After consulting with financial experts, seven practical tips have been identified in order to help individuals reach their goal of becoming a millionaire. Although the advice is straightforward, achieving the goal is not without its difficulties.
1. Develop a written financial plan. creating a practical plan and a written record of your goals and desired outcomes is essential to achieving financial wealth. Stewart Welch, founder of The Welch Group, suggests considering all possible options, such as opening a Roth IRA or contributing to a 401(k), and utilizing Bankrate’s investment calculator to determine how much you need to contribute and earn over time.
2. Developing a healthy saving habit is a great way to ensure a more secure financial future. Mark Hamrick, senior economic analyst at Bankrate, recommends “paying yourself first” by setting aside a portion of your income into a savings account for emergency situations. Doing so can help to protect your other investments and savings from unanticipated or unexpected costs.
It is important to save at least half of every pay raise and to explore your savings options to ensure you get the most out of your money. Additionally, consider taking advantage of your retirement fund by maxing out your 401(k) and investing any additional funds in a traditional IRA or Roth IRA. Diversifying your savings is key to building a nest egg for the future. With a long-term outlook, investing in stocks may be beneficial for increasing your savings. Ultimately, it is important not to regret the failure to save for emergencies or retirement.
3. Becoming financially secure requires mindful budgeting and avoiding overspending. This can be achieved by living below your means and avoiding the urge to tie your self-worth to the possessions you purchase. It is more rewarding to be admired for your resourcefulness and wealth-building as opposed to your spending. Bankrate’s house calculator can be a useful tool to determine how much house you can actually afford.
4. Making wise spending decisions can help you build financial security. Aim to pay yourself first and avoid taking on debt, such as credit cards, car loans and most student loans, as they can hold you back and prevent you from making progress towards achieving your financial goals. If you have a stack of credit card bills, pay them off and keep just one or two. Try not to put anything on your cards that you can’t pay off in two or three months.
5. Investing in different asset classes is a beneficial way to diversify and reduce risk. A good place to start is often your employer retirement plan, which allows for automated contributions and helps you stay focused on long-term goals. Additionally, consider looking into passive income opportunities such as rental property or peer-to-peer lending. Over the long-term, building a diversified stock portfolio can help you earn a potential 10% return on equity investments.
6. According to Thomas Stanley and William Danko in their book “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy,” two-thirds of millionaires are self-employed, and that entrepreneurs represent the majority of that group. They note that most millionaires have worked a long time, lived on less than they made, saved money, and made smart investments. This can be seen in the Forbes 400 list of richest Americans, where it has been observed that self-made millionaires comprised 67 percent of the list in 2018. Therefore, starting a business is a great way to create wealth and financial stability.
7. It is a wise decision to seek professional advice from a financial advisor to help with investments and strategies to build and preserve wealth. However, it is also important to stay informed and take an active interest in where your money is being invested and why. It is recommended to occasionally update your knowledge of personal finance and related topics to keep your goals in sight. If you are unable to have a financial planner manage your money, there are advisors who provide one-time reviews and recommendations for a fee. Bankrate’s “Save a million dollars calculator” is a helpful tool to show how long it will take to reach your goal.