The Best Ways to Become a Millionaire
A few simple steps can make all the difference
Think you can't become a millionaire? You might be surprised at the various ways you can get there. But before you get too excited, if you think becoming a millionaire means fancy cars, a lavish house, and an upscale lifestyle, think again. If you had a million and spent it that way, you’d blow through it pretty quickly.
In retirement, $1 million might provide you an income of $50,000 a year if you carefully invest it using either withdrawal rate rules or a time-segmented approach. However, a million dollars in the bank is well worth aspiring to, and it may be more achievable than you think. Here are eight ways to become a millionaire.
Develop Your Career and Expertise
Many millionaires are millionaires because they worked hard and found a way to earn a lot of money. They earned degrees, professional designations, and certifications to increase their knowledge, and they were often willing to spend time doing low-paid internships and apprenticeships to learn their craft. As they became experts, they began to earn more.
Save Diligently and Invest for Growth
You can become wealthy by spending less than they make, saving diligently, and investing appropriately. How much you need to save depends on how much time you have and the rate of return you will earn.
The biggest mistake people make that keeps them from reaching millionaire status is they upsize their lifestyle when their income rises. When your income goes up, the first thing you should increase is the amount you contribute to savings.
Have an emergency fund available so that you don't have to dip into savings. What's more, have a focused plan for how much you'll save every paycheck. If you can put those savings in an account you never touch, you'll be well on your way to building that nest egg. Bonus points if you can put it in an account with a high interest rate.
Create Intellectual Property
Intellectual property includes things like books, trademarks, patents, songs, scripts, and art. Some professors use their expertise to write books and consult in their field. Other subject-matter experts design seminars, workshops, and training programs where they sell their books and other materials.
Artists such as actors and singers essentially turn themselves and their “image” into a marketable entity. Electricians, plumbers, woodworkers, masons, and other craftspeople may create new tools to use in their industry.
The same thing is true for surgeons and dentists who design improved instruments. Software developers turn their ideas and code into intellectual property. If you have an idea or achieve mastery at what you do, think about ways you might create subscriptions, licenses, or franchises to expand on your position in your industry.
Build a Business
If you are in a service business, creating a duplicatable business model can be challenging; typically the business is in your area of expertise, and you are the business. You have to figure out a way to train others to do what you do so that you can work on your business rather than work in your business.
The situation is different if you make a product. You have to figure out how to market, manufacture, and distribute that product profitably.
Invest in Real Estate
Real estate millionaires put in a lot of hard work early on, but it pays off later in the form of residual rental income, not to mention rising real estate values over time. Those who develop real estate projects also take on significant risks; some pay off big, and others create losses. Be prepared for ups and downs with your real estate ventures.
Hire a Financial Adviser
Even though you may be taking what you think are all the right steps, you should still consult a professional. Wealth advisers can work on helping you create a road map for your savings goals, point you to wise investments, and identify areas where you can reduce expenses or get better returns on those investments.
Make Smart Investments
Being a smart investor doesn't always mean playing the stock market and hoping you get in on the ground floor for the next Apple or Amazon. Figure out which investments work for you; this might mean maxing out your 401(k) or opening an IRA or even a money market account. The idea is to avoid having all of your savings in passive accounts. You want to make your money work a little bit.
Nor do you have to use an excessive amount of your income for investment purposes. Find an amount that you're comfortable with and start there.
Create a Financial Plan
Whether you hire a financial adviser or decide to go it solo, you need a plan of action. How much will you save? Where will you invest and when? What if you get laid off from your job or you have a financial setback? Try to prepare for as many outcomes as possible. You don't have to always imagine the worst-case scenario, but you should know what you'll do if you get off track.