If presented with the opportunity, you would want to become a millionaire…right? Who in their right mind would turn that down?
Becoming a millionaire would mean financial security. It would mean a solid retirement. It would possibly mean paying for your child’s education, or traveling the world.
These are things most people dream about, and most of the time, they stay as dreams.
What if I told you that becoming a millionaire is within reach, so long as you follow certain wealth building strategies?
I know it might be hard to believe (I was surprised to see the math behind it), but if you invest a decent amount of money during your 20s, continue contributing, and let it compound in the background, you can become a millionaire by the time you’re ready to retire. Here are 7 strategies you can use to get there.
1) Always Be Mindful of Your Money
This one goes without saying, but most millionaires know exactly where their money is going, and where it’s coming in from. You don’t have to track every single penny, but having a general idea will help you far more than remaining oblivious to it will.
One simple key to becoming a millionaire is to spend less than you earn. That’s a basic personal finance rule, yet people have great difficulty following it.
The only way you’ll know if you’re keeping to this rule is by checking your bank balance (are you negative?) or by using money-tracking software like Personal Capital.
It’s well worth the slight time investment to do this, otherwise, you won’t have any progress to measure against! How will you become a millionaire if you don’t know how or where to start managing your money?
2) Be Wise With Your Purchases
Along the same lines, you want to spend intentionally – with purpose. Your spending shouldn’t be a disorganized mess (aka “I need to buy all the shiny things!”). You should know the reasons behind why you bought certain things and why you left others on the shelf.
Additionally, being “wise” means taking different angles into consideration. Many “frugal” people buy cheap items because of the price tag, but they end up replacing these items several times throughout the years. That means a $10 item that needs to be replaced five times per year is really $50. It’s wiser to invest in a quality item, even if you’re paying more upfront, because it’s (hopefully) a one-and-done deal. You won’t have to worry about your possessions falling apart, either.
Additionally, don’t give into the latest fashion or fads immediately. There’s no reason to be an early adopter unless you love tech and that’s your passion/hobby. Don’t let the Joneses influence you to the point of being broke. Millionaires stay true to their values when spending – not the values of others.
3) Think Like a Business Owner
If you’ve ever read The Millionaire Next Door, you’ll know that many millionaires are business owners, whether they inherited a family business or started their own. In some way, shape, or form, these millionaires are managing their finances as a business owner would manage the books.
This is advantageous because it gives them an extra connection to building their wealth. Business owners are also more logical with their financial decisions and approach money management with a different process than most people. You need to care more about your money out of anyone else managing it, because at the end of the day, you’re the only one affected. Your money is your business. It’s sustaining you!
I also want to mention the benefit of thinking like a business owner in terms of your time. When I made the switch to self-employment, I wasn’t exactly managing my time well. I didn’t see time as money. Now that I know what my time is worth, I critically evaluate how I’m spending it, and whether or not something is worth my time or not.
For example, many business owners are fans of outsourcing because they know their time is worth X, they can pay someone else Y, and still come out ahead. Being a millionaire means managing both your time and money well.
4) Invest in the Market
It’s just a fact: unless you receive a large lump-sum payment, you’re likely going to have to invest to make your wealth grow. That’s not a bad thing – it’s how the process works.
There’s no use whatsoever in stashing your money under your mattress or in a drawer. Regardless of interest rates on savings accounts, your money isn’t earning nearly enough in there to outpace inflation someday. That’s a fancy way of saying your money is likely going to lose value if you keep it out of the market.
You don’t have to get crazy with your investments; there’s no need to make things complicated by choosing individual stocks. Choose an ETF/index fund/mutual fund, and stick with it for a while. Don’t sell or buy based on heightened emotions, and you’ll be fine. Most millionaires invest for the long run – they stick it out regardless of current market conditions.
5) Define Your Values and Goals
One of the hardest parts of becoming a millionaire is the length of the journey and the many breaking points you might experience along the way.
There are definitely going to be times when you ask yourself why you’re going to such great lengths to save for your future. While you might have a general plan, a date with your values and goals may be in order to help you gain clarity.
Why? Because this narrows your focus down. Instead of thinking about ten different things at once, you can focus on two to four. By focusing your attention on certain goals, you can accomplish them faster.
It’s not enough to organize your money in the sense of accounts and numbers; you should be aware of what drives your financial decisions, too. Most successful people have a “why” behind what they’re doing. Follow their lead!
6) Hire Professional Help
It doesn’t matter whether you’re a financial expert or not. You should hire a financial professional to look everything over for you.
It never hurts to have a second opinion, and financial advisors see a multitude of clients each day. Due to their experience, they have a variety of solutions, some of which you may not have thought of on your own.
The bottom line is professionals enlist the help of other professionals. Don’t be too proud or think your situation doesn’t deserve extra attention. Millionaires have teams of people helping them manage various aspects of their business and finances, why shouldn’t you?
7) Spend Time Learning
As Benjamin Franklin said, knowledge can be one of the most important investments you make in your life. While you should hire a financial advisor, becoming a millionaire also requires knowing how to maximize your wealth growing opportunities.
Unfortunately, financial literacy has been in somewhat of a downward spiral. Less and less people are interested in learning about how to manage their money. In fact, when most people ask what I do for a living, saying “personal finance writer” is usually enough for eyes to glaze over.
You’ll never know how to best help yourself if you don’t learn the basics and more advanced methods. As an example, I never knew about all the different debt payoff methods that existed before I researched how others were paying off their student loan debt. Learning from the experience of others has been one of the best things I did for my financial situation.
______________
The point of this is that becoming a millionaire is a possibility if you’re dedicated enough to the goal. There are no myths or secrets, and being a millionaire doesn’t mean having yachts, mansions, and the whole nine yards. The most average person could be a millionaire without you knowing it! So if they can do it, why can’t that be you?
Are you working your way toward becoming a millionaire? Do you think you need more than that in retirement? How are you saving and investing your money to reach your goals?
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I just started using Personal Capital, and it is great. I like tracking my net worth because it gives me a holistic view of my finances and, like you mentioned, makes it easier to track your progress towards your financial goals.
Pay off your debt!! That’s the biggest one I know to get ahead. Once your debt is gone you can then build massive wealth.
Good list Erin! So much of it flows out of #1 & #5 in my opinion. Like you said, I don’t know that #1 breaks down to tracking every penny, but it definitely comes down to spending less than you bring in – to a large extent. I think #5 is so key because you need to know where you want to go and know how your actions play into the larger end game – which will only help you decide what steps to take.
I love “think like a business.” It’s strange that sometimes we don’t even consider trying to be profitable in our personal finances, when that practice would never fly in business. Of course the two are different, but why not stay in the black if possible?
I think spending time learning is huge. Knowledge is power. The more you learn about money, the better you will be with it.
Good tips…I really do think most people could become a millionaire if they followed those tips. It’s just that must people prefer how to become a millionaire overnight tips. I’m a big fan of the Millionaire Next Door book and do remember it mentioning many millionaires are business owners. It would be hard for me to leave my job to go off on my own at this point, but with the internet there are so many opportunities out there. I spend more time learning about those opportunities and try to do them on the side until it can translate into a true business
Aliyyah Yes, that’s a great way to use it – to keep track of the overall picture. It’s nice to have everything in one central location for tracking purposes.
Financegirl Of course – you’ll never get ahead if you stay in debt (aside from debt to build assets). I was trying to take the approach of what you can do when you’re ready to take the step toward building wealth. Paying off debt should definitely be addressed first!
FrugalRules Yep, it’s like putting all the pieces of the puzzle together, and there are a lot of pieces to figure out when building a wealth plan! That’s why it’s so important to have those values defined beforehand as they’ll guide the way.
Pretend to Be Poor It’s an interesting perspective to take. You’re the owner of your financial picture, so why not act like it? So many people think their financial situation is out of their control, and that doesn’t help anything. Thinking like a business owner can help there!
Jason @ The Butler Journal I agree, Jason. I love learning and being able to apply that knowledge to better my situation!
Andrew LivingRichCheaply Unfortunately, as we all know, there really aren’t any get rich quick schemes that work. Building wealth takes a long time, but you also learn a lot in the process, which can be valuable. Becoming a business owner certainly isn’t for everyone, but there are other ways to build wealth (like real estate) that don’t require *as* much of a time commitment!
Great post Erin! I know I say this a lot but I like what you write about; it’s on point (pardon the terrible cliche ;) ) ha.. How do you find your topics anyway?
I’ll get on to answering your questions; yes I am keen to keep building towards this goal and more.. I’m not sure I ever really want to “retire” anyway however I feel having more than that is great although not always necessary.. Depends on what you want to achieve :)
I’m really looking to become educated, getting amongst the people who have already achieved what I am looking to do in property, stocks etc
Thanks again for posting!
mycareercrusade Thanks! Though you can thank DC for the majority of the topics, haha. I feel the same way! I’m not entirely sure what retirement will look like for me, but I do know that money gives you options, and I’m all about having more down the road in case things change.
I totally agree with your statements above.
I particularly like #5. When you don’t have goals, you don’t know where you want to end up. You are like walking on a long and winding road without any foreseeable end. With set goals, you know where you want to end up and how to end up there. You know what to stay away from and what opportunities to take.
practicalsaver Exactly, great metaphor! I get that goals and values change over time, but it’s better to have a purpose than to wander aimlessly. No one said you can’t switch paths at a later date, and only by going down a certain path will you get to branch out.
Nice post Erin. I particularly enjoy #7 as knowledge is indeed power. Listening to what many people say to invest in can be useful but at the end of the day it is your personal money. Everybody needs to do individual research and make sure they have the right investment and financial plans to suite their life
The Millennial Budget Thanks! I agree. It’s great to take in a variety of information and then make the decision that’s best for you. That’s why I enjoy reading other blogs so much.
Erin @ Journey to Saving mycareercrusade Well thanks DC although a topic is only as good as it’s writer eh? ;)
I’m confident it’ll evolve as it gets closer, definitely getting involved in the Not for Profit or social enterprise space is a big one for me :)
mycareercrusade Erin @ Journey to Saving Thanks for the feedback on the topics, Jef! But Erin writes great posts so I think that’s more of a factor here than the topics!
The point about buying cheap items is so true! I bought a pair of Nordstrom jeans two years ago and haven’t regretted it once. Not only did the jeans look better on me than the cheap jeans I usually buy, I also got to replace them twice when they wore out at no charge! Love their return policy!
Millennial Boss Wow, nice! That’s a pretty great return policy. I have a lot of clothes from 3-4 years ago still, but whenever I upgrade my wardrobe, I try and focus on quality. Having a shirt rip a few weeks after buying it is not fun!
Think like a business owner, point number 3, is one of my favorite. I think people overlook the fact that their lives are their own personal brand and business. You have the power to create your life as a business and shape into your own dreams if your willing to take control of it. Don’t let your job define you and spend everything you make. Let your heart define you, and invest in opportunities to empower your heart so you can become the leader you’re supposed to become. Build your life as a business so it can fund the journey for you to find who you’re supposed to be.