5 Steps to Becoming a Millionaire

How to become a millionaire
5 Steps to Becoming a Millionaire

So you want to become a millionaire? Well, let me tell you it isn’t all that easy! Make no mistakes; it will take you a lot of time, hard work, and dedication to make the millionaires list. Remember, millionaires don’t get lucky, they make their own luck!

Sure the luxurious lifestyle of sipping beverages on a beach sounds nice, but what does it take to get there? We’ve broken down what it takes to become a millionaire into five steps.

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Learn to Manage Money

Millionaires are great with managing their money. In other words, they know how to budget! They know where each dollar in their bank account is going to be spent or invested on.

What does an effective budget look like? An effective budget allocates all of your income into categories to spend, save, or invest. It should also account for your month-to-month expenses and carries over any extra money to the next month.

What do I mean when I say your budget should allocate all of your income?

Let’s simplify your living expenses and assume the only things you had to worry about are housing expenses, groceries, and investing. Let’s also assume you make $1,500 every month. You need to find a way to “spend” that money in your budget, such as allocating $600 to housing expenses, $400 to groceries, and $500 to investing. As you can see each dollar earned is assigned to a category, and you will need to do the same for your budget and expenses.

What do I mean when I say your budget carries over extra money each month in each category?

For example, If you allocate $400 to groceries every month and you only spend $375 in January, you should start February with $425 to spend on groceries. If for some reason, you went over budget (which you should avoid) and spent $450 in February on groceries, you should start out March with $375.

Budgeting is a skill that takes time to master. If you haven’t done it before, then it will be difficult to estimate your month-to-month expenses. One of the best courses I’ve taken is Dave Ramsey’s Financial Peace University. Millionaires have this down to a science!

Live Simple

Millionaires didn’t get to become millionaires by spending their money going to concerts, eating out every night, and living the millionaire lifestyle before they made it! Millionaires became millionaires because they managed to live frugal lifestyles.

Billionaire Mark Cuban once mentioned on an episode of Shark Tank that he once lived on eating ketchup and mustard sandwiches! Gross! I don’t expect any of you future millionaires to be doing anything of the sort, but it does go to show you how serious they are about cutting their expenses to achieve financial freedom because every dollar counts.

Every dollar does count if you want to become a millionaire! If you already have the money managing skills we talked about above then, this will be an easier step. It’s time for you to itemize your expenses and find out what you can cut back on.

Realize the difference between wanting and needing things. Often people begin to blur the lines and try to justify the things they want as a thing they need, and it only hurts their chances at gaining financial freedom. Ask yourself “can I live without this?”

Many people aren’t living a simple lifestyle and are spending more than they can afford. One of the biggest areas of overspending is the house we decide to purchase. If it is just you, did you need to buy a four-bedroom two-bathroom house? Can you live in a one-bedroom one-bathroom house for a fraction of the cost instead?

Another area people overspend on is food. Americans have already reached the point where they spend more on eating out than at grocery stores, and it’s killing your finances! Cooked meals are cheaper and will help you reach your dreams of becoming a millionaire more than a restaurant!

Learn Everything

You cannot become a millionaire if you don’t know the strings that control the system. Millionaires pride themselves with high IQs. Think about the last time you saw a self-made millionaire with a low IQ?

You don’t typically see it because millionaires are always learning about how things work. If you know how something works, you stand a better chance at making money from it!

The more you learn, the more you earn! So how are you going to learn? The library is one of the best sources of knowledge just waiting to be tapped into, but hardly anyone uses it! I bet if people started to use the libraries more we would have more millionaires, less crime, and happier people.

Another alternative to the library is the internet. I must say, the type of information you will find on the internet is nothing compared to what you may find in the library. The internet isn’t a bad place to start, but it is heavily weighed down with useless information.

Ultimately, learning something no matter how you go about doing it is better than doing nothing. Start learning today if you want to become a millionaire. I would recommend starting to learn about how money is made, transferred, stored, and invested. Try to learn new and exciting ways of making more money.

Create a Side Business

Did you know millionaires have multiple streams of income? Think about your current situation with the job you work.

You go to work each day with an agreement that if I work this many hours, I will get paid this much. You are severely limiting your income potential by only having one source of income.

Millionaires have found a way to break this cycle by going into business for themselves. They understand that a set salary will not get them the results and to become a millionaire they need unlimited earning potential by selling a product.

It’s important to understand this “unlimited earning potential.” If you go to work and make $40,000 a year or roughly $3,300 a month, you are stuck making that monthly wage. You might get a yearly raise, but nothing much will change.

Now let’s say you invent the next Spotify, charging $10 for a monthly membership, and you manage to get 10,000 people subscribed creating yourself a gross income (before expenses) of $100,000 a month! 10,000 people is just the tip of the iceberg because you’re are going to keep getting subscribers.

Now, on the other hand, you could start yourself a local gym that you run after your day job for three hours a day. Provided you do all the work and gain membership; you are still limited by the fact that you only have so much floor space to let people work out in.

Assuming you could only have 200 members because of the available floor space, and the average membership runs about $90, which means you would make $18,000 before expenses.

Chances are with equipment upkeep and building rent your $18,000 a month is going to quickly whittle down to only a couple thousand extra a month which isn’t bad, but it isn’t as great as the example earning you $100,000 a month.

Your goal as a future millionaire should be to figure out what side business you can start that has unlimited earning potential. It won’t be easy, and it’s going to take a lot of time, dedication, and hard work.

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Invest the Profits

Now that you’ve worked so hard to generate yourself a secondary income stream, I bet you are tempted to go out and spend it. I hope not, because an actual millionaire is going to reinvest those profits into something that will make them more money.

Millionaires don’t take more payment than they need until they have multiple income streams built that are earning them money. Don’t show off your money; reinvest your money so you can show it off later if you have too.

How are you going to reinvest your profits? While there are many options available to reinvest your money, the best thing you can do is talk to a financial advisor and lay out your goals. Your financial advisor will be able to help you lay out a plan to get you where you want to go. If you are going to invest in the stock market, a financial advisor has been trained and will probably be able to earn you more of a return than you could make for yourself.

Another option is to invest in real estate and rent out property. There are many risks with owning property. Something always breaks and tenants aren’t always respectful of someone else’s property. Being a landlord can be very demanding on your time, which is why many hire a property management firm to do the work for them, but this does eat into your profits.

At the very least, I would recommend putting your money into a money market provided by your local financial institution until you know what you are going to do with the money. A money market is like a savings account, but it yields a higher interest rate, and that means more money for you. Typically you won’t want to touch the money in the money market account, and each financial institution has their own set of rules on money market accounts.

 

If you follow these five steps and work hard, you should have a better chance at becoming a millionaire. Have any questions? Ask us in the comments below!