Who wants to become a millionaire? Many people would love to reach this seven-digit goal and know they can give themselves that title. But is it possible?
While a million dollars may seem out of reach, accumulating wealth is not as difficult as it seems. There are many ways to become a millionaire and build your net worth. Which one you choose depends on what works for your particular situation.
The road to becoming a millionaire is simple but not easy. If it was easy, everyone would be doing it. However, if you apply the lessons below, you will be well on your way to entering the seven-figure club.
But before we get started, let’s talk about being rich vs. being a millionaire. And no, they are not the same thing.
What Does It Mean to Be Rich?
Many people equate being a millionaire with being rich. They want the lifestyle of the top 1 percent of the population, including sports cars and fancy yachts. While a million dollars is a lot of money, you’re going to need a lot more to live a life of luxury.
There are many millionaires who live in regular neighborhoods and drive regular cars. In his book, The Millionaire Next Door, Thomas J. Stanley makes the argument that most millionaires don’t hang out at country clubs or own private yachts. They are a lot more likely to have a Toyota in their driveway than a Ferrari.
Most self-made millionaires got there through hard work, saving, and investing their money. Every dollar spent on dining out, fancy clothes or expensive cars is a dollar that you can’t put to work for you, growing your wealth.
Looking rich and being rich are not the same thing. In many ways, you are already rich. If you have a roof over your head, food on the table, and regular income, you are wealthy.
Keep this in mind as you embark on the quest to accumulate a million dollars (or more!).
5 Simple Ways to Become a Millionaire
Becoming a millionaire is simple but not necessarily easy. There is no secret formula or trick that will make you a millionaire overnight. It takes a lot of hard work, focus, and dedication to reach the seven-figure milestone.
Before you get started, you need to decide what is more important to you: looking like a millionaire or actually becoming one. That’s because spending your money on fancy clothes, a big house or a luxury car will cost you money and won’t actually add to your bank account.
Becoming a millionaire requires putting your money to work for you rather than spending it on a luxury lifestyle. Here are five ways to accumulate wealth and enter the double comma club:
1. Become financially savvy
One of the best ways to improve your financial situation is to learn as much as you can about money. There are countless websites and books that will help you understand the basics of personal finance.
Learn as much as you can about saving money, investing, generating multiple streams of income, and so on. Every piece of knowledge will help you on your quest to become a millionaire.
Live below your means and invest the rest. While the idea is simple, the execution is anything but easy. Learning the whys of personal finance can help you make better financial decisions every day.
Talk to a trusted financial advisor about your income, your assets, and your net worth. They can help you define your financial goals and figure out the fastest way to get there. Having the right person in your court can accelerate your wealth accumulation and help you make difficult decisions that could lead to increasing your net worth.
If you have a partner, make sure he or she is on board we well. If one of you saves money while the other one saves it, you’re not going to go anywhere fast. It’s like having two people in the same boat rowing in opposite directions. You end up going in a circle instead of moving forward.
Talk to your spouse about your goal to become a millionaire and make sure you’re both on board. Share the financial knowledge you acquire and work together toward achieving the seven-figure goal.
Develop a written financial plan that can serve as your guide on wealth accumulation. Putting time and effort into your finances will have a direct correlation with your net worth. This is the difference between those who succeed in becoming millionaires and those who don’t.
2. Invest your earnings
While saving money is great, you need to put those dollar bills to work. Imagine them as little green workers, going out into the world to multiply and work hard on your behalf. However, for that to happen, you need to give them a leg up.
Putting all of your money under your mattress is not a smart financial move. Stashing them in a bank account that earns 0.12 percent isn’t much better. To truly accumulate the kind of wealth it takes to join the double-comma club, you need to start investing.
Many people stress about investing or don’t know where to start. Do you buy stocks such as Apple or Target or should you put your money in a mutual fund? What about index funds? Are they better?
A financial advisor can help you wade through all of the incorrect information out there about investing or the latest stock market performance. In addition, you should educate yourself as much as possible about investing and the stock market.
Investing doesn’t have to be difficult or complicated. Most investors can benefit from owning a diversified portfolio of stocks and holding them for the long term.
If you’re looking for a good book to get you started, check out the Little Book of Common Sense Investing. The book is written by John Bogle, the founder of Vanguard Group and creator of the world’s first mutual fund.
3. Hustle smarter not harder
There is nothing wrong with working harder. In fact, you should be working hard every day at everything you do. However, hard work alone does not guarantee big earnings or result in accumulating enough to become a millionaire.
Small, intelligent tweaks to things you are already doing can have a huge impact on your bottom line. Figure out what changes will make the biggest difference for you and go after them.
One great example is the Pareto Principle, named for economist Vilfredo Pareto. It states that for many events, about 80 percent of the results come from 20 percent of the work. Look at your own work - which 20 percent of your work produce 80 percent of the results? Double down on those and watch your hard work pay off.
Look at everything you are doing on a daily basis. How does it contribute to building wealth or advancing your career? Consider giving up work activities that don’t directly contribute to increasing your net worth or helping you get ahead.
Figure out what decisions or tasks you can automate throughout your day. Every decision you make requires willpower and discipline. As the day progresses, you have less and less energy to make decisions.
The more you can automate, the less of your willpower you will have to deplete. This way you can focus your decision-making on what adds to your bottom line or helps you make progress.
4. Build your own business
While you can certainly become a millionaire by working for someone else and saving large chunks of cash to invest, running your own business can speed up the process.
Owning your own business means that you directly reap the benefits of all of the hard work you put in. When you work for someone else, working harder does not necessarily mean more money in your pocket (unless you work on commission).
Running your own business means you call the shots. You can work on the things that add more to your bottom line and ignore everything else. You have the option to scale up and work more or pull back and work less, as necessary.
As a business owner, you also build equity in your business. This means you may be able to sell your business one day and make more money than you would just working for someone else.
This doesn’t mean that you should quit your job tomorrow and start your own business. Building something worthwhile takes time and money. It’s better to launch something on the side and use your income from your day job to fund it and grow it.
Make sure you have a solid business model and a plan for growing and expanding it. Once your business is making sufficient money to cover your income needs, you can consider how you want to move forward with it.
5. Start an opportunity fund
What is an opportunity fund? It’s money you set aside or earmark for opportunities that can help you grow your income or advance your career. This can be anything from starting a business, getting an advanced degree or investing in real estate.
Many people are faced with opportunities to make more money but don’t have the capital to invest. For example, maybe you have the chance to buy an income-generating property.
All the financials check out and this could be a great way to increase your wealth, but you need money for a down payment. With an opportunity fund, you can just pull the money you need for the down payment and take advantage of this option to increase your income streams.
Maybe your friend is starting a business that you think is a great idea. It fulfills a need that not many other do and has the potential to generate a great return on investment. An opportunity fund can give you the money to put toward this idea and build equity while helping your friend.
To get started building your opportunity fund, open a high-interest savings account and start adding to it. Think about how much money would make sense for your opportunity fund. There is no hard and fast rule about how much to save - just go with what you think is best.
You can have money deducted every paycheck and funneled into the account. In addition, consider putting any bonus checks and extra money toward it to increase the balance faster.
When you are faced with a potential opportunity to invest, consider the risks and rewards before deciding if you should use the money from your fund toward it. Just knowing you have this cushion can make it easier to take bigger risks that could pay off down the road.
The Bottom Line on Becoming a Millionaire
Many of the steps to becoming a millionaire are not difficult. However, they do take hard work and perseverance. You need to want to build wealth more than a fancy car or a big house today. Put in the work and watch your net worth grow over time.
The math behind building a million-dollar net worth is simple. However, it’s the emotional side that prevents many people from reaching the seven-figure mark. You need to make a plan for how you will make more money and put it to work for you so you can reap the benefits of millionaire status.