Money / Financial Planning
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You might think most millionaires are celebrities or tech moguls, but many of the richest people — around 20 million in the United States alone — are ordinary people. Not many people know how to grow their income fast enough to accumulate this kind of net worth, but it’s not too hard to do if you have multiple sources of income from salaries, investment dividends, property income rental and business investments – this is how a majority of millionaires generate wealth.
Here are nine steps to help you become a millionaire in five years or less.
Step 1: Create a Wealth Creation Plan
Having a plan for building wealth is essential to ensuring financial freedom. An effective system calculates liabilities and assets and is continually modified as you go through the different stages of life. However, a plan should not only consider your budget. It should also take into account your:
Most experts recommend making a quantifiable financial plan — the kind that has hard numbers and specific dates to measure your success. The sooner you start making a plan, the sooner you’ll start building wealth.
How to become a millionaire in 1 year?
Becoming a millionaire in a year is difficult if you are not already making a lot of money. However, getting rich takes immediate action. Start saving, investing and challenging yourself today.
Step 2: Take advantage of employer contributions
Taking advantage of your employer’s retirement contributions makes it easier for you to become a millionaire by reducing the amount of money you need to save on your own. Many of the nation’s largest companies match 50 cents for every dollar an employee contributes to a retirement account. Although these contributions are generally capped at 6% of your salary, these benefits can add up to $200 per month to your retirement accounts.
For example, maybe you earn $50,000 a year and contribute $450 to your retirement accounts each month. Without employer contributions, you will have $1 million in about 40 years. If your employer matches your contributions up to 6% of your salary, you’ll earn an extra $250 per month. This extra money will allow you to become a millionaire in 34 years instead of 40.
Step 3: Ask for a raise
One of the best ways to accumulate a net worth of over a million dollars is to increase the amount of money you earn. Asking for a raise is one of the quickest ways to do that.
You should do your research before approaching your boss. You need to understand how much other people in your industry make so you can make an informed argument at your annual employee review.
Step 4: Save a significant portion of your earnings
You need to save a large portion of your income to accumulate significant wealth in a short time. Reduce your budget and live well below your means. Do not incur additional debt and do not worry about the luxury items that other people buy.
Build a strict savings plan to avoid wasting money on unnecessary items. Many people start by saving 10% of their income and then increase it to 20%. You’ll quickly find that you’re comfortable living on a smaller portion of your income if you track your spending carefully.
For example, suppose you and your partner earn a combined income of $100,000 per year, which leaves you with about $80,000 after paying taxes. You will save $25,000 each year if you save 25% of your income. The remaining $55,000 is enough to live on in many US states if you reduce your housing expenses and eliminate your debt.
Step 5: Develop multiple streams of income
Supplementing your full-time salary by developing multiple streams of income is another way to become a millionaire in five years or less. Starting a side hustle, landing a part-time job, or starting a home-based business are just a few ways to generate more money. Keep in mind that this income is not play money. To make it grow, you have to invest it.
How much money would it take to be a millionaire in 10 years?
You need to save about $8,400 per month to become a millionaire in 10 years.
Step 6: Eliminate Debt
Debt is one of the biggest deterrents to becoming a millionaire because it reduces the amount of money you can save on your paycheck. The biggest barrier to wealth creation for most young people is student loan debt. The average student graduates with over $35,000 in loans and those with higher degrees may leave school with far more debt than that.
Focus on paying off your student loans and eliminating other consumer debt such as credit cards, personal loans, and car loans. You may need to prioritize debt elimination over other financial strategies if you have more than $10,000 in credit card debt. Eliminating debt will increase the time it takes to become a millionaire, but it’s a crucial part of your future financial success.
Step 7: Choose smart investments
You might think that most individuals become millionaires by making technical and complicated investments. However, a simple investment strategy is often the most effective. Most self-made millionaires take risks with their careers but have conservative investment portfolios.
Every investment portfolio must contain stocks. Investing in simple and affordable index funds is the best strategy for most people. Resist the temptation to invest in trendy financial products such as cryptocurrency. These investments are strongly influenced by market factors and can lead to considerable losses.
Another option if you want to try something other than index funds is real estate investment trusts. These funds invest in commercial real estate and large residential buildings. Historically, REIT funds have offered high returns to investors. Adding a REIT to an otherwise heavily indexed portfolio adds the diversification you need to start realizing financial gains.
Step 8: Improve your skills
Until you start seeing significant returns from your investments, your income is your most important source of wealth. No matter your industry or career, take the time to hone your skills. The better you perform at your job, the more you will earn and the more you can save.
Investing in your career can take many forms. Maybe you need an advanced degree to receive a promotion. Make a plan to earn that degree smartly. Research affordable programs and develop a payment strategy. Do not take out loans to finance your studies. See if your employer offers tuition assistance or look for schools with monthly payment plans.
Maybe earning a designation or taking a tailored course can help you land a promotion or a better-paying job. If you work in finance, consider becoming a CPA to increase your earning potential.
Step 9: Resist the urge to spend money
Living well below your means is essential if you want to become a millionaire in five years or less. In addition to making a realistic budget, you need to find ways to control impulse spending. Avoid visiting your favorite online shopping sites and stick to a list when you go grocery shopping.
Also, research alternatives before buying anything new. If you have a broken computer, see if you can get it fixed before buying a new one. Maybe a family or friend has a used computer you can buy.
How can I get rich independently in 5 years?
There are three steps to getting rich independently in five years.
- Budget and reduce your expenses, become more efficient with your money so you can keep more of your income.
- Save and invest as much of your income as possible.
- Find mentors and colleagues who will challenge you.
If you want to become a millionaire in five years or less, you’ll need to adopt an aggressive investing and saving strategy. Many young adults can benefit from adopting a more realistic schedule. If you’re in your 20s or 30s, start slow by taking advantage of compound returns and you’ll likely see your money grow in no time.
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