The Best Ways to Become a Millionaire
How to Become a Millionaire with Simple Steps
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 six ways to become a millionaire.
Develop Your Career and Expertise
Consider the old-fashioned approach: work hard to build skills, make yourself valuable, and you'll be compensated when you apply yourself in a career. 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 may have been willing to spend time doing low-paid internships and apprenticeships to learn their craft. As they acquired greater levels of expertise, and a stronger foothold in their field, they began to earn more.
Not every vocational investment guarantees a certain level of income, and not all career paths are straight lines, but skill-building, work experience, and self-betterment are surefire ways to enhance your value in the workplace.
Create a Side Hustle
Income is only one end of the millionaire equation, but it's a foundational one. The more you earn, the more you have to put away towards that million-dollar goal. If you have a great job with plenty of surplus income, you're already on your way. If not, you may need to get creative. A side hustle can be a smart way to supplement your current income, and could become quite lucrative on its own.
Create Intellectual Property
Intellectual property includes products of unique creative invention such as books, trademarks, patents, songs, scripts, and art. There are many ways to make your personal projects profitable, depending on your craft and industry.
- Professors use their expertise to write books and consult in their field.
- Subject-matter experts design seminars, workshops, and training programs where they sell their books and other materials.
- Actors, singers, and musicians create performance art, and many essentially turn themselves and their “image” into a marketable entity.
- Writers, painters, and sculptors produce familiar forms of art for sale, but may also expand the scope of their intellectual property to include merchandise, or branding for other companies.
- Electricians, plumbers, woodworkers, masons, and other craftspeople may create new tools to use in their industry.
- Medical practitioners such as surgeons and dentists may design improved instruments, or create patented medical processes.
- 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
Creating a new business entirely is an ambitious side hustle, because it typically requires a great deal of time and some investment capital up front. The upside is that you'll have autonomy over the progress, and there's always the possible for high earnings if it's successful.
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.
Save Diligently and Invest for Growth
You can become wealthy by spending less than you 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.
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. Spend some time learning about the market, and figure out which investments work for you. Think about your budget, how much you can afford to invest, and how comfortable you are with risk. For one person this might mean maxing out your 401(k); another might choose to make robust monthly contributions to an aggressive-leaning investment portfolio; another might choose a simple money market account or CD to get started. The idea is to avoid having all of your savings in passive accounts. You want to make your money work a little bit, whether earning steady interest, or paying yearly dividends.
Hire a Financial Professional
You don't need an excessive amount of extra income to invest, only an amount you're comfortable with. If you are unsure of how to gauge your aversion (or tolerance) for risk, or if you have questions about investing, a financial professional can help. For new investors especially, even though you may be taking what you think are all the right steps, an advisor can educate and build confidence. Or if you simply don't have the time to research smart investments and prefer to have someone do the work for you, outsourcing can be a great alternative. Wealth advisors 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.
It is important to note that there are many types of financial professionals, each with different roles, and not all are held to the same standard. Fiduciaries have a legal obligation to treat your money with due care, and to make financial decisions in your best interest. When choosing an financial professional, be sure to understand the scope of their service, and research their credentials.
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.
Create a Financial Plan
Whether you hire a financial advisor or decide to go it solo, you need a plan of action. How much will you save? Where will you invest and when? Are your current earning, saving, spending, and investing practices flexible? What if you get laid off from your job or you have a financial setback? What if your family grows? 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.
It's also important to keep a balance between your goals, both short-term, and long-term. Hitting the million dollar mark is an excellent aspiration, requiring smarts and sacrifices, but don't forget to tend to your short-term goals, and keep a balanced lifestyle along the way.