Do you want to become a millionaire? Who doesn’t? A quick Google search for “how to become a millionaire” yielded about 2.8 million results. That is a ton of information. Luckily, you don’t have to rummage through all 2.8 million results to find the cream of the crop when it comes to how to actually become a millionaire. This is because I have done all of the work for you here.
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Keep Spending In Check
I don’t care if you spend $5 a day at the coffee shop or if you buy a new car instead of a used car. All that matters is that you keep your spending in check. What does this mean? It simply means to stay out of high interest debt. When you get yourself into credit card debt, you are costing yourself hard earned money because you are likely paying close to 20% in interest charges. This is a wealth killer and you will never become a millionaire if you have credit card debt.
However, just remember that some debt is necessary, like when buying a home or paying for college. While most of us do take on debt to get our college degree or pay for a house, the key is to be responsible with the amount. Don’t buy more of a house than you can afford. Don’t take out a crazy amount in student loans just to get a degree. You have to be smart when borrowing money.
Start Thinking Long-Term
Nowadays, we are wired to think short-term. We are all about instant gratification. Unfortunately this mindset gets us into financial trouble. If I asked you – what is the one difference between the rich and the poor, what would you say? I would say it is looking at the long-term. The poor only focus on the short-term – what will the monthly payment be. The rich focus on the long-term – what will the total cost be.
Here is an example to help you better understand. When looking for a new car, the short term philosophy is to focus on the monthly payment. If you can afford the $300 payment, then you can afford the car. Wealthy individuals look at the interest rate, fuel expense, and overall costs to own the car as well. If they find this overall cost to be acceptable, then they can afford the car.
Learn to start looking at the bigger picture. When borrowing money, look at the overall cost, including interest payments, fees, tax deductions, etc. If that number scares you, then make it a point to save more or lower your expectations so that you don’t have to borrow as much.
Bring In Additional Income
The more money you can bring in, the better off you will be. I’m not suggesting you take a second job or find a new career. Instead, find a way to turn a hobby into an income. With the internet, your options for bringing in additional income is almost limitless. Can you craft? Sell stuff on Etsy. Can you sing? Sell birthday wishes on Fiverr. If you have a talent, the internet is a place where you can earn an income. You just have to figure out where you can make the money. If there isn’t a community for your skill, maybe it’s time you create one.
If you can’t craft or can’t sing, don’t worry. Can you write? You can become a freelance writer. Maybe you love photography? You can sell your photos. Take 5 minutes to write down the things you love to do, then do some research online to see how you can make money from it.
You have to invest even before you begin to earn more. When it comes to long-term returns, nothing beats investing in the stock market. You can average around 9% a year over the long-term with the stock market. Yet, you can’t just invest for 5 years and expect a miracle. You need to invest for at least 10+ years.
To be a successful investor, you first need a plan. From there, you can create a low-cost portfolio (think index funds) and keep contributing money over time. You can get all the detailed information about successful investing here.
When you invest 100% of your side income, you are going to grow your wealth fast. This is because you are going to be able to take advantage of compound interest and time. As your portfolio grows in size, the amount it compounds grows as well.
Look at the chart below. On the left is a person that is investing $5,000 a year. On the right is a person investing $10,000 a year – the additional $5,000 is the annual income from a side business. Both earn 7% annually for 20 years. The difference is close to $220,000!
Becoming a millionaire can be done just by following these 4 steps. By being smart with debt, thinking long-term, bringing in additional income and investing, you will set yourself up for reaching millionaire status faster than you can imagine. All it takes is discipline on your end.
For that, I suggest you make reminders to keep your goals in mind. This will help you to remember to think long-term and work on bringing in additional income to invest. When you do this, you will reach millionaire status.
Author Bio: Jon blogs at Money Smart Guides, a personal finance blog that helps readers to get out of debt and start investing for their future. There you will learn the basic tips to take control of your finances and live the financial life of your dreams.