Being a millionaire is no longer a certain path to luxury (in the form of homes, yachts, and caviar), the bar has always been higher. Phoenix Marketing International, a business that studies the wealthy market growth rates, reports that over 6.71% of families in the United States (or 8,386,508 out of 125,018,808 US households) had investable assets of $1 million or more in the year 2020. In Nigeria and most African nations, it is significantly lower.
There exist varying methods to become a millionaire. A net worth of $1 million is also sufficient; this is calculated by deducting all debts (such as mortgages and vehicle payments) from all assets (such as the value of your home and your retirement funds). However you look at it, being a millionaire is a challenging task that requires dedication and discipline.
Below are some of the best techniques to employ on becoming a millionaire.
Steps to becoming a millionaire
1. Hard work and determination
Most people believe they are doomed to poverty if they do not spend their childhood summers on Martha’s Vineyard or attend an elite boarding school. Nonetheless, you may make it to the top without having affluent parents. Most persons with a net worth of at least $1 million were not born rich, from Oprah Winfrey to Bill Gates, Aliko Dangote and other billionaires across the world today.
According to Thomas J. Stanley and William D. Danko’s book ‘The Millionaire Next Door’, only around 20% of the wealthy got their wealth via a trust or an inheritance. Stanley and Danko both claim that in their thirty years of studying the affluent, they have determined that 80% and 85% of all millionaires are self-made. Also, according to a 2017 poll by Fidelity Investments, 80% of millionaires were self-made.
2. A degree is good, but not necessary
With apologies to those who have racked up graduate school debt, having one indeed increases the likelihood that you’ll make more money throughout your lifetime. Nonetheless, it doesn’t guarantee you’ll end up in the millionaire’s club.
According to Spectrem Group, an organization focusing on wealth analysis and management, 74% of millionaires had at least an undergraduate degree, even if they did not continue their education to get a master’s or doctorate. For the billionaire class, that figure is 70.1%. It is often worthwhile to continue your education past the undergraduate level. The average wage for a person with a bachelor’s degree in the US is $67,860 per year, while the median salary for someone with a master’s degree is $98,436. The average yearly salary of a high school graduate is $10,612.
3. Utilize the power of compound interest
Under what savings plan might you retire with $1 million in your bank account by age 65, assuming yearly returns of 8%? You may put away $200 a month starting at age 20 or $800 a month beginning at age 40.
Growth via compounding is the key to monetary success. Your savings can accumulate interest yearly on the initial deposit and the previous year’s interest. The faster your assets increase and the easier it is to reach $1 million, the longer your time horizon has to be.
A person who begins saving $200 a month at the age of 20 and continues to do so until they reach the retirement age of 65 would have approximately $1,055,000. For some families, it is less than the cost of a monthly pizza tab, so it’s not a bad deal. At age 30, if you start contributing $400 each month, the sum lowers to around $918,000. If a person at age 50 started saving $1,500 a month, they would only have $519,000 when they retired.
4. Invest in the stock market
You don’t have to know everything about the stock market
Most millionaires know very little about investing. Making a million dollars can be done without a background in finance or memorizing stock tables. According to Spectrem Group, 58% of millionaires believe they have a “great lot” to learn about investing, while 19% claim to know very little about the topic. Those who have index funds and read Investing for Dummies books can take heart from this.
Still, many wealthy people put their money into the stock market. Most investors choose to put their money into American companies through direct ownership or mutual funds that invest in American equities. Moreover, the rich are open to assistance from experts; around two-thirds of millionaires say they often engage with financial counsellors.
5. Stay consistent
Millionaires remain steady even in economic downturns.
There are currently more American families with $1 million in investable assets than in 2006, before the Great Recession.
According to Phoenix Marketing International, the number of U.S. families with at least $1 million in investable assets has increased by 56% since before the Great Recession.
6. Start with what you have
Making a million dollars doesn’t require a high-paying job.
You have a decent job that pays little money; you would often think that your dreams of becoming a millionaire are hopeless, right? It doesn’t matter what you do for a living; you should save as much as possible. While managers make up 13% of the millionaire club, teachers make up 11%. Two-thirds of millionaires are self-employed, and many works in relatively common fields like pest control or property management, as suggested by the book The Millionaire Next Door.
It is irrelevant how much money you make or what kind of job you have; what matters is that you start saving early and keep saving over time. Take Paul Navone, for example, who worked as a quality control inspector at a glass factory throughout his whole life and made at most $11 an hour. But the retiree managed to save and invest his way to more than $3 million before he stopped working.
7. Begin a savings plan early on
One may become a millionaire at any age, but it requires more resources at one age. If you start saving $1,700 a month when you’re 45 and have no money saved up, you can retire at 65 with $1 million (assuming 8% average annual returns).
8. Stay out of debt
Debt is like a burden. If you plan to become a millionaire then one thing that you should avoid is accruing debts. To avoid debt, you need to control your habit and taste. Try living within your means.
Living within your means is a sacrifice. You don’t have to buy a car if there is a suitable way of getting to work or going about your business. You don’t have to live in a big house if you cannot afford that.
Recommended: How to pay off debt and earn financial freedom
9. Seek help if necessary
Seeking help here comes in two forms. You can seek professional help or the help of someone you trust.
If you have problems sticking to your plans, you may need an accountability partner. Someone to help keep you focused. Your spouse, a sibling or parents are examples of people you can talk to frequently.
You can also seek the help of finance experts.
There exist varying opportunities to becoming a millionaire in today’s world economy. To be a millionaire, according to wealth research standards, a household must have at least $1 million in investable assets, without counting the value of primary residences, employer-sponsored retirement plans, or ownership stakes in closely held businesses.
Frequently Asked Questions (FAQs)
In Nigeria, Lagos has the largest concentration of millionaires. Nonetheless, millionaires can also be found across the country in other states including states with busy cities like Kano, Kaduna, Abuja, Rivers, Abia, Anambra, Ogun, Oyo, Imo, Enugu, Edo and Delta states.
Silicon Valley (more precisely, the San Jose-Sunnyvale-Santa Clara metro region) has the largest number of millionaires per capita in the world. However, the New York metro area has the most millionaire families overall.