How to become a millionaire
So, you want to become a millionaire. You know your goal, but maybe it seems too far off in the distance, too improbable, too unattainable, for an everyday person like you to reach. Youíve seen the success stories on TV, but those people inherited their money, had high-paying jobs, or hit it big with the lottery. Maybe you find yourself thinking: If only I were that lucky.
Well, Iíve got good news for you. You can become a millionaire ó and it has nothing to do with your familyís money or your education. It has everything to do with you.
If you follow these principles, youíll be on your way to becoming a millionaire. Are you ready?
Steer clear of debt
From cars to clothes to houses to jewellery, you can get a loan for pretty much anything nowadays. Thereís this idea floating around our culture that you should get what you want the moment you want it. Get it now, pay for it later ó and pay more later.
But hear me say this: debt is quicksand to your financial dreams. Every time you buy something on credit, youíre digging a deeper hole for yourself. That money youíre sending to lenders is money you could be putting towards your future!
Take the average car loan, which has a monthly payment of $523 and a term length of five years and nine months. If you were to invest $500 a month for five years instead, you could have $40,000. And look at this: if you invested that $40,000 for another 20 years, you could have almost $270,000! Now whereís that car in 25 years? Most likely in a junkyard.
In addition to steering clear of debt, investing early can help you become a millionaire.
If you start putting away $300 a month beginning at age 25, you could reach millionaire status by age 60 ó and be sitting pretty on a $2 million nest egg come retirement (age 67). Thatís just $300 a month! If you waited until age 35 to start investing, youíd have to put away $800 a month to hit the million-dollar mark by age 60.
Letís look at it a different way.
If you invested $300 a month for 40 years (age 25 to age 65), you could have $1.75 million. If you invested that $300 a month for 30 years instead (age 35 to age 65), youíd only have $651,400. Youíd have to work an extra ten years (to age 70) to hit $1 million. And youíd have to work until age 75 to hit $1.75 million.
Get serious about your savings
If you want to become a millionaire, the percentage you invest is just as important as the actual act of investing.
The average personal savings rate in the US, including retirement savings and emergency funds, is 5.5 per cent. If we apply that percentage to the US median household income of approximately $59,000, it works out to $3,245 a year or around $270 a month. Invested over 30 years, assuming a 10 per cent rate of return, that money could turn into $586,256. That number looks great, right?
It might, until you find out the average couple will need $280,000 for medical expenses in retirement, and that doesnít include long-term care. If you subtract that amount from your investment total, youíd only have about $306,000 left. Can you live off that for two decades? It ends up being only $15,300 a year.
Let me give you a much better scenario. If you invested 15 per cent of that $59,000 income, you would be putting away $8,850 a year or around $737 a month. Over 30 years, that could grow to $1.6 million, assuming a 10 per cent return. And if you waited just five more years, youíd be sitting on over $2.3 million. That beats $15,300 a year, donít you think?
Increase your income to reach your goal faster
When I talk about how to become a millionaire, people often say: ďBut Chris, I donít make that much money. I canít save enough.Ē Letís get something straight here: you donít need a six-figure salary to become a millionaire. However, if youíre crunching the numbers and realise you still canít put away the recommended 15 per cent, you do need to increase your income so you can.
How do you do that? You can get a job that pays more. You can take on a second job temporarily. Or you can get training to increase your skills, demand, and earning potential.
For example, letís look at the field of nursing. You can become a Nursing Assistant, Licensed Practical Nurse, Registered Nurse, or an Advanced Practice Registered Nurse. Each of those jobs requires a different level of training and testing, and their salaries all vary. An LPN makes around $45,000 a year, while an RN makes around $70,000.
When you increase your skills and expertise, you can increase your salary.
Cut unnecessary expenses
As you work towards becoming a millionaire, you also want to make sure your money is being spent with intention. So, sit down and evaluate your expenses regularly. Look at your budgets from previous months to see where money may be leaking or where you could cut expenses. Thatís money you could be investing and putting towards your 15 per cent.
Remember, you control your expenses. You may not dictate how much youíre charged per watt of electricity, but you do control the thermostat!
Keep your millionaire goal front and centre
The steps to becoming a millionaire run counter to most peopleís behaviour, which means youíll see friends and family going places, doing things, and buying stuff. And if you focus on what theyíre doing, you could be in trouble financially. Just this year, a study showed that 57 per cent of millennials said they spent money they hadnít planned to because of what they saw on social media. And 88 per cent of them, along with 71 per cent of gen-Xers and 54 per cent of baby-boomers, believe social media creates a comparison problem.
We live in a comparison culture. We buy stuff we donít need to impress people we donít even know. Who are you trying to impress? Seriously. Itís a good question to ask yourself when youíre tempted to buy something you donít need. The people I know who have become millionaires didnít get there by playing the comparison game. They stayed focused on their own goals and didnít worry about what other people were thinking or doing.
Hereís my challenge to you: instead of obsessing over what you donít have, focus on the valuable but intangible gifts in your life ó family and friends; your church; work that matters; the legacy youíll leave your children. Those will bring you much greater and longer lasting joy than a new car or a destination vacation.
Know that itís okay to still enjoy stuff. Just make sure it doesnít derail your larger plan to become a millionaire!
ē Chris Hogan is a #1 national bestselling author, dynamic speaker and host of The Chris Hogan Show. For more than a decade, Hogan has served at Ramsey Solutions, equipping and challenging people to take control of their money and reach their financial goals. His second book, Everyday Millionaire: How Ordinary People Built Extraordinary Wealth ó And How You Can Too, releases in January 2019. You can follow Chris Hogan on Twitter and Instagram at@ChrisHogan360 and online at chrishogan360.com or facebook.com/chrishogan360