessible in your emergency fund.
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7. Invest in real estate
Once you have the money to invest in real estate, you should plunge into the market and not look back. Real estate is one of the best ways to become a millionaire.
First, buy your own house and get out of the renting cycle. Stop paying a landlord every month and get a house with a mortgage so you can pay yourself and build equity over time.
Then, start investing in real estate. Look into buying a rental property or put money into real estate investment trusts (REITs) for passive income. You may also want to look into flipping houses.
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8. Stick to a budget
To become a millionaire, you must put every dollar to work. And this requires budgeting.
Simply put, creating a budget helps you maximize savings and investments while reducing unnecessary spending. Once you build yourself up, sticking to a budget helps you maintain and grow that wealth.
If you need some help calculating your monthly budgets and cash flow, look into services like You Need a Budget (YNAB) or Mint, which make it easy to track and manage your finances.
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9. Get paid more at work
Most millionaires will tell you they didn’t get to where they are by only working a nine-to-five job and collecting a base salary.
If you really want to build wealth, eventually you may need to leave your job or set up lucrative side hustles to reach millionaire status. Only you can determine which income streams you want to pursue. In the meantime, you can also make sure you’re getting paid as much as you can for the work you’re currently performing.
Scope out your salary on Glassdoor. If you’re not getting paid a competitive rate, it’s time to negotiate for a raise or look for another job that pays more.
As much as saving is essential, some of the best financial advice I can give is that increasing your income is the best method for building wealth.
In that light, getting a boost in your paycheck allows you to pump more into your monthly investments, accelerating your journey towards becoming a millionaire.
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10. Figure out your X factor
Everyone has a few qualities that make them unique. The trick is to hone in on these qualities, refine them, and transform them into profits.
Maybe you’re funny and have what it takes to make people laugh. Or, you may be excellent at bookkeeping.
Don’t be dismayed if you’re approaching 40, and your guitar skills didn’t land you on a stage at Bonnaroo. It’s not a race. Colonel Harland Sanders was 65 before he discovered his legendary chicken recipe and started KFC.
The point is, you may have some skills that could potentially separate you from the rest and catapult you to millionaire status. Jeff Bezos started Amazon as a small online bookstore. The possibilities are limitless once you apply your skills to your career or a new business venture.
If you don’t think you have any unique skills or talents, there’s still plenty of time to learn.
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11. Travel wisely
Millennials love to travel—and travel is important! As the late great Anthony Bourdain once said, “Travel changes you.”
It can inspire you and expose you to new ideas that can help you become more successful and a more well-rounded person.
That said, traveling can also be very costly, leading to bad debt if you’re not careful. So, as you budget for travel, consider looking for ways to get paid while you do so. You should also maximize travel rewards and sign-up bonuses, which can cover the cost of flights, hotels, and rental cars.
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12. Keep your eye on the crypto market
Cryptocurrency is risky. There’s no doubt about it. However, many people took a gamble in early 2020 when Bitcoin was under $5,000 per coin and rode that wave to millionaire status.
At the time of writing, Bitcoin is hovering around $59,000 per coin—an incredible spike.
Some people argue that Bitcoin is the only coin worth investing in, but that’s debatable. There are many alternative coins with growth potential on the market.
Explore the cryptocurrency market and see if you like what you find. It’s not for everyone, but it’s certainly worth knowing about as an investor.
Why you should become a millionaire
As you can see, there is no clear path towards becoming a millionaire. But it’s a goal just about anyone can attain with the right strategy in place.
Here are some reasons why you should prioritize becoming a millionaire.
Attain financial freedom
Financial freedom is the point when you stop working out of necessity and start working to achieve your own personal goals.
For some people, financial freedom is the point when they can exit the workforce and live off of interest payments alone. For others, it may be the chance to launch a business, relocate, and shift their priorities.
By becoming a millionaire, you can reach financial freedom and start living life on your terms. It’s one of the most empowering things you can do.
Give your family a better life
If you have a family, then you understand the importance of providing for them. By becoming a millionaire, you can give your loved ones a more secure future.
This means putting better food on the table, having the means to take fun vacations, and giving your kids all the resources they need to flourish.
Ideally, you will also spend more time with them if your investments are generating residual income. Just imagine being able to spend more time with your kids doing the things you love, instead of working for someone else doing a job that you hate. It’s a powerful shift.
Maximize your value
There is a force inside of you with unlimited potential. I am so incredibly grateful to have found my force, just like so many others have as well.
Remember that you weren’t put on this planet to fall short of expectations. Becoming a millionaire is your right—it’s just a matter of seizing the opportunity and making it a reality.
By becoming a millionaire, you can rest easy in your later years knowing you did everything possible to live your best life and provide for your family.
Frequently asked questions
Is it hard to become a millionaire?
Yes. Absolutely. Becoming a millionaire takes years of hard work, patience, and sometimes a bit of luck. If money grew on trees, everyone would be a millionaire.
Is it worth it to become a millionaire?
Yes, of course. Once you become a millionaire, it opens many new doors. It gives you freedom and options. And the more money you have, the more freedom and choices come along. Suddenly, making $5 million becomes easily attainable. And once you have $5 million, you can make $10 million and so on.
What’s more, you’ll learn a lot about yourself during your quest towards millionaire status. It’s worth becoming a millionaire not just for the money, but the lessons that you learn and the work ethic you develop along the way. Making money builds character, and it can increase your feelings of self-worth.
What’s the best way to become a millionaire?
The best way to become a millionaire, hands down, is through hard work and strategic investments. Work as hard as possible, doing as many jobs as you can for as much money as possible, and save and invest aggressively along the way. See the above for more advice about how to do all of that.
The Bottom Line
A million dollars is a large amount of money, and it takes careful financial planning to get there.
Start by forming millionaire habits. Save, invest, and stick to a budget. You may also want to hire a financial advisor as you proceed in your journey.
Over time, your personal finances will improve as the nest egg in your bank account grows. Before you know it, you will have a million dollars saved, and that’s just the beginning!
Keep learning by checking out “The Millionaire Next Door” by William D. Danko. In this book, Danko shows the secrets of America’s wealthy.
The post How to Become a Millionaire: A Step by Step Guide appeared first on Millennial Money.
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