At one time or another, we have all asked ourselves this question, how to become a millionaire? It may seem impossible, but becoming a millionaire is not. As of December 2020, it was estimated that there are over 46 million millionaires in the world. In the United States alone, there are over 18 million millionaires. To achieve this status, you need to know the steps that will increase your likelihood of becoming a millionaire and consistently apply these steps overtime.
How To Become A Millionaire?
Whether they realize it or not, every year many individuals take steps to become a millionaire. However, these same individuals also take many steps to prevent or hinder achievement of this goal. If you are asking how to become a millionaire, consider saving, reducing debt, investing, earning more and repeat.
Save
On any financial journey, to achieve that goal, you must save. Saving is the basis of any financial plan. If you are wondering how to become a millionaire, generally, you must keep more than you spend. You must save!
Build A Habit
If you are able to save a lot, do so. But if you are struggling to save, start small. Start by saving $50 per pay check if you can. When you can save $75, do so. At first, saving is not about the amount that you save, it is about building a saving habit. Once you build a saving habit, you will be able to easily increase your saving rate. The task is to get use to seeing your money and not spending it.
The Benefits Of Saving
There are plenty of benefits to saving. Not only does saving provide the confidence of knowing that you can handle an unforeseen financial emergency, you can watch your money grow as well. It is a great feeling to see your money grow over time. Additionally, by saving, you are able to contribute to an emergency fund. With a fully funded emergency fund, not only will you have some money on the side, you will have 6 months to a year or more of expenses saved. This will not only serve as a financial back stop, but will also enable you to take advantage of financial opportunities when they arise.
Take Advantage Of Opportunities
By having a strong savings account, you are able to invest at opportune times (for example when there is a massive sell off in the markets). With money saved, you are able to take advantage of interest rates at an opportune time. By saving, you are able to not only slowly grow your money, you may also be able to turbo charge your money by taking advantage of opportunities because you have the funds available to do so.
Your Buying Power
When saving, also appreciate the rate of inflation and the interest being paid on your savings. Inflation can eat away the buying power of your savings. With regard to interest rates paid, the average brick and mortar bank will provide a very minuscule interest on your savings. Online banks will provide significantly more interest, as such, you should strongly consider having an online saving account.
Reduce Debt
One of the fastest ways to lose money is through debt interest payments. By paying off your debts, you are automatically getting rid of this cost.
In some instances, debt financing can be beneficial. For example, if you are in real estate investing, the use of debt can be useful. But most types of debts can be disastrous to your financial health.
If your debts are those of consumer debt, for example credit cards, if you want to be a millionaire, you should pay these off. You should pay off your credit card balance each month. If you cannot pay off your credit card balance at the end of each month, do not use your credit card. Your credit cards are not free. If you do not pay off your credit card balance, you will continue to ask how to become a millionaire because the chances of getting there will continue to elude you.
The simple fact is, having a credit card balance is expensive, very expensive. The average credit card Annual Percentage Rate (APR) is about 20%. That is about 20% per year on your credit card balance. Worst than credit cards are typically company cards. Company cards, such as department store cards generally have higher interest rates than that of credit cards. Company cards at times charge 24% APR or more. That is a lot of money.
If you use credit cards, pay them off. Get the rewards, but do not allow your credit card company to charge you. PAY THEM OFF!
Invest
Saving alone will not do the job if you are trying to become a millionaire. Saving is the basis of any financial plan, but you must also invest. This could be by investing in the stock market, retirement accounts or investing in yourself. Whatever the route you take, by putting money into a vehicle with the opportunity to get a return on investment that is a multiple of what you put in is one of the best ways to grow your wealth.
Investing does leave you open to losing at least a portion of whatever you invest. As such, ensure that you are comfortable with the possibility of losing at least apportion of your investment. The more risky the investment, typically, the higher the reward. If you are investing in the stock market, note that there are different asset classes that you can invest in, from highly risky to less risky.
When investing, ensure that you do your due diligence. Whether you are investing on your own or using a financial professional. Do your research. Ensure that your financial professional is on the level. We have all heard of Bernie Madoff and others like him. Protect yourself. As always, with any investment or financial opportunity, if it sounds too good to be true, it probably is.
You may also invest in yourself. This may be in the form of your education, financial development or health. Your return on investment may not immediately be financial, but over time it will. Investing in your education may lead to a better job with a higher salary range. By investing in your financial development, you may be able to find ways to keep more of your money. Investing in your health will allow you to keep going, keep learning, less aches and pain, potentially a longer and more rich life.
Earn More
How to become a millionaire? Earn more. This sounds simple and straight forward, but it is not always the case. If you want to become a millionaire, constantly strive to earn more. Whether you are earning more through a promotion at your place of employment or by obtaining a new job, earn more. If you continue to earn more, you will be able to save more, pay off more debt and invest more. By earning more, you significantly increase your chances of achieving your financial goals earlier.
Do not limit yourself to earning more through an employer, you can build one or more side hustles or you can also become an entrepreneur. Be creative in how you earn.
It is important to note that by saving more, you can earn more through interest payments. By investing, you can earn more through a return on investment. The steps of how to become a millionaire are additive and works together to achieve your financial goals.
Repeat
Once you begin to save, pay off debts, invest and earn more, rinse and repeat. You must consistently repeat these actions to achieve your ultimate goal. If not, you may increase your wealth but may not achieve your goal.
For example, by earning more, you may fall into the trap of lifestyle creep and spend more. The net result may not necessarily be a growth in wealth. However, by earning more, saving more, using the money to pay down debts or invest, the net result is likely to be an increase in wealth.
Conclusion
At one time or another, we have all asked ourselves this question, how to become a millionaire? It may seem impossible, but becoming a millionaire is not. As of December 2020, it was estimated that there are over 46 million millionaires in the world. In the United States alone, there are over 18 million millionaires. To achieve this status, you need to know the steps that will increase your likelihood of becoming a millionaire and consistently apply these steps overtime. Not surprisingly, the steps to become a millionaire are similar to those for achieving financial independence.
There are also other ways to become a millionaire, but some are less likely to occur. You may win the lottery or an inheritance from your rich uncle. While possible, these are long shots. Most millionaires became millionaires by saving, reducing debt, investing, earning more and repeating these foundational acts.
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