This Is How to Become a Millionaire in 6 Simple Steps

Wondering how to become a millionaire?

To achieve millionaire status, a hefty salary or family inheritance isn’t a necessity. Instead, it’s about adopting certain financial habits that pave the way for wealth accumulation.

➤ How to become a millionaire

1. Getting a Head Start on Savings

Here’s a nugget of wisdom: starting early is your ticket to boosting those savings. Picture this: you’re 20 and putting $6,000 yearly ($500 monthly) into an IRA for 40 years—totaling $240,000 invested.

Now, thanks to the magical effect of compounding, with a 7% return, that $240,000 turns into a whopping $1.37 million by the time you’re 57.

Voila! Millionaire status achieved, all from stashing away $500 monthly. Okay, maybe 57 isn’t your dream age for that title, but fear not, there’s more to unpack here!

2. Ditch Unnecessary Spending and Debt

Hold up on those unnecessary buys, especially if you’re swiping that high-interest credit card. Before splurging, ask yourself:

“Do I really need this?”

“Do I already own something similar?”

“Is this thing worth more than my millionaire dreams?”

Remember, every dollar spent on needless stuff is a missed opportunity for investment. Consider this reality check: if you invest an extra $25 weekly for 40 years, that’s an additional $277,693.

Can you trim $25 of unnecessary spending from your weekly budget? It’s a step closer to your goal!

3. Aim for 15% (or More) Savings from Your Income

Let’s talk savings rates! On average, Americans were only saving 3.4% of their income in September 2023 (ouch). But hold your horses, that won’t cut it for a cozy retirement, let alone the millionaire club.

So, how much should you stash?

Most financial gurus recommend aiming for at least 15% of your annual gross income, specifically for retirement. It’s ambitious, sure, but totally doable. And hey, if your employer throws in a 6% match in your 401(k), you’re on track by saving 9%.

4. Boost Your Income

Okay, making more money isn’t a breeze, but it’s a pivotal move if you’re eyeing that 15% income savings goal. If you’re not currently hitting that mark, here are some tricks up your sleeve:

• Ask for that raise if you’ve earned it.
• Clock in those extra hours or consider a second job.
• Invest in training to level up your earning potential. Remember, long-term, this investment pays off big time.

Let’s break it down: say you’re an LPN making around $54,620 yearly. But hey, RNs rake in about $81,220 annually!

Sure, it takes a bit more education, but that extra cash flow really turbocharges your financial goals—especially if one of them is that millionaire status!

5. Resist Lifestyle Inflation

Picture this: as your career climbs, so does the temptation to spend more. Suddenly, that cozy apartment doesn’t cut it, and you’re eyeing a suburban home or a sleeker car.

But hold up! Instead of splurging just because your paycheck grew, consider ramping up your savings and investments. That’s the express lane to your financial goals!

6. Seek Guidance When Needed

Planning for retirement can feel like navigating a maze with endless investment options and a lot of unknowns. Here’s the reality check: only about 18% of folks are super confident about retiring comfortably.

If finance wizardry isn’t your jam, it’s worth investing in a qualified financial advisor. They can craft a tailored retirement plan, assist in picking investments, budgeting, and make sure you’re set to make that money last when the time comes.

➤ How to maximize retirement savings

Let’s dive into how retirement savings accounts can be your secret weapon in reaching your financial goals:

Employer-Sponsored Retirement Plans (401(k), 403(b))

If you’re in a regular job with benefits, chances are you’ve got access to a retirement plan like a 401(k) or a 403(b). These plans cover around 69% of private company employees and a whopping 92% of government workers.

Why are they great? Well, they offer tax benefits and easy payroll deductions. Plus, many employers sweeten the deal by matching a portion of your contribution, giving your account a head start in growing.

Annual contribution tip: For 2024, the maximum you can stash is $23,000, increasing to $30,500 if you’re 50 or older—up $500 from last year.

Traditional and Roth IRAs

For those freelancers or self-employed champs out there, retirement accounts like traditional or Roth IRAs are your go-to.

What’s the big difference? With a traditional IRA, you deduct contributions in the year you make them, paying taxes when you withdraw in retirement.

Meanwhile, with a Roth IRA, you pay taxes when you deposit money, but qualified withdrawals during retirement are tax-free. The contribution limit? $7,000 (or $8,000 if you’re 50+) for 2024.

Simplified Employee Pension (SEP) and SIMPLE IRAs

Small business owners, listen up! The SIMPLE IRA is a retirement plan that you and your employees can benefit from. Then there’s the SEP IRA, ideal for self-employed individuals or small business owners with a few staff.

These plans are hassle-free to set up, requiring minimal paperwork and offering tax-deferred investment earnings.

Limits update for 2024: You can stash away up to $69,000 in a SEP IRA or $16,000 in a SIMPLE IRA. A bump up from the previous year!

Taxable Brokerage Accounts

Hit the limit on your retirement accounts? No worries! Taxable brokerage accounts allow you to invest additional funds. Just a heads-up, though: any income generated here is taxable in the year you receive it.

➤ Retirements savings example

To illustrate the potential of retirement savings, let’s follow Paul’s journey to the million-dollar mark:

Now, let’s delve into Paul’s specific retirement savings plan:

• Paul starts at age 33, single, and earning $50,000 annually.
• He contributes to a 401(k) with a 5% employer match, putting away $2,500 yearly.
• Additionally, Paul saves $4,000 annually in a Roth IRA.
• Assuming a consistent 7% return over 34 years.

Breakdown of Paul’s Savings Over 34 Years:

Paul’s total retirement savings sum up to $1,235,132, paving his way to the Millionaire Club!

Paul’s early start and consistent contributions show how savings accumulate significantly over time. The table illustrates the varying outcomes if Paul had commenced his plan at different ages.

➤ FAQ

Best way to become a millionaire?

The easiest route to millionaire status? Start saving early! The sooner you begin, the more your money grows from compound interest—it’s like interest on top of interest.

Aim to stash away at least 15% of your income, cut unnecessary expenses, seek professional advice, and consider upgrading skills or exploring side gigs if feasible.

How much to invest to become a millionaire?

The investment needed depends on your life stage. When younger, though earnings might be lower, time’s on your side for wealth growth.

Delaying savings means a higher monthly stash to reach the same goal.

Get rich with no money?

Unless you’re born into wealth or hit the jackpot, passive riches are unlikely. Success demands discipline, planning, and sometimes, guidance from a registered professional.

Having a solid plan and the right advice push you towards that millionaire dream.

➤ Final thoughts

The extent of your wealth hinges on your investment performance. In youth, there’s room to take slightly more investment risks, exploring options that promise higher returns.

Avoid stashing a large portion in low-yield investments like CDs or money markets. Instead, consider equities that surpass inflation rates, boosting your savings over time.

Remember, commencing early, maintaining discipline, and crafting a robust long-term financial plan are paramount. The journey to your first million won’t be a breeze, but it’s a realistic goal with dedication and a sound strategy.

🔥 Daily Inspiration 🔥

It’s easier to feel a little more spiritual with a couple of bucks in your pocket.

— Craig Ferguson