Who wants to be a millionaire? Everyone! (Maybe?) May 20th is Millionaires Day, and what could be nicer than working towards joining the Millionaires Club.
I am a firm believer in building wealth, especially when I start young. But it is possible to become a millionaire at almost any age.
Here are some helpful tips to get you a little closer to becoming a millionaire:
Fast facts about becoming a millionaire
First, let’s look at some facts about millionaires before we dive in. Too many people are discouraged from becoming a millionaire, while the math of becoming one is more achievable than most think.
- There are 20,270,000 millionaire households in the US (Source: Credit Suisse)
- There are 51,882,000 millionaire households worldwide (source: Credit Suisse)
- According to Thomas J Stanley’s The Millionaire Next Door, 80% of millionaires are self-made (only 20% inherited their wealth).
- The median age of a millionaire in the US is 62 years (Source: Spectrem)
- There are 618,000 millennial millionaires in the United States (Source: Coldwell Banker)
And remember, reaching a million just depends on your savings rate:
Here is the amount you need to invest per year to reach $ 1,000,000 by age 62:
That said, if you start investing at age 25, all you have to do is invest $ 383 per month and you will achieve your goal! That’s less than your annual IRA contribution!
Pay off your debt
First you just have to pay off your debt. You need to move from a negative to a positive net worth. The wrong type of debt can prevent you from making progress on your financial goals. If you have any type of consumer debt, you should come up with a plan to pay it back asap.
Once your debts are paid off, you can use that money on your investments.
Here are some great resources to help you pay off debt:
It is important to note that most millionaires are in debt. Debt itself is not a bad thing. When used to grow your wealth, it can be positive. However, if it is used poorly (e.g. to simply buy things for your home) it can hurt you.
Review your investments to identify ways to improve them
Over time, your investment strategy requirements will change. Make a habit of reviewing your investments and looking for opportunities for improvement.
Here are a few things you might want to check:
Start or increase your 401K contribution
Maximizing your retirement account annually is a surefire way to retire a millionaire.
If you don’t already have a 401k Open, meet with HR at your workplace and have one set up. You should contribute as much as possible (up to the maximum contribution amounts) or at least enough to receive an employer match if necessary.
If you already have a 401k, plan to increase your contributions as much as possible each year until you hit the max.
What if your employer doesn’t offer a 401k?
No problem! You can still open a Roth IRA, a traditional IRA or, if you are self-employed, a SEP IRA. If no employer has sponsored 401,000, this is no excuse to skip investing in retirement. You should also continually increase your contributions to these accounts.
Connected: Best order of operations to save for retirement
Retune your portfolio if necessary
While you may have started with the perfect asset allocation, it will change over time as your wealth increases or decreases in value.
Review your current portfolio to ensure that your investments are currently properly weighted based on your strategy and risk tolerance. Make adjustments if necessary. You should do this at least once a year to meet your investment goals.
Check out our guide to learn how to split your portfolio across multiple accounts.
Check for fees
Investment fees can keep you from becoming a millionaire. They can seriously affect your ability to get a decent return on investment.
Check out FeeX, a free tool that can help you analyze your portfolio and make recommendations on funds and ETFs that may cost you too much in fees. Oh, and the best part? It’s free.
Invest in yourself
All millionaires invest in themselves. While it is vital for you to develop a smart retirement plan that includes a mix of assets like CDs, stocks, and bonds, it is just as important to invest in yourself.
After all, YOU are your most valuable asset.
Review and update your budget to incorporate opportunities to spend less and save more
One of the fastest ways to instantly have more money to save and invest is to cut your spending.
Check your budget and make cuts if necessary. I would warn you to cut budget cuts slowly so that the habit persists. If you try to make too many changes at once, you will end too soon.
Here are some areas of your budget to look at:
Eat – Saving on groceries is by far one of the easiest ways to cut your budget. You can do this by eliminating takeout, creating a menu plan, prepping meals in advance (freeze cooking), and making purchases.
Cell Phones – Cell phones are another of those guilty joys that people typically overpay for. The fact is that you can get paid for around a third of the price if you make calls using the same features as your contract smartphone. Turning off your phone can save you significant savings.
Living – Housing is one of the toughest budget cuts, but it can also have the biggest impact. By downgrading your housing situation and saving hundreds to thousands of dollars a month, you can quickly accelerate your millionaire status.
Transport – How much money do you spend on a car payment and insurance each year? If you’re not already financially stable, selling an expensive, gas-guzzling high-insurance car and swapping it for an older model that you can pay for up front can save you thousands of dollars a year.
Insurance – Typically, every 2-3 years you can save money on car insurance simply by switching companies. Don’t be afraid to call your agent for quotes from multiple insurance carriers.
Dress – Thrift stores and consignment stores are great places to buy clothes. There are even high-end consignment stores online that now make it extremely convenient to get beautiful branded clothing at a fraction of the retail price.
When you’re cutting your expenses, you’re doing the best that you can. We are all in different situations, so there is no one-size-fits-all situation. Remember, we’ve compiled a list of ways to save over $ 500 per month. It is possible – I made it.
Make a plan to make more money
While reducing your expenses is the fastest way to free up extra cash in your budget, it is also a very limited way. If you want to get to millionaire status really quickly, you need to work on both sides of the equation. That said, you need a plan to increase your income.
Here are some ideas:
Ask about a raise – This is a simple yet effective solution. If you’ve been with your company for at least a couple of years and you’ve proven your worth, a raise might be in your future. Meet with your boss and explain the value you offer and why you feel you deserve a raise. The worst thing you will be told is no.
Change jobs – Another option is to change jobs altogether. If you are underpaid for your position and not happy with your employer, you can look for alternatives.
Offering freelance services – Everyone knows a certain area. Why not take this knowledge and offer it as a freelance service?
Start a side business – Starting a side business is personally my favorite way to increase income. Your options are limitless and you can choose something that you enjoy. Here are fifty sideline ideas to get you started.
Review your financial goals frequently
Behind every good goal there is a strong reason. Find out why becoming a millionaire is so important to you.
Do you want to be financially free? Retire early? Or just have some rest?
The reason for your aim must be strong so that you can see through everything. Practice writing down your goals every day. This will prevent you from falling behind.
Create millionaire habits
If you want to become a millionaire, you have to create millionaire habits. This means living below your means, increasing your income, getting rid of debt, and most importantly, making smart investments.
Start building your millionaire plan while you are young and you will be able to hit or exceed the millionaire mark across the board.
What tips and tricks do you need to be a millionaire at any age?