Seeing people announce their net worth on social media may make you ask yourself, “How do I become a millionaire?” Yet “millionaire” can feel like a vast, unattainable word. However, the good news is that becoming one is more realistic than you might think.
These days, being a millionaire isn’t necessarily about butlers, private jets, or luxury. Instead, it can mean guaranteeing yourself a comfortable (or early) retirement. It can give you the career freedom to pursue a passion instead of being tied to a paycheck.
The public perception of “millionaires” may be rooted in consumerism, but that doesn’t have to be your goal. Just how easy is it to become a millionaire? Well, “easy” isn’t the right word—it requires a lot of intentionality, discipline, and patience. The better term is “simple.”
By studying the standard practices of millionaires, we can identify patterns and follow their steps to become a millionaire. Let’s dive into how to become a millionaire the simple way!
1. Develop a millionaire’s mindset: So, to answer your burning question, “How do I become a millionaire?” you need to develop a millionaire’s mindset. Don’t worry; I won’t tell you to make a vision board (unless you want to). But more than anything, wealth is a mental game.
If you’re starting with a solid money mindset, you may need help to adopt the habits and practices of millionaires that you need. Some ways to think like a millionaire are to plan, be determined, be patient and wait to get what you want, be confident, and be open.
Of course, not all millionaires share these traits, but I’m not talking about lottery winners, celebrities, or trust-fund inheritors. I’m talking about regular people who decided they were going to build wealth and went ahead and did it. They’re not that different from you!
2. Carefully watch your expenses (big and small): The secret to becoming a millionaire fast is to manage all your costs, big and small! One of the quickest ways to hamstring your financial progress is to buy too many houses or cars. You may have heard the term “house poor,” and this is what it means.
Too many people get caught up in the trap of having overly luxurious mortgages and car loans that take up the bulk of their income, leaving them with little or nothing to put toward their savings. While big purchase decisions only come around occasionally, your financial plan should also account for small expenses.
These can be “death by a thousand cuts” to your savings goals. Look for ways to cut costs such as your cell phone bill, cable or subscription services, eating out, shopping for non-essentials, and so on.
A great goal is to see if you can live on just half of your income and save the other half. Try it as an experiment for a year, and keep it going if you can! This will get you to your million-dollar goal a lot faster. Please take a look at the 25 tips for saving money here.
3. Try maxing out retirement investment accounts: — Investing your money is the fastest way to become a millionaire. The two most common retirement accounts are IRAs, which are personal accounts, and 401(k)s, which are usually offered through work. You can have both kinds, allowing you to invest in the stock market while saving money on taxes. You can learn more about the different types of retirement accounts.
Contributing as much as you can to these accounts is like putting yourself on the fast track to becoming a millionaire. 2019 brought an all-time high of both “401(k) millionaires” and “IRA millionaires,” meaning that people become millionaires just by investing in these accounts.
This is encouraging because the contribution limits are the same for everyone. For 2022, you can contribute a maximum of $20,500 to a 401(k) and $6,000 to an IRA, according to the IRS. In conclusion, those “IRA millionaires” didn’t get there because they were already rich and could contribute hundreds of thousands of dollars all at once. It means they got there through slow and steady investment and growth.
Of course, people have yet to learn what the stock market will do in the upcoming years. It could take years with a negative return before recovering and growing again. But if you stop investing out of fear of a crash, you might miss out on years of incredible growth.
4. Increase your income to become a millionaire faster: — If you’re thinking to yourself, “Yeah, okay, like I have an extra $200 a month,” I’m with you! Even if you’ve pared down your expenses as far as they’ll go, sometimes there’s just no more wiggle room. That’s when it’s time to look at the other side of the equation: increasing income.
You can evaluate your skills, interests, and strengths and brainstorm how to monetize them. The more you earn, the more you’ll be able to save and invest. Increase your income to become a millionaire quickly!
5. Use your money to make money: — Most wealthy people do not simply sit on a gold hoard like a dragon—they put their money to work for them. Using your cash to make cash with a lively little attempt is called “passive profits.”
The most straightforward way to generate passive profits is by investing in shares or retaining your savings in high-interest financial institution debt. If you manage to max out your retirement debts for the year, you could keep investing cash in a brokerage account or an HSA for fitness expenses.
Many millionaires got there by investing in real estate, which can bring in active or passive income, depending on how you do it. You can learn more about real-estate investment alternatives for novices here. There also are a few precise methods to make passive profits, like shopping at an ATM and earning income through charges or proudly owning a merchandising device in a well-located location.
So, using your money to make money is a quick way to become a millionaire.
6. Avoid “way of life creep”: As you scale your profits, it will become tempting to scale your way of life too. Lifestyle creep when items that were once considered luxuries become part of your new normal. This can be as simple as buying expensive coffee every morning or as complex as purchasing a beach house or a boat.
Another unusual trap that humans fall into is “keeping up with the Joneses.” When your neighbors, friends, and family members are shopping for high-end cars, dining out every day, and renovating their homes, it is natural for envy to set in.
But keep in mind that the average American is about $38,000 in debt, which includes their mortgages. You do not need to keep up with the Joneses due to the fact that the Joneses are stressed about how they may be going to repay that BMW. It may sound strange, but if you want to become a millionaire, act as if you are already one.