Think you can't become a millionaire? You might be surprised at the 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. You'd need to invest it using either withdrawal-rate rules or a time-segmented approach. However, having a million dollars' worth of assets is a fine goal, and it may be easier 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 might receive more when you apply yourself in a career. Many millionaires have made it because they have worked hard and found a way to earn a lot of money.
They may have earned degrees and professional certifications to increase their knowledge. They may have been willing to spend time doing low-paid internships and apprenticeships to learn their crafts. As they have gained greater expertise and stronger footholds in their fields, they have begun to earn more.
Not every work investment guarantees a certain level of income, and not all career paths are straight lines. 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. However, it's a crucial one. The more you earn, the more you can put away toward your million-dollar goal. If you have a great job with plenty of surplus income, you're on your way. If not, you may need to get creative. A side hustle can be a smart way to augment your current income and could become quite fruitful on its own.
Create Intellectual Property
Intellectual property includes products of unique creativity, such as books, patented inventions, songs, scripts, trademarked products, and art. There are many ways to make your projects profitable, depending on your craft and industry.
- Professors use their expertise to write books and consult in their fields.
- Subject-matter experts can design seminars, workshops, and training programs. They sell their books and other materials to make additional income.
- Actors, singers, and musicians create performance art. Many turn themselves and their “image” into a marketable item.
- Writers, painters, and sculptors produce familiar forms of art for sale. They may also expand the scope of their intellectual property to include products or branding for other companies.
- Electricians, plumbers, woodworkers, masons, and other craftspeople may create new tools to use in their industries.
- Medical practitioners, such as surgeons and dentists, may design improved instruments or create patentable medical processes.
- Software developers turn their ideas and code into intellectual property.
When you master your field, find a way to market and sell your services. If you create a new product or service, do the same. You could create subscriptions, licenses, or franchises to expand on your standing in your industry.
Build a Business
Creating a new business from scratch is a bold side hustle, because it requires a great deal of time and money upfront. The upside is that you'll have control over the progress, and you'll make more money if it's successful.
If you are in a service business, creating a business model that others can duplicate is challenging; 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.
If you make a product, the challenge is greater; you have to figure out how to market, manufacture, and distribute that product and create a profit.
Save Diligently, and Invest for Growth
You can become wealthy by spending less than you make, saving diligently, and investing smartly. How much you need to save depends on how much time you have and the rate of return you will earn.
The biggest mistake that people make that keeps them from making a million is they upsize their lifestyle when their income rises. When your income goes up, the first thing you should increase is the amount you put into your savings.
Have an emergency fund available so that you don't have to dip into savings for unexpected expenses. Medical bills, home repairs, job loss, natural disasters, and other surprises can be costly. You can salvage or protect your savings by having a financial cushion set aside just for emergencies.
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 on your way to building that nest egg. (Bonus points if you can put them 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 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) contributions; 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. Money that works for you earns steady interest or pays yearly dividends.
Hire a Financial Professional
You don't need a large amount of extra income to invest. You should only use an amount you're comfortable with. If you are unsure of how to gauge your risk tolerance, a financial advisor can help you learn and build confidence.
Wealth advisors can help you create a road map for your savings goals, point you toward wise investments, and identify areas where you can reduce expenses or get better returns on your investments.
Even if you're a savvy investor, you may benefit from hiring a professional. Some people even prefer to have someone else research smart investments and do the work for them.
It is important to note that there are many types of financial professionals, each with different roles. Not all are held to the same standard by their organizations. Fiduciaries are legally required to treat your money with due care and to make financial decisions in your best interest.
When choosing a 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, while others create losses.
Be prepared for ups and downs with your real estate ventures. You'll need to feed money into improvements and maintenance unless you invest in real estate funds that don't require actual property ownership.
Create a Financial Plan
Whether you hire a financial advisor or decide to go solo, you need a plan of action. How much will you save? Where will you invest, and when? Are your current earnings, 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 always have to 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 short- and long-term goals. Hitting the million-dollar mark is something that many aspire to. It requires smarts and sacrifices to get there. However, don't forget to tend to your short-term goals and keep a balanced lifestyle along the way.