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5 Easy Steps to Becoming A Millionaire

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Seriously, becoming a millionaire only takes five very easy steps and luckily Money got their act together and decided to finally, after years in business, write them down in one place and share it with everyone! And today I get the opportunity to share these five ridiculously simple tips with you.

Okay okay, that introductory paragraph was a little facetious but entirely true. In fact, 8.9M U.S. households have a net worth that exceeds one million dollars (not including home equity) and it really does take just a little bit of diligence to join their ranks. (plus you get a little bit of financial trivia)

Step 1. Make saving automatic

Set it then forget it! If it works for a Ronco Rotisserie Chicken machine, it can certainly work for your savings. Just participate in some sort of savings or investment program and before you know it, you’ll have a ton of cash socked away. “Beginning at age 30, if you save $671 each month at an 8% return, you’ll have $1 million by age 60. Begin at age 40, and you need to save $1,698 each month.”

Step 2. Take advantage of Uncle Sam

You get to deduct your contributions to a 401K and Traditional IRAs from your income in the year you make them, definitely want to take advantage of that. If you contribute to a Roth IRA, that contribution isn’t deductible but the principal and earnings are when you retire. Either way, the earnings are growing tax free so taxes won’t slow you down. And the key stat on this one is that “46% of millionaire households own investment real estate.”

Step 3. Make stocks work for you

If you’re starting early, stocks has to be the way to go. Whether it’s investing in actual individual stocks or a fund that does it for you, you have to go with stocks in order to have your investments grow FAST (twice as fast as bonds in fact). And this step’s completely irrelevant factoid is: “Most wealth of millionaires comes from job earnings (32%). Just 16% is inherited.” (but this dovetails into step 4)

Step 4. Boost your earning power

Let’s be honest, if you want to reach a million bucks faster than you are getting there now… you need to make more money. In order to make more money, the first step is to get a high powered MBA or other Master’s degree (if you’re young enough). If that’s not an option, try negotiating your next salary move or consider a job change. And did you know that the “average household income for millionaires is $209,000.”

Step 5. Don’t stop saving

With this step, I think Money has the reasoning for this step correct and the step itself is also correct, but doing this step for that particular reason isn’t entirely “right.” See, you are constantly fighting inflation, which is an erosion in your dollar’s purchasing power, and so Money recommends that you keep saving for that reason. However, what actually fights inflation is the rate of return of your investments, not your savings rate. This is why putting your money into low risk, low yield investments (or even going with a high yield savings account) is a bad idea unless you’re very close to retirement.

However, just because your investments are beating inflation doesn’t mean that you should stop saving either. Prudent saving and prudent investing got you to seven figures but that doesn’t mean you should abandon either when you make it (you likely won’t though). And our final stat of the series has to do with inflation – “A millionaire in 1976 would need $3.5 million today to have the same buying power.”

Source: Money

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7 Responses to “5 Easy Steps to Becoming A Millionaire”

  1. Dus10 says:

    Well, there you have it; so simple, yet true. I think that you will see a sharp increase in the number of millionaires in the next ten years. Part of this will have to do with inflation, and part of it will have to do with retirement savings. I think more people are taking advantage of retirement savings than ever before (which isn’t saying much). I don’t think most of them will get to seven figures, but for those that were already savings, I think many of them have increased their rate of savings.

  2. Angry Dinosaur says:

    At that rate of inflation, if it takes you 30 years to save up your million, it will only be worth the equivalent of $300,000. Being a millionaire won’t be all *that* great… so dont forget to enjoy the journey, too!

  3. Gregg says:

    Or you could spend countless hours chasing and saving the buck trying to become a millionaire and die shortly after your retirement (never getting to enjoy all your hard earned money). Both my grandfathers died within about a year after they retired.

  4. Terry Piatt says:

    Sorry, but I earn minimum wage, and I do not know of ANYONE who could save $671 per month on a minimum wage income. Could the author propose something more realistic?

  5. Tag says:

    This is a good list, straight and to the point. The part I don’t understand is when people talk about “chasing and saving the buck” and not living for today. Why do they equate savings for the future with being some how deprived now. My wife and I save, invest, and still find time to enjoy today. I believe you can have and do both. Thanks for the list never hurts to be reminded of the basics.

    Tag

  6. Great Post! I just want to add some miniatures to make it more convincing and reinforcing, if you really want to become rich you must want to have less in life while at the same time increasing your income. It is also wise to have multiple streams and passive incomes to increase liquidity and resources. The most important thing to do to become a millionaire is to justify first why you want to become one. Many people would resort to so many dreams contrary to their leads in becoming rich. They want to take vacations around the world, buy diamond rings, buy big mansions and luxurious cars – these are all overheads that would lead to insolvency. The most important thing first is to find the cause how you can attain all those dreams. In other words, the causes would mean being frugal, setting goals and plans, saving, entering into 401 (k) program of your company, creating and owning your own business, advancing ones self in furthering education like MBAs, Ph.Ds. LLBs and ED.Ds, investing in mutual funds and buying real estate lands to gain capital gains. After earning now the fruits of the causes the effects could now be entertained and these are world tours, buying Ferrari cars and even owning a mansion house. Remember the rich are different!

  7. THE CHARACTER OF A SEED TO A BILLION WHAT IS IT?

    Your faith level in what makes you called and action your motives in what you want to go in an establishment in your areas of calling or in Marketing Business.

    You most have something to generate an interest! in order for your justification in what you are trying to achived to let it comes in line in what you have to go for.

    If and when you become a billionaire from millionaire how would you determind your team! Would you be the same character as of when you started.

    And also you need to know the love of what fame up in the ladder of a bilionaire. But not every seeds of some thing make it to that level! $/£ (Billions) unless it as the drive in achieving your labour!.

    This is what allow you to get in shape ans learn other methoad that can garentee hope and sucess!.

    Kinds Regards
    Miss Ann Marie KELLY
    708


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