Reaching millionaire status is a dream for many Americans. Yet, the road to achieving this can be tricky, especially in the current economic landscape. Sticky inflation, which is affecting everyday life, and soaring rates are continuing to take a toll on consumers’ wallets and are leaving little for savings.
Yet, with discipline and patience, achieving this dream might not be too far-fetched, according to experts. And many self-made millionaires have made their fortunes thanks to having built their own successful businesses — and thanks to being methodical, patient and having great ideas.
“When we talk about self-made millionaires, we’re essentially referring to people who’ve actively pursued entrepreneurship, delving into various business ventures and opportunities,” said Joe Camberato, CEO of National Business Capital.
“They’ve amassed their wealth through their own sweat, grit and innovative endeavors. On the flip side, millionaires, in the broader sense, may include those who’ve inherited substantial wealth or have climbed the corporate ladder to build their fortune.”
So, what does it take to become a self-made millionaire?
Determination, Effort and Consistency Over a Substantial Period
According to Camberato, you should also diversify your financial portfolio by investing in assets beyond your business, such as real estate, stocks or other businesses.
“Not only will this diversification expedite your path to becoming a millionaire, it mitigates risk by reducing your reliance solely on your business,” he said.
And similarly to stock market fluctuations, businesses also experience their fair share of ups and downs, so once your business becomes more stable and generates a good amount of income, shift your focus toward income sources outside your own business.
“Just as you wouldn’t put all your money into a single stock, you shouldn’t rely solely on your business for your income,” he added.
Live Below Your Means
While this is pretty straightforward, it’s not as easy as it sounds and requires a lot of discipline and self-control.
In practical terms, it’s knowing exactly what you have to spend each week or month and then doing the work to spend less than that so that you can save, invest and accumulate wealth gradually, over time, said Kyle Enright, president of Achieve Lending.
In other words, it means taking charge of your money and deciding where it will go, he added.
This also means minimizing expenses. For instance, check with your service providers to evaluate and see if better options or deals are available.
“This might include insurance, cell phone, internet and cable/streaming services. Every time you uncover savings, save or invest that amount. For instance, if you cut your internet service bill by $15 a month, add that amount to your monthly emergency fund savings,” he added.
Learn To Create and Use a Simple Budget and Don’t Be Afraid To ‘Think Big’
Budgeting is not a popular word and scares many people because of its negative connotations, noted Enright, but it is the number one way to manage money and build up savings, because it acts as a spending plan.
“Use an app, spreadsheet or paper and pencil, but start by setting and prioritizing goals — short-term and long-term, which might range from taking a trip to retiring at a certain age to having time to train for a triathlon,” he said.
According to him, you can make the most progress in life by setting positive and challenging goals.
“Don’t be afraid to ‘think big’ with goals; many self-made millionaires — and billionaires — have set a goal to start a business or have a net worth of a certain amount by a certain age,” he said. “Define what you want, and then do the research to list exactly what you need to achieve the goals.”
Save and Plan Your Retirement
Another tip is to allocate a percentage — 10%, more if possible, less if necessary — to save from every paycheck.
“Remember that most millionaires are self-made and got there not by founding the next Microsoft or Apple, but by saving and spending smartly,” Enright said.
And in terms of retirement planning, while the concept may not resonate with younger adults, “freedom to do whatever you want” does, he said.
“Take advantage of your employer if you are fortunate enough to have a job and a 401(k) plan or pension plan,” he added. “If your employer matches any part of your contributions, it’s additional savings — absolutely at no cost to you. Skip contributing and you are effectively giving money away. No employer-sponsored plan? No excuse. Save in an IRA or, if you qualify, self-employment plan.”
Be Responsible With Your Credit Cards and Avoid Bank Fees
According to Enright, individuals should learn how to use just one credit card — not multiple ones.
“When you use a credit card, pay every bill in full and on time. Make it a point to never carry a balance and to pay off anything you charge at the end of every month — in effect, to live within your means and therefore have no credit card debt. Ever,” he added.
Another hindrance to becoming a self-made millionaire is wasting money on bank fees, which add up fast.
“Bank fees, late fees and interest can pull hundreds or even thousands of dollars out of your pocket every year,” said Enright. “Owing $10,000 on a credit card at an average interest rate of even just 15% will cost you $125 in interest per month. That means you will pay $1,500 per year.”
So, if you instead deposited that $125 each month in an investment earning 4% annually, in 30 years, you would have more than $87,000, he noted.
Focus on Earning More
While you need to save more, you also need to earn more.
One way to go about it is by learning new skills that stay relevant in the job market. You can also consider taking a class or taking on training to move up in your career. And in this economy of side gigs, find something you can do and like to do, said Enright.
Be Clear About Your Goals
Finally, it’s important that individuals be clear about what they want. “Do they seek a net worth over $1 million in assets? Is the goal to be liquid for over $1 million dollars — $1 million in the bank? Those are different metrics of wealth and would have to be approached in different ways,” said Peter C. Earle, economist with American Institute for Economic Research.
For instance, to retire with $1 million or more, the most direct way is to contribute to a 401(k) or other retirement plan over one’s career, dollar cost averaging over decades in up and down markets, he said.
On the other hand, one route to acquiring more than $1 million in cash and assets in a self-made context is entrepreneurship.
“Come up with an idea that meets a currently unmet need or desire, capitalize it and market [and] sell it,” he added. “But the statistics are daunting — the vast majority of startups don’t make it to their fifth year. Outside of winning the lottery or experiencing sudden entertainment or sports stardom, though, explosive self-made wealth arises from business success.”
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