How To Make a Million at any Age
Wondering, “How to make $1 million dollars? There are multiple secrets to becoming a millionaire, but it is not easy. According to a recent Motley Fool article by Christy Bieber, “What Are the Odds of Becoming a Millionaire?” the U.S. has roughly 24,500,000 millionaires. With 336,000,000 people in the U.S., approximately 7.3% of the population are millionaires.
You control the odds of becoming a millionaire, but as with any goal, it starts with commitment. Following are ways that you can become a millionaire.
Do You Need a Million Dollars to Retire?
Conservative retirement estimates indicate that most people need at least a million dollars at retirement. Although, if you live in a low cost of living area and live frugally, you might not need a million dollars to retire. Whether you need $1 million to retire or not, here is a path to strengthen your finances for the future.
Like any big goal, breaking it down into bite-sized steps makes it more attainable. And, you don’t need to earn big bucks to end up with a million dollars! There are stories of janitors, barbers and librarians amassing a million on an average or lower salary.
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Whether you’re wondering, “How can I make a million dollars?” for your retirement or are hoping to learn some millionaire secrets so you can live in financial independence in your 30s, there are ways for you to bring your goals into reach. Whether you need a million bucks to retire or not, read on to shore up your financial future and find out how you can become a millionaire or even become a multi-millionaire.
1. To Make a Million – Check Your Behavior
Are you living like you want to become a millionaire? If not, now’s the time to start. Becoming a millionaire means living below your means! In fact, it’s difficult to recognize most millionaires, as they look like you and me. They didn’t get rich by living extravagantly. In the well-known book by Thomas J. Stanley, “Millionaire Next Door,” most multi-millionaires and millionaires are hard to recognize and don’t live extravagantly.
Consumerism is a difficult foe to tackle in this age of near-constant advertisements. Our social media feeds and continual ads bombard us with messages that tell us we aren’t worthy or successful if we don’t have the latest gadgets, the trendiest clothes, or a luxury car. The first way to become a millionaire is to ignore the messages to buy more.
We’re not suggesting that you need to live in misery. However, one of our millionaire secrets is that you need to be selective about where your money goes. Some ways to increase your odds of becoming a millionaire are:
- Write down your millionaire goal, and your plan to become wealthy.
- Keep your mortgage or rent at a reasonable percentage of your income. Most experts recommend that your housing expenses not exceed 30% of your take home pay!
- Be thoughtful about your car. Purchasing a used vehicle can be a cost-effective way to secure the kind of car you want (yes, even a sports car) at a price tag you can live with.
- Align your spending with your values – spend on what’s truly important, not to keep up with the Jones’.
- Practice thinking before you spend.
2. To Become a Millionaire – Know Your Net Worth
The millionaire mindset includes awareness of your income, spending, expenses and your net worth.
Your net worth formula is:
- List your assets or how much you own, such as money in the bank, retirement accounts, investments, your home and your car.
- Subtract what you owe, such as your credit card debt, student loans, car note and mortgage.
- What remains is your net worth.
- If your debts or loans are greater than your assets, then you have a negative net worth.
The easiest way to calculate your net worth is with the FREE Empower financial management tools. Simply link your financial accounts and Empower will calculate your net worth, and so much more:
Why does becoming a millionaire begin with knowing your net worth? Because knowing where you stand financially, provides a way to track your progress towards your million-dollar goal.
3. Tip to Become a Millionaire – Pay off Debt
One of the easiest ways to becoming a millionaire is to pay off debt. Imagine that you have $1,000 of credit card debt and are paying 20% interest per year on that debt. That debt interest payment is $200. If you invest $1000 in the stock market, and receive a 10% annual return, you might earn $100. So, even if you are investing in the financial markets, if you have high yield debt, you won’t be making financial progress. You will earn $100 in investment gains and pay $200 in interest payments, netting a $100 loss.
Paying off high yield debt alone won’t make you a millionaire, but having too much debt can prevent you from reaching that goal. Pay off your credit cards, and high yield debt. Tips to pay off your debt are available online and on social media platforms. Or just bite the bullet, trim your spending, and divert excess funds to paying off the debt.
You don’t have to pay off all debt. There is good and bad debt. Good debt is borrowing to buy an appreciating asset, like a home, or rental property. While bad debt is using debt to buy things will depreciate or won’t last, like clothes, vacations, and restaurant meals.
4. Easiest Way to Make a Millionaire Dollars – Max Out Your Retirement Funds
Maxing out your 401(k) is one of the basic steps to becoming a millionaire.
First, if you don’t contribute enough to your workplace retirement account to at least take advantage of your employer’s match, you’re throwing money away. If you can’t afford to max out your contributions (which is $23,00 per year as of 2024, plus a $7,500 catch up allowance if you are over 50), you should at least invest as much as your employer will match.
With every pay raise, increase your retirement account contribution.
This might be the easiest way ever to become a millionaire. If you can invest $18,500 per year and earn a 7% return on average, it will take you 22 years to become a millionaire. We have contributed the max to our retirement accounts for decades and learned to live on the remaining money in our checking account. There were months where money was tight, but after many years using this approach, the results are well worth it.
If you elect to max out your 401(k) or 401(b) and an IRA, you’ll become a millionaire faster. Although, this will require greater belt-tightening.
Both 401(k)s and IRAs are good investment options, as long as you aim to max them out. If you’re self-employed, save for retirement with a SEP or SIMPLE IRA. If you can max out both your 401(k) and IRA, your money will compound more quickly.
If you don’t want to manage your own investments. You might open an IRA at a robo-advisor such as Wealthfront. In fact, Robinhood also offers Wise Advisory, a digital investment manager.
5. To Become a Millionaire – Automate Your Savings
While we’re on the topic of tucking away money, you may as well set up direct deposits or automatic transfers to your retirement funds. If you never see this money hit your bank account, you’ll be less likely to spend it. If you can’t access the money, you’re likely to let it grow and compound for years.
Many years ago in a book long forgotten, personal finance Jane Bryant Quinn recommended that the easiest way to budget was to automate saving and investing. After you automatically transfer money into your saving and investing accounts, you can spend all that remains.
Humans are typically lazy and once a behavior is set into place, we tend to leave it alone.
Setting up a direct deposit into a separate savings account is a good start for short term cash needs, like a six-month emergency fund. While automatically investing in an account that is more difficult to access, such as an IRA and a 401(k), is also a sound millionaire tip. It puts your money to work immediately, and keeps you from spending it on seemingly urgent expenses.
By automatically transferring money from your paycheck into your retirement accounts and possibly another emergency savings account, you can spend what’s left. No need to budget, as your most important savings goals are taken care of reminds Jane Bryant Quinn.
6. To Become a Millionaire – Diversify Your Streams of Income
This does not necessarily mean that you should work 80 hours per week at multiple jobs—although picking up some extra work is definitely a good idea, particularly if you’re aiming to pay off debt or rapidly save. In addition to your 9 to 5 job, add additional streams of income.
By adding additional streams of income, or sources of income, you’ll reach millionaire status sooner. There are countless ideas for side-hustle ideas.
Examples of this include investing the savings from your 9-5 into a duplex or triplex. Live in one unit and have the other unit cover most (or all!) of your mortgage. Continue stashing away money until you’re able to afford a second multifamily home, which you can rent out entirely. Investing is a perfect example of how the dividends and capital gains of your stock market or REIT (real estate investment trust) investments continue to grow, without much oversight.
If you’ve got a spare room, consider renting it out to defray the mortgage costs.
The key to becoming a millionaire is to make your money do the work for you. Pursue it diligently, but not at the expense of your time—the sooner your income streams turn passive, the better.
By investing part of your side hustle income into a real estate debt fund, you’ll diversify your investments and gain access to the real estate loans market.
7. How do People Become Millionaires? – Surround Yourself with Like-Minded People
Mom’s advice from your teenage years still holds true: you become like the people you spend the most time with. Spend your time with other millionaires or those striving to become millionaires. Joining with those living a lavish life now, with expensive restaurants, cars, clothes and vacations, isn’t the way to become a millionaire.
This tip doesn’t mean you need to surround yourself with millionaires. What it does mean is that you should surround yourself with those that share your values and goals. If you’re striving to build wealth, and all your friends are living and spending for today, it’s tough to stay focused on your own goals.
The millionaire habits you create today will become embedded in your behavior and lead to wealth. My Dad was very poor growing up. His goal was to become a millionaire, and he achieved that goal. His millionaire lifestyle habits were ingrained in my lifestyle. Our family made deliberate lifestyle choices to facilitate the millionaire goal. Dad drove a luxury car, but bought it used. My parents bought a big house at a discount, because it needed work. They rehabbed the house to create value.
Of course, you’ll want to avoid people who spend millions of dollars. If you’re looking for millionaire secrets, look for people who live frugally and have intentional lifestyles. You’ll be inspired to create sensible spending, saving and investing habits. For support, inspiration and affordable living tips search for Facebook, TikTok and Instagram communities who practice wise financial habits.
8. How do Millionaires Invest? – Keep Fees Low
Warren Buffett, arguably one of the greatest investors, advises most investors to buy and hold low-cost index funds. These investments, mirror the holdings of the overall stock market. For example, the Vanguard Total Stock Market index (VTI) replicates the overall US stock market. While the Vanguard FTSE All-World ex-US ETF (VEU) owns representative companies from around the world. By investing in low-cost index funds you’ll receive these benefits:
- Well diversified investment portfolios
- More of your money going into investment markets, than to investment managers
- Market matching returns. Average stock market returns, over long periods of time range from 8% to 10%. This performance surpasses the returns of most active fund managers most of the time.
Most 401(k) and 403(b) accounts offer low-fee index fund. They also provide target date funds, which are designed to align with the date that you expect to retire, and provide a well-diversified portfolio. Just watch out for expense ratios higher than 0.35% or so for a target date mutual fund. While your low-fee index fund should charge between 0.05% to 0.09% management fees.
When investing in your IRA or taxable brokerage account, you can select low-cost index exchange traded funds or ETFs. Low management fees will speed up your journey to becoming a millionaire.
If you prefer to outsource your investing, low-fee robo-advisors do a good job of creating diversified investment portfolios for low fees. Remember that Robinhood also offers Robinhood Wiser Advisor, a low fee robo-advisor, and a 1% match (you must keep funds invested for at least five years to maintain the 1% match).
9. To Become a Millionaire – Think Big, and Act Accordingly
Working a few hours a week for minimum wage won’t get you to millionaire status. Cutting Starbucks visits alone won’t do it. In order to become a millionaire, you need to think bigger picture and take some steps that might seem scary. you also need to persist, despite setbacks and difficulties.
Taking a calculated risk, could result in a shorter path to becoming a millionaire.
Some things that might seem scary but could pay off are:
- Taking an opportunity presented at work that is outside of your comfort zone, but can increase your outreach or networking (like speaking at a conference, or representing your organization at a national gathering).
- Work harder than your peers, and ask for a raise.
- Take a small portion of your money (no more that 5%) and make a high-risk investment. Going “all in” is rarely a good plan, but changing up your investment style can have high rewards. That could mean devoting a greater portion of your investment dollars to stock investments, when you’re younger.
- Starting a side business with a friend or family member, like splitting the down payment on a fixer-upper and sharing the profit after you flip the house.
Always weigh potential risk against potential reward, and make sure you have some a backup plan in case things don’t work out.
10. To Become a Millionaire – Stop Making Excuses
A wise person once pointed out to me that there is a big difference between making an excuse and stating a reason.
We all have reasons that our net worth might drop; maybe your car needed substantial repairs, or a series of micro-emergencies drained your hard-earned emergency fund. These are good reasons for your financial setback, and all you can do to compensate is to plan for the unexpected, and pick yourself back up after financial setbacks.
Be aware that investing in financial markets involve the likelihood that your investment portfolio will decline occasionally. The best strategy to handle investment portfolio declines, is to remain invested, do not sell after a market drop. If you have extra cash, it’s difficult, but smart, to invest in financial markets after a price drop. You’ll be buying stocks or stock funds at bargain prices.
Excuses, on the other hand, are less, well, excusable. Have you ever thought one of these things about yourself?
- I can’t make a million dollars—I’m not smart/innovative/creative enough.
- I’d love to enact these ideas, but I just don’t have the time.
- Sure, this works for other people. I’m just too focused on my *real* job to make any extra money right now.
These excuses are ways you are selling yourself short. Essentially, you are in your own way to becoming a millionaire.
Uncover the excuses that stop you from pursuing your dreams? Next, try replacing the thought with something more positive. For example, “I don’t have the time” can become “I have 15 minutes right now: what can I do in that time that will help push me toward my financial goals?”
You might be surprised at how small simple changes can lead to big results.
How Long Does it Take to Become a Millionaire?
Assume you invest every month into a diversified portfolio, including stock and bond funds, and that portfolio earns a 7.5% average annual return.
The amount you invest, how long you invest, and your rate of return will determine when you will become a millionaire.
Key Takeaways:
- The more money you invest every month, the faster you’ll reach $1 million
- The earlier you begin investing, the sooner you’ll become a millionaire.
- The higher your average annual return is, the more quickly you’ll reach a million dollars.
Why are we using a 7.5% average annual return? This is a conservative return expectation, based upon a diversified stock and bond portfolio. Could your investment portfolio earn more? Sure. Could it earn less, possibly. For more information, read about historical stock and bond returns.
You Can Become a Millionaire at Any Age – Wrap up
These 10 secrets to becoming a millionaire are steppingstones to cultivating your first million dollars. After you’ve amassed your first million dollars, you’re well on your way to becoming a multimillionaire. Your investment dollars will compound more quickly, the larger your asset base becomes.
Some millionaire behaviors can be implemented immediately, like cutting expenses, calculating your net worth, setting up automatic deposits to max out your retirement accounts, and seeking out opportunities to network with like-minded people. Millionaire interviews are a great way to learn about how others have reached this goal.
Other millionaire secrets include not making excuses and diversifying your streams of income to generate passive income. Keeping the big picture in mind and acting accordingly will also help you on your trek to becoming a millionaire.
And of course, implementing our “Wealth Tips” will keep you on track. They’re included, for free, with the following download:
Click here and find out how we grew our retirement account 965% and get the 14 Rules of Investing.
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