How do you become a millionaire in 10 years?
High-income earners stand a better chance of becoming a millionaire in 10 years. Earning a high-income combined with frugal living provides a surplus of extra cash. Investing the surplus of extra cash will allow you to become a millionaire in 10 years.
Imagine, having a million dollars in a matter of 10 years because of smart choices you made. Making $1,000,000 is a very simple formula, but few follow it.
Don’t be discouraged if you don’t have a high income. The same principles apply for building wealth, even if you don’t reach $1,000,000.
Luckily for you, I’m going to show you the exact steps to becoming a millionaire in only 10 years. I’ll even show you how much money you need to invest to make it happen. Even if you don’t hit a million dollars, you are going to be far better off than most of your peers.
- Becoming a millionaire in 10 years is challenging, requiring a $5,000 per month investment at 10% annual return on investment.
- You can find a higher rate of return and invest less or a lower rate of return and invest more each month.
- High-income earners have an easier time investing money, but often fall subject to lifestyle inflation.
- Focus on growing your income while keeping your expenses low. Invest the difference between your income and expenses.
- 1 in 3 Americans have a side hustle. Consider a side hustle to increase your income and fuel your investments.
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How can I become a millionaire in 10 years?
To become a millionaire in 10 years, you must have a high savings rate or income to spending. Find a way to keep your expenses low while increasing your income through whatever means possible. Invest as much money as possible at the highest rate of return you can find.
1. Focus on reducing expenses and living frugal
The first step to becoming a millionaire is to take control of your expenses. You need every single penny to go towards investments, not stuff.
You should have a method of budgeting or tracking your expenses. There are many different ways of managing finances, but it’s simply essential that you start. The goal is to identify areas where you are spending unnecessarily.
Most people have specific areas where they overspend. It’s effortless to overspend when you aren’t tracking your finances. Usually, the small expenses that add up over time keep you poor.
2. Save your money
Making more money isn’t the only way to free up cash for savings and investments. Cutting your expenses also frees up cash. Now, we’re going to look at ways you can cut down your spending, resulting in more money saved.
1. Set a Savings Goal
Start with a goal in mind. It’s hard for us to reach for something if we don’t know what it is. When you have an actual goal, you’re more inclined to do what it takes to get there.
2. Set Up an Auto-Draft
Set up an auto-payment that takes money from your paycheck as soon as it hits your bank account. It makes it easier to live as if you never even had that money when it just transfers all on its own.
3. Pack Your Lunch for Work
Packing your lunch means you’re planning for your day. We tend to spend frivolously when we don’t plan. It’s also cheaper to make lunches from purchased groceries than go out for lunch each day.
4. Lower Your Utility Bills
Lowering your utility bills is easy if you take the time to do it. Weatherize your home with appropriate stripping and sealers when the cold seasons are coming. During the hot months, open your windows in the mornings and evenings to let the cooler air in.
You can also reduce the water heater temperature by 5 to 10 degrees. Or upgrade your appliances to Energy Star certified versions. You’ll have a bit of an up-front cost, but eventually, it pays itself off in savings.
5. Nix Unhealthy, Expensive Habits
If you smoke, drink, or hit up your favorite coffee bar every day, stop, or at least cutback. There’s an easy way to get motivated to do this. It’s called annualizing.
Annualize the cost of your habit. Let’s say you smoke a pack of cigarettes every day. One package costs about $8 on average. There are 365 days a year, and you’re spending $8 daily on your cigarettes. That works out to $2,920. You can quit and save all of that money.
3. Increase your income
You will also need to find a way to increase your income. The idea is that we are making enough money to invest. Once your money is invested, it keeps on growing without your assistance.
The more money you can make, the more money you can invest. The more money invested, the more money that is gained passively.
Look, life is hard. There is no doubt about that. Life is going to take money.
You are going to earn an income. The IRS is going to want a portion of that income. You will also need a place to stay, food to eat, hot water, and electricity.
Everyone is going to get a portion of your money. The only way to keep more of that money is to make more of it.
Therefore, you need to find a way to increase your income at work and outside of work. It would be best if you always looked around for better job opportunities. Ideally, you are trying to create an income source outside your 9 to 5 job.
The best thing you can do is find a way to make money based on results and not time. Your time is limited, but your results are not. For example, you could make more money selling ten houses as a realtor than you might working a desk job for a year.
4. Invest $5k per month (10% ROI)
As we previously discussed, you can hit one million dollars in 10 years by investing $5,000 monthly at 10% ROI. However, that is just one of the many examples of how to save $1,000,000. Investing simply relies on how much money you invest and your rate of return.
For example, let’s assume you can get a 20% return on investment. In this case, you would only have to invest $2,700 monthly. For most people, investing $2,700 it’s much easier than $5,000.
The question is, where will you find a 20% ROI?
Alternatively, you can find a way to invest more money at a lower rate of return. At a 6% return on investment, you would have to invest $6,200 per month.
You need to find an investment strategy that works for you. You need to develop a plan which specifies the amount of money you will invest at what percent ROI.
5. Consider leveraged investments
One of the riskier strategies is to consider a leveraged investment. A leveraged investment borrows money to make more money. So technically, you are taking on debt by choosing a leveraged investment.
As you’ve seen, it isn’t easy to find $5,000 per month to invest. A leveraged investment makes it easier because you borrow money to invest.
Real estate is an example of a leveraged investment. You make a down payment and borrow the rest of the money from a bank. Tenants pay you back in the form of rent which is then used to pay back your mortgage.
You are taking on the liability of borrowing the money. You are still responsible should a tenant not pay the monthly rent. However, you can build wealth quickly by borrowing money.
5. Take advantage of tax advantage investment accounts
Investing in tax advantage investment accounts will make it easier for you to reach one million dollars. A tax advantage investment account allows you to invest your money before taxes are taken out. Your money is allowed to grow without subject to taxation until you withdraw the money in retirement.
One of the most common examples is your companies 401k plan. You can invest money on a pre-tax basis. The money you would have used to pay for taxes will continue to grow and take advantage of compound interest.
Can you become a millionaire in 10 years?
It is possible to become a millionaire in 10 years. You will likely become a millionaire if you have a high savings rate and are frugal. High-income earners have an advantage, but high-income earners often spend more money than necessary, leaving them with less disposable income.
A high savings rate is one of the most critical factors to becoming a millionaire. Savings rate is the ratio of your income to money spent. Your goal is to have as much income as possible without spending any of it.
It’s next to impossible not to spend any money you make. We all have bills to pay, mouths to feed, and places to go. But set a goal to save more money than you have in the past. Paying attention to what you have left over every month is the first key to building your wealth.
Naturally, frugal people do better with savings and stand a better chance of building wealth. Too many high-income earners fall into the trap of buying things simply because they can afford to.
For example, a high-income earner might earn $100,000 but only save $10,000. However, a $50,000 earner might save $25,000.
The high-income earner is too busy spending their money to build wealth. A person saving $25,000 on a $50k salary already invests 2.5 times as much.
So yes, high income helps, but only if you are smart with your money. The easiest way to become a millionaire is to have a high income and be frugal.
How much money would it take to be a millionaire in 10 years?
At a 10% return on investment, investing $5,000 per month would make you a millionaire in 10 years. Your total contribution would be $600,000 with an estimated growth of $400,000. However, you can find a higher return on investments and invest less money or invest more money with less return on investment.
Finding $5,000 per month to invest can be very difficult. The most likely scenario is having a couple who both have high-income jobs. For example, a couple of engineers each making $100k per year.
Alternatively, you can start a side hustle to help make up the difference. Some side hustles are easier to start than others, but some have the potential to make 5K per month.
Regardless, you will need to find the cash if you want to become a millionaire in 10 years.
How Can I Make Extra Money?
Did you know that about a third of adult Americans have side hustles? And many of those who don’t have intentions to start one. What’s more, that trend is expected to continue to increase as time progresses.
So, let’s take a minute and talk about some different side hustles that can help you make extra cash to stock away or invest. Keep reading to see if these might be a good fit for you.
1. Neighborhood Work
Take a second and think about what you’re good at. What kind of home projects are you good with? Chances are, whatever it is, someone else in your neighborhood wants that done but doesn’t know how to do it themselves.
You can start your own page or just use the neighborhood social media pages to market your skills for gardening, cleaning, babysitting, reupholstering, and more.
2. Rent Something Out
Most of us have heard of the websites that help you rent out your home to vacationers. People with second homes can make a lot of extra cash by allowing people to use their homes when they are not in them.
But did you know you can rent out other things you own? For instance, a website now allows you to post the pool in your backyard for rent. You can also rent your car to people in lieu of a rental car. Why not use things you already have to make money when you can?
3. Entertain the Masses
You can start your own YouTube channel doing just about anything if it will entertain people. You’ll need to be unique, creative, engaging, and knowledgeable about your work.
What can you freelance? You can freelance many things. Freelance photography is a great way to make extra money if you have an eye for it and the equipment.
Freelance baker/cake decorators can make boatloads of money making cakes for birthday parties, retirements, weddings, graduations, you name it.
Freelance writing, painting, tutoring, scrapbooking, and sewing are also hobbies that can pull in cash.
5. Consulting or Coaching
You can be a consultant or coach for many things. Let’s say you’re good with finances. Plenty of people are not good with finances. You can coach those people and help them get better control over their financial situations.
Another example is someone who’s organized and can help others rearrange things in their homes. You can be an organizational consultant and help people bring order into their homes.
You’ll find people all across the nation doing the things we just discussed to pocket more cash. These side hustles are in the top 10 ways to make extra money.
Summary: How to become a millionaire in 10 years
As you can see, it is possible to become a millionaire in only ten years. However, finding the amount of money needed to invest to become a millionaire can be challenging. Investing is all about how much money you invest for a certain time frame.
The sooner you want results, the more money you need to invest. Someone wanting to invest in a simple S&P 500 Index Fund would need to invest about $5,000 per month. Assuming a 10% return on investment, you would hit $1,000,000 in 10 years.
Use some of the ideas we mentioned above to bring in extra money on the side. 1 in 3 adults in the U.S. has some side hustle working for them. There’s room for you to do it too. Then, work to decrease your expenses every month. Trim your spending however you can.
Focus on creating a gap between income and expenses. You need to invest as much money as possible to become a millionaire.
If you cannot come up with $5,000 per month, you may consider leveraged investments. Leverage investments are considered riskier because you are taking on debt. However, you are borrowing money which gives you money to invest.