You may think that most millionaires are celebrities or technology magnates, but many of the wealthiest people — roughly 20 million in the U.S. alone — are regular people. Few know how to increase their incomes rapidly enough to amass that kind of net worth, but it isn’t too tough to do if you have multiple income streams from salaries, investment dividends, rental property income and business investments — that’s how a majority of millionaires generate wealth.
Step 1: Create a Wealth-Building Plan
Having a wealth-building plan is vital to ensuring financial freedom. An effective one calculates liabilities and assets and is continually modified as you pass through various life stages. However, a plan should take more than just your budget into consideration. It should also factor in your:
Most experts recommend making a quantifiable financial plan — the kind that’s got concrete numbers and specific dates to measure your success. The sooner you start building a plan, the quicker you’ll start building wealth.
How Can I Become a Millionaire in 1 Year?
Becoming a millionaire in a year is difficult if you’re not already making a lot of money. However, becoming rich takes immediate action. Start saving, investing and challenging yourself today.
Step 2: Take Advantage of Employer Contributions
Taking advantage of your employer’s retirement contributions makes it easier for you to become a millionaire by reducing the amount of money you need to save on your own. Many of the country’s largest companies match 50 cents for every $1 contributed by an employee into a retirement account. While these contributions are typically capped at 6% of your salary, these benefits can add up to $200 a month to your retirement accounts.
For instance, perhaps you make $50,000 a year and contribute $450 to your retirement accounts each month. Without employer contributions, you’ll have $1 million in around 40 years. If your employer matches your contributions for up to 6% of your salary, you’ll gain an additional $250 a month. That extra cash will allow you to become a millionaire in 34 years instead of 40.
Step 3: Ask for a Raise
One of the best ways to amass a net worth of over $1 million is to increase the amount of money you’re earning. Asking for a raise is one of the quickest ways to accomplish that.
You should do your research before approaching your boss. You need to understand how much other people in your industry make so you can make an educated argument when it’s time for your annual employee review.
Step 4: Save a Significant Portion of Your Earnings
You need to save a large portion of your income to accumulate a significant amount of wealth in a short period. Trim down your budget and live well below your means. Don’t take on extra debt, and don’t worry about the luxury items other people are buying.
Build a strict savings plan so you avoid wasting money on unnecessary items. Many people start by saving 10% of their income and then increase it to 20%. You’ll quickly find that you are comfortable living on a smaller portion of your income if you diligently track your expenses.
For example, assume you and your partner make a combined income of $100,000 per year, leaving you with about $80,000 after paying taxes. You’ll put $25,000 into savings each year if you save 25% of your income. The remaining $55,000 is enough to live on in many U.S. states if you reduce your housing expenses and eliminate debt.
Step 5: Develop Multiple Income Streams
Supplementing your full-time pay by developing multiple income streams is another way to become a millionaire in five years or less. Starting a side hustle, picking up a part-time job or creating a home-based business are just a few ways to generate more money. Keep in mind that this income isn’t fun money. To grow it, you need to invest it.
How Much Money Would It Take To Be a Millionaire in 10 Years?
You need to save approximately $8,400 per month to become a millionaire in 10 years.
Step 6: Eliminate Debt
Debt is one of the biggest deterrents to becoming a millionaire because it reduces the amount of money you can save from your paycheck. The biggest obstacle to building wealth for most young people is student loan debt. The average student graduates with more than $35,000 in loans, and those with advanced degrees can leave school with much more debt than that.
Focus on paying down your student loans and eliminating other consumer debt such as credit cards, personal loans and auto loans. You may need to prioritize eliminating debt over other financial strategies if you have more than $10,000 in credit card debt. Eliminating debt will increase the time it takes to become a millionaire, but it’s a crucial part of your future financial success.
Step 7: Choose Smart Investments
You may think that most individuals become millionaires by making technical, complicated investments. However, a simple investment strategy is often the most effective. Most self-made millionaires take risks with their careers but have conservative investment portfolios.
Every investment portfolio should contain stocks. Investing in simple, affordable index funds is the best strategy for most people. Resist the temptation to invest in trendy financial products such as cryptocurrency. These investments are heavily influenced by market factors and can result in drastic losses.
Another option if you want to try something other than index funds is real estate investment trusts. These funds invest in commercial real estate properties and large residential apartment buildings. Historically, REIT funds provide high returns for investors. Adding a REIT to an otherwise index-heavy portfolio adds the diversification you need to start making financial gains.
Step 8: Improve Your Skills
Until you begin to see significant returns from your investments, your income is your most significant source of wealth. No matter your industry or chosen career, take the time to perfect your skills. The better you are at your job, the more you will earn and the more you can save.
Investing in your career can take many forms. Perhaps you need an advanced degree to receive a promotion. Make a plan to obtain that degree smartly. Research affordable programs and map out a payment strategy. Do not take out loans to finance your education. See if your employer offers tuition assistance or search for schools with monthly payment plans.
Perhaps earning a designation or taking a tailored course can help you land a promotion or a higher-paying job. If you work in finance, consider becoming a certified public accountant to increase your earning potential.
Step 9: Resist the Urge To Spend Cash
Living well beneath your means is essential if you want to become a millionaire in five years or less. Besides making a realistic budget, you need to find ways to control impulse spending. Avoid visiting your favorite online shopping sites and stick to a list when going to the grocery store.
Also, look for alternatives before purchasing something new. If you have a broken computer, see if you can have it repaired before buying a new one. Maybe a family or friend has a used computer you can buy.
How Can I Become Independently Rich in 5 Years?
There are three steps to follow to become independently rich in five years.
If you want to become a millionaire in five years or less, you’ll need to adopt an aggressive investment and savings strategy. Many young adults can benefit from adopting a more realistic timeline. If you’re in your 20s or 30s, start slow by taking advantage of compound returns and you’ll likely see your money grow in no time.
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- Statista. 2021. "Countries with the most individuals with a net worth over one million U.S. dollars in 2020."
- Forbes. "Forbes."
- Business Insider. "Business Insider."