The thought of being a millionaire might seem completely unattainable, but it may actually be achievable with the right strategy and a lot of discipline. Although it’s likely you won’t be able to become a millionaire overnight (unless you win the lottery or get some other major windfall), it’s a goal you may be able to reach within a decade.
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GOBankingRates spoke to financial pros to get their best tips for becoming a millionaire in 10 years or less.
Ensure You’re Getting Paid What You Are Worth
One of the main ways to build wealth is to increase your income.
“In light of Great Resignation, this is a tight labor market, particularly for those employees willing to stay with their current employer or within their current industry,” said Stephen Dunbar, an advisor with Equitable Advisors. “Know your worth by engaging with a headhunter, coach or compensation consultant to make sure you are getting what you are worth either through internal promotion, career pathing or by changing firms.”
Have Multiple Income Streams
You should certainly aim to make as much as possible at your job, but you may also need to incorporate additional income streams to achieve this goal.
“The majority of millionaires have numerous sources of income,” said Lyle Solomon, a consumer bankruptcy attorney and financial expert. “There are two compelling reasons for this. The first is that you will become wealthier as you make more money. But that is self-evident. The other reason is to keep your financial flow safe.”
If you are reliant on only one income stream, your plans could be derailed if you lose your job.
“You suddenly can’t afford to pay your expenses, you don’t have any funds to invest and no fresh money is coming in,” Solomon said. “That is why the rich concentrate on diversifying their sources of income. If one flow is interrupted, you still have other streams flowing in.”
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Save as Much as You Possibly Can
Becoming a millionaire in the next decade may mean cutting back on expenses and discretionary spending now so that you can funnel as much money as possible into savings.
“The reality of it is, if you’re starting from scratch, to have $1 million in 10 years, you have to save a significant amount of money,” said Sean Moore, wealth manager at Merit Financial Advisors in Boynton Beach, Florida. “Say you’re going to average 10% a year on your investment return — you’re going to need to save about $5,000 each month to save $1 million.”
Moore recommends putting this money into an employer-sponsored retirement savings account if possible.
“I’m a huge proponent of using retirement savings or company plan savings for two reasons,” he said. “If you’re saving money on a before-tax basis, you need to save less to end up with more because you’re not paying taxes on the money before it goes to work for you. The other is that within a lot of company plans, they have a company match, so that’s free money you’re getting on top of your own savings. So that’s probably one of the best places to start.”
Make Savings Automatic
To ensure that you keep up with your savings goal, automate the process.
“Setting up automatic direct deposits from your paycheck into a savings or brokerage account and increasing your withholding into a company-sponsored 401(k) helps put those goals on autopilot,” said Michael Fischer, Principal at Cerity Partners. “Automatically allocating these resources via direct deposit or withholding simplifies the process and ensures you don’t overspend.”
Keep Debt to a Minimum
“Every dollar that’s spent servicing debt is a dollar you’re not using to build your own wealth,” Moore said.
While you should certainly try to keep high-interest debt, like credit card debt, to a minimum, Moore notes that not all debt is bad debt.
“Student loans are sometimes a necessary evil and mortgage debt is generally low-cost and high-value, so I’m not against all debt,” he said. “But if you’re spending money paying off your Visa bills, that money is better spent being invested.”
Don’t Fall Victim to ‘Shiny Ball Syndrome’
When you’re looking to gain a lot of wealth in a finite amount of time, your instinct may be to look for any possible shortcuts to get you there — but this isn’t the best strategy.
“The biggest thing in today’s environment that I would watch out for is what I call ‘shiny ball syndrome’ – chasing whatever the hot thing of the day or week or month is,” Moore said. “For everybody that made $1 million in GameStop [stock], there were a lot of people that lost a ton of money by constantly chasing the next hot thing. It’s OK to put a little money in this lottery-type event and if it pays off, great, but I think you’re better served to have a solid game plan, stick to the plan and use good solid investments that have proven themselves over time.”
Keep Cash in Interest-Bearing Accounts
To build wealth, you should be investing the majority of your funds, but you will of course need access to cash during this time. Moore said to be mindful of where you keep this cash when you’re in wealth-building mode.
“The national average interest rate for savings accounts is .06%, which means your cash is actually losing money,” he said. “Consider taking advantage of online banks, which are also FDIC-insured but pay higher yields. Remember that the rates often change, so you should revisit where your cash is held regularly to make sure you’re earning the highest possible rates.”
Optimize Your Tax Situation
“Taxes are a significant expense that the general consumer just accepts when they don’t have to,” Dunbar said.
In addition to utilizing tax-advantaged retirement plans, he recommends taking advantage of cash value life insurance to set up a tax-exempt bucket, and
working with a good CPA to maximize other available deductions.
Invest Your Raises
It’s likely that your income will increase over the next decade, and you should use these extra funds to help you achieve millionaire status.
“When you get a raise, it is very easy to match your spending to your new income,” said Katie Keller, executive director of operations at Annual Insights in Claremont, California. “Instead, consider continuing to live as you were and save the entire raise amount.”
Work With a Financial Professional
A financial professional can help you develop a strategy that works for you and pivot this strategy as needed to make sure you stay on track to meet that million-dollar goal.
“Everybody should work with a qualified financial advisor,” Moore said.
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