You want to be a millionaire, right? Who doesn’t? In fact, becoming a multi-millionaire is even better and a great goal! Surprising to many people, achieving millionaire status isn’t nearly as hard as often thought.
It’s never too late to take action toward becoming a millionaire. It sure is a lot easier if you start young though. By young I mean when you first start earning a steady income in your twenties – or earlier if you work earlier. Of course, no one can guarantee specific outcomes, but taking a few basic steps when you are in your twenties can definitely increase your odds of reaching wealthy status.
To help you set a plan for getting you on the right path to financial prosperity, I put together a list of seven recommendations based on observations of existing wealthy people. The more of these guidelines you follow, the better off you’ll be financially. If you don’t want to tackle all seven at once, that’s fine, just work on a few at a time.
1. Focus on your income
When I first graduated college I had a job that paid me about $2,500 per month. By the last ten years of my corporate work life, I was making over $10,000 per month.
Yes, you can (and should) be smart with your money no matter what your income level. There are a ton of people who’ve achieved millionaire status but never made anywhere near $100,000 per year. A high income definitely isn’t required – but it sure does make wealth-building easier!
When you are in your 20’s you are usually just getting started so you have a tremendous amount of upward earning potential. Sometimes this means sticking with the same job and getting raises and promotions. Sometimes this means taking steps to further educate yourself so you can change jobs – perhaps into a field with more future potential for you.
Never sell yourself short. If you can take steps to position yourself for continuous income increases while you are young, the sky is the limit as you get older. Expect higher earnings over time; take actions to deserve the higher pay; and when necessary, ask for it!
RELATED BOOK: Broke Millennialat Amazon.
2. Develop multiple streams of income
Besides getting salary increases as work, another way to increase your income is to add multiple streams of income. By this, I mean income from a variety of sources. Studies of self-made millionaires show that almost two-thirds of them have multiple income streams.
What are some additional income stream options? Really it can be anything that makes money for you. It could be a side-gig doing consulting, driving with one of the ridesharing services, or even blogging. But it can also include things like stock market investments, real estate investments, or investing in a small business. (Read 11 career options that can be started with little or no money.)
Having multiple income sources not only helps increase your overall income and accelerate your wealth-building, but it also provides protection. What if you had three sources of income and your salaried job was providing about 1/2 of your total income but then you lost that job for some reason? Well, it would create some challenges for sure, but losing just half of your income is a lot easier to deal with than losing all of your income at once!
3. Save money, but not in savings
You definitely SHOULD have an emergency fund (cash reserves). That emergency fund SHOULD be kept in a savings or money market account. But beyond that, your savings should go into investments. Investing, especially in stocks (whether private or public companies) historically has provided the largest returns. The larger return options also tend to have the largest volatility (price swings) but when you have a 20+ year timeline before you need your money, those short-term swings shouldn’t matter to you. Accept that market conditions do, and will, change based on a lot of different factors. Be okay with it. After you’ve accepted that reality, add to your investments every month. Every. Single. Month. That’s the best way to become an automatic millionaire.
RELATED BOOK:Automatic Millionaire at Amazon
I wrote a post about the risk of NOT being invested in stocks. If you think loading up your savings account is a good thing for your financial future, please read that post.
Some specifics on investing
If you have a 401k plan through your employer you should seriously consider that option. The main reasons are:
1. 401k plans have higher contribution limitsthan personal plans like IRAs or Roth IRAs, so you can save more aggressively with this option.
2. 401k plans often have an employer match, which means instant gain on your money!
Do not under-estimate the importance of that second point. If your employer matches $.50 for each $1.00 you add to your 401k, that means you’ve made a 50% gain on your money right away!
Without a 401k option available you can look into IRA and/or Roth IRA options for tax-preferential accounts. Beyond that, there is nothing at all wrong with just opening a taxable investment account and building wealth that way. In fact, most wealthy people have the vast majority of their money in taxable investment accounts – because of the retirement account contribution limits.
The most important thing about investing is doing it. As mentioned above, to be most effective in investing you need to add to your investments every single month consistently. This is called dollar-cost-averaging (DCA) and if you want to understand just how powerful it is, check out this post:The Magic Behind Consistent Investing
4. Aim for wealthy instead of rich
When you look around and see someone with a bunch of fancy items – watches, cars, super-nice houses, etc – do you think “they’re rich” or do you think “they’re wealthy”? Most people would respond “rich” and they’d be right. Studies show that people who own a lot of expensive possessions often don’t have large levels of wealth. Why? Because they are spending a large portion of their income on “stuff” rather than saving the money toward their futures.
In the book the Millionaire Next Door Dr. Stanley’s studies show that the average American millionaire drives a used car (often domestic), doesn’t own a luxury watch, and lives in a very reasonable house in a middle-class neighborhood. Here’s how wealthy people really live. Follow their model and don’t focus on material possessions. Instead, focus on true wealth – your net worth.
RELATED BOOK: Millionaire Next Doorat Amazon (one of my favorites!)
5. YOU are your best investment
When you have an opportunity to do so, invest in yourself. This might mean paying for some additional education so that you can further your career options. It might mean taking time to read materials on personal improvement. It might mean investing in a small business that you’ve been considering. Whatever it is, don’t neglect it.
You know yourself well. (If not, invest in learning more about yourself.) You’re a known entity and you are in control of that specific entity. Don’t throw caution to the wind and do something without reasonable consideration, but do trust in yourself. Take steps to stay healthy, grow personally, and improve professionally.
RELATED BOOK: Why Didn’t They Teach Me This In School at Amazon
6. Set big goals and smaller milestones
If you want to achieve something big, you need a clearly defined goal. Not just “I want to be wealthy” but give it a number and give it a deadline date. Now that you have the big goal, break it into smaller blocks – milestones. If your plan is going to span ten years, why not set annual milestones? Maybe even more frequently.
When you have both the big goal and the milestones, it allows you to track progress along the way. Sometimes you’ll get off-track and these milestones will point that out to you. No problem – things happen – just take steps to get back on track. When you are on track already, milestones can be huge motivators and cause for celebrating your progress.
7. Surround yourself with like-minded people
I don’t know who said it originally, but I know I’ve heard Dave Ramsey say it: You will become more like your ten closest acquaintances. Whoever you spend time with most – you will slowly become more like them. If they are healthy and fit, you’ll likely also be healthy and fit. If they spend all of their money going out every night of the week, chances are you will do the same.
The goal here is to become wealthy, so find some people who are either already wealthy or who are making financially smart decisions on their own path to wealth.
With these seven tips – especially if you start following them in your 20s – you will be well on your way to building a lot of wealth. Millionaire status and beyond. Think multi-millionaire! Are you ready to get started? There is no time like the present!
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As a fee-only financial advisor, I can help you clarify your dreams and priorities, then develop an actionable plan to achieve your goals. Having a financial plan for your life includes much more than just investing, but intelligent investing is definitely part of the solution. Just select Start Here and let’s talk about how I can help you maximize your money to achieve the life of your dreams.