“Hello! My name is [fill in the blank] and I’m a millionaire.”
If this sentence gets your blood pumping, then you may be wondering, “How do I become a millionaire, exactly?” Well, in honor of “Be a Millionaire Day,” this post is for you.
Here are six strategies that can help you get from where you are today to gold-star millionaire status.
Maximize Your Income
It may go without saying, but each of the ways to become a millionaire begins with having starter cash available to invest.
Ways to do boost your income could include:
- Crafting a persuasive request for a raise.
- Going after a promotion.
- Job hunting to find a better-paying role.
- Starting a lucrative side gig.
If you’ve got a spouse or partner who shares your enthusiasm for ambitious financial goals, that’s even better. Two people pursuing these strategies for a boosted household income could get you to your target faster.
Create a Budget That Includes Investing
If you want to put more money towards investments, it may be time to create a monthly budget. You can also use these strategies to upgrade your current budget to include money for investing. This might also be the time to determine how much risk tolerance you have and find that sweet spot on the risk-reward continuum.
So, how much should you invest monthly to reach your goals?
There are plenty of investment calculators where you can plug in the starting amount of investments, the length of time, the rate of return, monthly contributions, and other factors. As a general rule, the more money you can invest each month, the sooner you may be able to reach your goal.
For example, let’s say that you’ve really skyrocketed your income and created a budget that frees up $10,000 each month to invest. You invest those funds at the beginning of the month in a way that brings a 6% return, compounded annually. Based on the rate of return, even if you were brand new to saving and investing, millionaire status may only be seven years away.
So, to state the obvious, wisely investing large amounts of money would be a fast way to become a millionaire.
If you can’t invest that much money each month, no worries. That’s not a feasible investing budget for most of us. Play around with the online calculators and talk to financial planners to see what is reasonable for your budget.
Assuming that all other factors are the same as our original example (other than the investment amounts), here are other potential best case scenarios to reaching millionaire status:
- $5,000 monthly deposit: 12 years.
- $2,500 monthly deposit: 19 years.
- $1,000 monthly deposit: 31 years.
When you break strategy down into monthly investment goals, millionaire status might not feel as far away.
After You Invest, Reinvest
When you invest in a company’s stock, you become one of its stockholders. If that business does well, they may distribute dividends to their stockholders, which means they’ll either give you more shares of their stock or some cash based upon a dividend percentage.
It often makes sense to reinvest the dividends you receive back into the market, whether that dividend income is generated monthly, quarterly, or annually. Reinvesting increases the principal balance of your investments, and can help your savings grow faster.
Sometimes, though, it may not make sense to reinvest your dividends into the company whose stock shares generated that income. If, for example, the stock price is currently too high, it can make sense to take the dividend cash and invest it into a better opportunity elsewhere.
If you’re starting to have concerns about the company whose stock you hold, this can be another example of when you might diversify your holdings by purchasing a different stock. It might also be an indication that you should think about whether that stock belongs in your investment portfolio at all.
Diversify and Rebalance
Diversification, most financial experts agree, is key to successful portfolio management. That way, if one stock — or stocks, in general, within a particular industry — underperforms, the impact on your overall investment portfolio is lessened. Remember, too, to rebalance your portfolio: Review it periodically to maintain a balanced, diversified portfolio that meshes with your risk tolerance level.
Reach Out for Help
As you brainstorm how to become a millionaire, focus on creating the right team of financial experts or professionals who can help you to reach your goals most effectively. They might include an investment-savvy financial planner, an accountant to advise you on tax-related issues, or a tax attorney to deal with more complex issues.
As your wealth increases (don’t you just love the sound of that?), you’ll need to know how your tax bracket may change and seek advice on how to manage your finances.
Maintain the Millionaire Mindset
Sure, it’s important to do the right things with your money, but it’s just as important to have and keep the right frame of mind as you move toward millionaire status. Determination, persistence, patience, flexibility and an ability to delay gratification can each go a long way in helping you to climb that financial mountain and plant your millionaire flag at its peak.
One study compared the personality traits of people in general with those who have wealth. From that research, there are some interesting conclusions about the “rich” folks.
People with wealth are more likely to be:
- Emotionally stable.
- Very extroverted.
- More open to new experiences.
- Less conflict avoidant.
- More conscientious.
Intriguing as this is, the study doesn’t tell us one important thing: whether people who became rich were always like this or if their wealth created opportunities for personal and professional expression. For example, perhaps people with money are more open to new experiences because they can easily afford them. A longer-term study might be useful to examine whether these personality traits existed before they gained wealth.
How Tally Can Help
The best way to become a millionaire varies for each person because each of us comes from a different starting point, with unique advantages and challenges. But if credit card debt is holding you back from achieving your financial dreams, Tally may be able to help.