How to Become a Millionaire

How to Become a Millionaire

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One of the biggest financial dreams harbored by many “regular folk” is to reach the point where they have a net worth of $1 million. Becoming a millionaire is a sign of financial success in our country, and, for some reason, we think that if we become a millionaire all of our money problems will disappear. However, it’s not the end result — becoming a millionaire — that fixes money problems. It’s the journey. How you become a millionaire has a lot to do with the way you manage your money.

How to Become a Millionaire 1

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Instant Millionaire: The Path to Bankruptcy?

The idea of becoming an instant millionaire, through lottery winnings, an inheritance or some other windfall is something that grabs the imagination. Unfortunately, the instant millionaire may not always remain a millionaire (although this is true of anyone).

A recent study looked at lottery winners and analyzed their behaviors and whether or not they went bankrupt. 5.5% of the winners in the study went bankrupt. Admittedly, no one in the study became a millionaire, but it still illustrated a point: Sometimes a windfall does nothing to improve someone’s finances long-term. Besides, there are plenty of stories of lottery millionaires who lost it all, as well as stories of athletes, celebrities, game show winners and “regular” people with inheritances who go broke.

While not everyone who becomes an instant millionaire is destined to bankruptcy, the keys to keeping all that money are the same as becoming a millionaire through a longer process.

Keys to Becoming a Millionaire

You can become a millionaire if you are willing to make tough decisions, put your money to work for you, and make wise decisions with your earnings. Here are some of the keys to becoming a millionaire:

  • Get out of the instant gratification mindset: One of the first things you have to do is move away from a mindset that involves having what you want now. Instead, you need to prioritize your spending. Take care of your needs first, and forgo some of your wants when necessary. Live within your means, and save up for large purchases.
  • Earn interest, don’t pay it: Instead of paying interest, you should be earning it. Pay off your debt as quickly as possible so that the money you have been spending to enrich others through interest is instead being used on your behalf. Look for smart investments that can put the power of compound interest to work for you, and be diligent in regular investing.
  • Look for ways to cultivate additional income: It is vital that you look for ways to diversify your income. Take charge of your income, looking for ways to encourage more cash inflows. This can include starting a home business, investing in dividend stocks, creating something that will result in royalties, or even getting a part-time job. Understand that if you want to speed your way to becoming a millionaire, relying on a traditional job is not your best option.
  • Prepare for the unexpected: Be ready for unexpected setbacks. An emergency fund is a good start. But it also helps to understand how money works. A professor in one of the business classes I took in college once said that there are two types of millionaires. One type knows how money works, and if she were to go broke today, and have nothing left but a dollar, she would know how to use that dollar to become a millionaire again. The other type doesn’t know about money, and could start with a whole pile of money and always be in financial trouble. If you are prepared for the unexpected, you will be more likely to recover and get back on track.

What do you think? What would it take for you to become a millionaire?

14 thoughts on “How to Become a Millionaire”

  1. Being a millionaire is not enough anymore! You have to accumulate much more to beat inflation because Most of us will live well into our eighties. I am on course to reach my multi-million retirement in 6.5 years.

    • Krantcents may be right. It’s not enough to be a millionaire perhaps. When you’re retired, you spend a fortune on extra health insurance and taking care of yourself and people are living much longer these days. But, if you plan now it will lead to living better when you retire.

    • Yes, I agree with you krantcents. Having a million dollars is not enough. It’s definitely not enough to retire on.

      It does take a lot of persistence to reach your first million. The important thing is not giving up.

    • Couldn’t disagree more about $1 million not being enough to retire on, PROVIDED other areas have been taken into account in planning for retirement, such as debt (i.e. none), preservation of principle, tax planning, estate planning and an accurate assessment of present and future financial needs including long term care. I worked with seniors who were retired or approaching it and most of these people had btwn $200k and $1 million in assets and with correct planning enjoyed a good retirement that allowed them to do the things they wanted to do in retirement. It’s all in the planning….

  2. I think trying to save up to some specific number is unwise, because you then have to figure out how to turn it into some type of annuity or cash dispensing asset. The work of accumulating $1MM in assets does not translate into turning it into a worthwhile, sustainable income. Many times, people who save up lump sums simply deplete it and are left broke.

    I think focusing more on creating passive income through owning high cash flow assets is a better focus, because you’re accomplishing your ultimate goal in one direct step instead of two. Also, once you do it once, it is easier to replicate and continue to grow if you need/want to.

    In regard to windfall income, Jim Rohn said it best “Pity the man who inherits a million dollars and who isn’t a millionaire. Here’s what would be pitiful: If your income grew and you didn’t.”

    • @Mary … not only those who take payday loans. Those in credit card debt or those financing a car (like me, I admit) should also read this post.
      But I agree, it’s a great point.

  3. The difference between rich and wealthy is based on the debt structure. Rich has no debt and spends as they see fit, wealthy is able to cover all their monthly debts without having to lift a finger to work. The trick is to be wealthy and have all non-W2 income streams cover your debts, plus some for fun. I would rather have a nice tax free or passive income stream with some debt that is being paid down by said income, than have no debt and no income stream. Cash flow in King in business and life.

  4. its savings and investment, particularly small businesses. Spending less than you make (savings). Regardless of how much you make, if you spend more you will never be a millionaire. For retirement generally and more specifically in something that (1) you are good at and (2) you enjoy. Finding the right combination of your interests and your abilities is the key to building a business.

  5. I would say: create, create, create.

    It’s really important to produce something new every single day because it make us more skilled and experienced at that which we are really good at. The greatest challenge of getting out of failure mindset and into the success mindset is the transition from being a consumer and into being an bundant producer.

    Production wins over consumption every single time.

  6. A million dollars is not enought to retire on these days. We’re working on our third million now and are still feeling a bit concerned about our financial situation in retirement.

    • @Lara: I think it depends on your age, how much you can afford to save, and what your retirement lifestyle will be. If your house is paid off and you don’t travel much you won’t need as much money as someone who still has a mortgage and wants to travel non-stop.

  7. Another way to make a good retirement on less money is to go off grid for at least part of your necessities.
    Most people think this means only giving up electricity, running water, etc, and may think it sounds utterly grim. It isn’t necessarily so.
    I want become at lest partially independent of other commercially controlled systems. I hope to have a few acres to cultivate extensive gardens, an “edible landscape” of fruit trees and berry bushes, etc. I want to keep a few animals for meat, milk, eggs, or the like, including earthworms to sell to those who like to fish. I also want to build up a home business that can become more passive as I tire.

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