For most Americans, becoming a millionaire may seem as unlikely as winning the lottery. In reality, it’s not as difficult as it seems for people who are committed to working hard to get there. By starting young and making smart financial decisions, anyone can become a millionaire over time. You don’t need a million dollar idea or a six-figure salary to reach the million-dollar mark. What you do need is consistency, commitment and good financial habits. If one of your life goals is to become a millionaire, here are 10 things you need to do to get there.
- Make A Plan
You wouldn’t try to drive from New York to Los Angeles without a road map. Why would you try to grow your savings from $0 to $1 million without a plan? Unfortunately, hoping for the best is not a good way to make it to $1 million. Start your plan by deciding on a time table. Once you have a time table, calculate how much you will need to save per year, per month, or even per week. Investing $500 per month at an 8 percent return gets you to $1.03 million in 35 years.
- Put Your Money To Work
Using the $500 per month example, a 30 year old can make it to $1.03 million by age 65. However, that 8 percent return is critical. Just saving $500 per month would only get you to $210,000 in 35 years. Fortunately, on a long-enough time horizon, the Standard & Poors 500 index has been remarkably consistent throughout history. Since 1926, the rolling 30-year annual return of the S&P 500 has ranged between about 8 percent and 15 percent. Historically, investing in a low-cost S&P 500 index fund would get you to that critical 8 percent annual return mark.
- Get Help
Making a financial plan and investing your savings responsibly can be a bit overwhelming to someone with limited experience, but there’s no shame in seeking professional help. Even if you’re confident in the plan you come up with on your own, it never hurts to have a financial advisor take a second look. Of course, professional money managers can be a major expense in their own right. Rather than simply turning over your money to a costly active money manager, consider implementing most of your financial plan as independently as possible after initially discussing it with a professional.
- Create A Budget
For people earning $60,000 per year, $500 per month is only 10 percent of their paycheck. Still, it can be difficult to find that financial flexibility on a monthly basis without a budget in place. Think about how much money you spend each month on different expenses, and prioritize that spending. Groceries and mortgage payments are top priorities. Most everything else, including savings, is a matter of personal preference. Going out with fiends several times a week, taking an Uber instead of driving and even buying name-brand products are all small decisions that can add up over time.
- Forget About Your Neighbors
If your goal is to become a millionaire to impress your neighbors, friends or family, you have a difficult decision to make. People impress the neighbors by buying the fastest car, the biggest boat, the latest tech gadget or by posting pictures of luxurious family vacations on social media. Unfortunately, all those things that impress your neighbors are also poison to your finances. Aggressive long-term saving and investing involves living well below your means. The good news is that you may eventually have a million dollars or more to spend to impress your neighbors during your retirement.
- Avoid Debt Like The Plague
Interest on debt, whether it be credit card debt, auto loans, student debt, mortgage debt or any other kind of credit, is…
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