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Becoming a millionaire is just a dream for many, but it is possible to achieve with focus and determination. While a sudden windfall or lucky break can accelerate the timeline, true millionaire status usually requires diligent effort over decades.
The good news is anyone can implement proven money management strategies that harness the power of time and compounding interest to build seven-figure wealth. With discipline and commitment to learn sound financial principles, the goal of amassing $1 million or more in assets is attainable for an increasing number of people.
This article will outline realistic paths that average earners can take to become millionaires through savvy decisions, persistence and patience. You’ll discover that becoming a millionaire is not about luck or overnight success, but rather daily choices to live below your means, invest early and often, take calculated risks, and continually educate yourself on how to master your money.
Start a Successful Business
Entrepreneurship provides the most direct path to becoming a millionaire, albeit with significant risk and effort. Building a company that scales, fills a market need and disrupts an industry can lead to an enormous payday through an IPO or acquisition.
But most businesses require large investments of time and money before becoming profitable. Success hinges on exceptional execution, differentiation, timing and a bit of luck. If you have the appetite for risk and a killer business idea, entrepreneurship could make you a millionaire.
Invest in the Stock Market
Investing money in stocks and bonds can grow wealth through compound interest over decades. By contributing to retirement accounts like 401(k)s and IRAs and investing in low-cost index funds, your money goes to work in the market. The key is to continually invest over long time horizons, through ups and downs.
With 30-40 years and consistent monthly investing, accumulating $1 million or more in investment accounts is very possible. Time and compounding do the heavy lifting.
Invest in Real Estate
Owning real estate, particularly rental properties, can build significant wealth over years of home value appreciation and rental income. Though capital is required upfront, properties typically gain value and generate steady cash flow. One strategy is “house hacking” by living in one unit of a multi-family property while renting other units. Real estate investing requires research and maintenance but can yield millions over time if done properly.
Develop High-Income Skills
Certain skills and careers reliably lead to a higher salary, which enables faster wealth building. Fields like software engineering, law, medicine and finance carry six-figure earning potential. Developing expertise in a high-income field makes it easier to save and invest larger amounts. Additionally, continuously learning new skills, seeking promotions and progressing your career increases salary potential over decades.
A high income allows you to accelerate your millionaire timeline.
Save and Invest Over Time
Religiously saving and investing 10%-20% of your income is a tried-and-true wealth building strategy. By consistently putting money away each month and letting compound interest work its magic, your invested savings grows exponentially over years. The key is giving your money as much time in the market as possible.
Any income level can utilize this savings approach. Committing to save a portion of every paycheck and regularly invest it provides the cornerstone to millionaire status.
Ride Economic Waves
Aligning your career and investments with fast-growing fields or technological shifts can provide a booming tailwind on your path to millionaire status. Areas like artificial intelligence, green energy and cryptocurrency are experiencing major growth. Educating yourself on high-potential sectors and making strategic career or investment moves helps multiply your money quicker by riding historical economic waves.
Timing major trends aids your ability to exponentially grow wealth — just be careful not to put too much of your money into one risky investment.
Get Out of Debt
Debt is dangerous if you want to be a millionaire. At best, it robs you of opportunities to save and invest. At worst, it can create financial chaos that can take years to escape.
For example, using a credit card to pay for purchases is convenient — and might even earn you a small amount of cash back or reward points that save you money. However, charging $5,000 at 16% APR would cost $3,140 in interest and take you 82 months — or almost seven years — to pay off if you only pay the minimum payment due each month of $100.
Cut Down on Expenses
Eliminating unnecessary expenses is another way to accumulate the wealth of a millionaire.
The more money you trim from your budget, the more money you have to save and invest. For example, instead of borrowing money to buy a car, you could save up to purchase one with cash. Then you — and not the bank — get to use the monthly payment to make more money.
Work With a Financial Advisor
A financial advisor may be just what you need to guide you on the path to becoming a millionaire. These professionals can help you define your financial goals and steer you toward the best investments to reach them.
You should interview potential financial advisors to make sure they’re a good match for you. Choose someone who operates as a fiduciary. This means they must act in your best interest instead of their own or their employers.
Here are a few questions to ask potential financial advisors:
- How are you compensated?
- Are you held to a fiduciary standard at all times?
- Do you provide comprehensive financial planning?
Generate Multiple Income Streams
Rich people diversify their sources of income. In addition to wages or salary earned from their primary jobs, they also earn money from investments and profit-generating side ventures like rental properties.
Passive income — money you earn without putting in much effort — amplifies your wealth building. It also provides a sense of financial security if one form of income dries up. Here are some ways to generate multiple income streams:
- Invest in securities
- Buy real estate
- Start a business
- Offer your services as a consultant
- Create a product you can sell
Can You Become a Millionaire in a Year?
Becoming a millionaire in a mere 12 months is possible, but it’s unlikely — unless you receive an unexpected financial windfall. Instead, the path to riches is more of a long-term goal.
Consider the following scenario to understand how long it takes to become a millionaire. You currently have $50,000 invested with an expected rate of return of 7%. If you save an additional $500 per month, it will take you approximately 30 years to reach $1 million. Even with a $150,000 starting investment, it would still take you 22 years to reach the $1 million mark.
Of course, with the use of the steps already mentioned, plus consistent determination, diligence and perseverance, you can reach your goal of becoming a millionaire even more quickly than the previous example.
But no matter how many of these steps you use, your path to wealth is likely to take a detour or two. The secret to getting rich is to anticipate these setbacks. Always plan for possible issues, and if they happen, learn from them. Then, refocus on hitting your goals to get rich.
Anne Dullaghan contributed to the reporting for this article.
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