If you want to become a millionaire, it is possible to do so and it is easier than you think. These 11 ways to make one million dollars are all realistic methods to follow.
People say that it takes money to make money because it is difficult to make the first million dollars. Once you make the first million, your money starts working for you. So let’s make that first million dollars!
There are a few key decisions you have to make at a relatively young age that can help or hinder your progress to becoming a millionaire.
1. Start a Business
Starting a business can make you a lot of money, but it is also risky. About half of all new businesses fail within the first five years. You can improve your chances of success by having a well-thought-out business plan and by planning to scale up. You should also keep good records, create an operations manual, and have a diverse group of customers. You can get free advice from SCORE, a nonprofit organization.
2. Start Investing
If you want to become a millionaire or billionaire, investing is the most important step you can take on your personal finance journey. Making smart investments is the key to financial success.
Time is the best investment when trying to make one million dollars. The sooner you start saving and compounding your money, the faster you will reach your goal.
This means that a project manager could earn a lower salary than a doctor, but if they save and invest more of their earnings, they could have a higher net worth over time.
You don’t need a lot of money or to be knowledgeable about investing to get started with M1 Finance. There is no minimum, the fees are low, and the process is simple.
If you want to grow your nest egg, you should invest. Timing the market is less important than being IN the market.
3. Save Early and Often
Approximately $1 million is what many new retirees deem as the optimal amount for a portfolio. It can provide a comfortable retirement, depending on other sources of income and the location of residence.
If you want to be successful, the best route is to have an employer-provided retirement plan. Your taxable income will be lower if you contribute to a 401(k). The money in the account will grow without being taxed, which will increase your annual return.
It is more likely that you will reach your goal if you start saving sooner, but you must be willing to increase your contributions. Nearly 60% of companies with 401(k) plans automatically enroll new employees, usually at a 3% contribution rate. However, this will not be enough to reach your goal. For example, if a 30-year-old makes $60,000 a year and contributes 3% a year, he’ll have about $367,000 by the time he’s 65 (that assumes a 3% annual raise and a 7% rate of return). But if he bumps up his contributions to 10%, he’ll end up with $1.2 million.
If your employer match contributions, you’re more likely to reach $1 million by age 65. For example, if you’re a 30-year-old earning $60,000/year and contribute 10% of your salary to a 401(k) plan with a 50% company match of up to 6% of your pay, you will have nearly $1.6 million by age 65.
4. Get That Free Money
Many of us first start investing through an employer-sponsored 401k retirement plan, which is an excellent place to start.
A 401k is an employer-sponsored retirement savings account that allows you to invest part of your paycheck into an investment account. The money in the account grows tax-free until you are ready to start withdrawing from it after age 59 1/2.
The money is taken directly from your check and put into an investment, so you never get a chance to spend it, which is great for people who have a hard time saving money.
This means if you contribute $100 to your account, your employer contributes $100 as well If you contribute to a 401k account, you will be taxed on a lower income. For example, if you earn $5,000 a month and invest $1,000 into your account, you are only taxed on the remaining $4,000. Some employers offer to match contributions, meaning if you contribute $100 to your account, your employer would also contribute $100.
If you invest 6% of your income, the company will match 3%. This is effectively free money, so you should invest enough to get the match even if you have consumer debt with a high interest rate.
The maximum amount you are able to invest in your 401k for the year 2018 is $18,500. Your employer will offer you a few choices for different investments; most plans generally include mutual funds that are made up of stocks, bonds, and money market investments.
5. Let Your Boss Help
Some employers offer benefits that could help you save up $1 million. For example, a traditional pension plan is available to 18% of private sector employees and more than 80% of public sector employees. Another benefit, restricted stock units (shares given to employees after a specified amount of time has passed), can be lucrative if the company’s stock does well. For example, a Google employee with 1,400 restricted stock units would have a nest egg worth more than $1 million.
With an HSA, you can get a triple tax advantage on your contributions. This means that the money you put into it is not subject to income tax, it grows tax-deferred, and you can withdrawal it tax-free at any time for medical expenses. If you’re employed by a large company, there’s a good chance they will match your contributions up to a certain amount. The average employer match is $900.
You can get the most out of your HSA by using other money to pay for medical bills and letting the money in the account grow. After you’re eligible for Medicare (and can no longer contribute to an HSA), you can use the money in the account to reimburse yourself for any eligible expenses you incurred after you first opened the account, as well as pay for retirement health expenses—including long-term care.
6. Keep Track Of Everything and Budget
The saying “what gets measured gets managed” is often used in business circles to underscore the importance of tracking key performance indicators. In the context of personal finance, it means that if you want to get a handle on your money, you need to start by tracking your spending. This will give you a clear picture of where your money is going, and how much of it is being wasted. Once you know where your money is going, you can start to make changes that will help you save.
Although a budget cannot directly control your spending, it can help you keep track of your spending and show you where your money is going.
If you’re unsure of how to set up your budget categories, we can help. The 50/30/20 rule is a simple way to allocate your money.
7. Don’t Overspend
Even if someone is frugal in their everyday life, they can still make money mistakes that undermine their efforts. For example, people with kids may be tempted to overspend when it’s time to send them to college. A better strategy:
While you should always aim to find a college your family can afford without taking out loans, federal student loans can be helpful as long as you keep the amount borrowed under control.
Paying more taxes than you owe is a mistake that could make it harder to reach your goal. According to H&R Block’s Tax Institute, millions of people could lower their taxes by itemizing deductions, rather than taking the standard deduction. Homeowners usually save more money by itemizing, but renters who pay high state income taxes or make large charitable donations could also save money. These savings could help you grow your million-dollar account.
An individual’s tax returns may not show as high of an ROI if they do not include investments such as municipal bonds and index funds that qualify for the lower long-term capital-gains tax rate.
8. Be Smart About Debt
Into most people’s lives, some debt will fall. This is not true for everyone, but it is true for most of us.
There is such a thing as good debt and bad debt. An example of good debt would be taking out a student loan to get a degree in a high-paying field. Another example of good debt would be borrowing money for a down payment on a home. Bad debt, on the other hand, would be buying unnecessary items on credit cards.
Instead of having to wait and save up enough money to buy something all at once, you can finance it and spread the payments out over many months or years.
You don’t have to wait to invest until you’ve paid off your student loan debt. Just remember that time is a crucial factor when it comes to investing.
Because the average return in the stock market is 7% and student loan interest is usually relatively low, 2-4%, you can make more money investing than you are paying in interest.
If you’re in credit card debt, you should make a plan to pay it off as quickly as possible. interest rates on credit cards are usually high, so it’s best to get rid of that debt as soon as you can. throwing extra money at various balances isn’t always the most efficient way to go about it.
To pay off your debt quickly and efficiently, you can use the snowball or stacking method. If you have good credit, you can apply for a balance transfer credit card. This card has a 0% APR period, so you can transfer your balance from a high interest rate card and pay it off without accruing additional interest.
9. Own a Home
Although there are risks involved in buying a house, such as the housing market crashing, you are more likely to reach your goal of $1 million if you own a home than if you rent. This is because with a fixed-rate mortgage, you lock in your monthly housing payment, meaning that if your income rises, you’ll have more to save and invest.
10. Pick the Right Place to Live
Options for where to live after college depend on where jobs are available. This can be difficult to determine, as many cities are expensive to live in.
Don’t just look for work in the big cities. There are often good opportunities in smaller cities too. Also, don’t be fixated on how much money you will be paid. It is important to consider the cost of living in the city you will be working in. For example, a salary of six figures might not be as good as it seems if you have to live in an expensive city like New York and raise a family there.
Unless you live with roommates in New York City, you will only just get by on an income of $80,000 a year. However, in other places such as Pittsburg, Asheville, and New Orleans, you could live quite comfortably on that same amount of money, or even $20,000 less.
Compile a list of several cities you would be content with living in before beginning to apply for jobs. Then, consult websites such as Glassdoor and PayScale to find out how much somebody in your occupation with your level of experience could earn in each city.
11. Buy When Stocks Are Cheap
Although a stock market slide may be disconcerting if you have to sell your investments, stocks are still the best option if your goal is to make a million dollars in the long run.
The amount of time it takes you to achieve one million dollars in savings depends on a few things- how much money you have to start with, how much you contribute regularly, and what kind of interest or return you make on your investments. According to historical data, stocks in the US have made an average of 10% return annually, which would mean that if you started with 50,000 dollars, it would take just over 32 years to reach one million. However, if you increased your contribution to 10,000 dollars per year, you would only need 24 years to reach the same goal. These calculations also assume that you are investing in a tax-deferred account.
How are you planning to make your first million?
Leave a Reply