Not a desire for status or a lavish lifestyle, but rather for financial security should be the driving force behind the quest for money. Seven-digit net worth is a reachable objective if you start young and form the appropriate financial habits.
Jason Flurry, CFP, founder and president of Legacy Partners Financial Group in Woodstock, Georgia, has discovered in his work with wealthy clients that those he refers to as “true millionaires,” people who acquire wealth and maintain it, view the role of money in their lives very differently from those who place more emphasis on what money can buy.
“Being rich” or having money for the sake of having money never makes a person feel content, according to him. Ironically, it can result in a different set of issues that the majority of people haven’t given much thought to in their search for more.
We have developed seven suggestions for becoming a millionaire with the assistance of financial professionals. The advice is very straightforward, but achieving the objective is difficult.
1. Create a formal financial plan
You won’t get wealthy just by declaring your desire for it. You must develop a practical plan, document it, and then carry it out.
“The written plan forces you to do something,” says Stewart Welch, founder of The Welch Group, a wealth management company in Birmingham, Alabama. “Calculate what you need to earn and how to invest.”
The dream, the goals, and the options are all part of the plan, not just the goal.
The options require “scenario planning” — coming up with all the ways you can accomplish that goal, such as opening a Roth IRA or contributing to a 401(k), says Welch. Bankrate’s investment calculator can show you how much you’ll need to contribute and earn over time to reach your goal.
2. Establish a saving routine
Saving money, according to Bankrate’s senior economic analyst Mark Hamrick, “truly means putting your finances first.” Therefore, consider saving money as a means to take care of yourself first. You increase your chances that your financial future will be stronger than your financial past or present by prioritizing saving money.
To avoid having to deplete the rest of your savings and investments when a large expense shows up out of the blue, start by creating an emergency fund in a savings account.
Make it a priority to save at least 50% of each wage increase. To ensure you receive the best value for your money, investigate your savings choices.
Make use of your retirement account as well. Maximize your 401(k) and invest any extra money in a Roth or regular IRA.
To maximize your investment, it’s imperative to diversify your savings. Stocks are good growth investments if you have a long time horizon until retirement and want to gradually develop your nest fund.
Don’t be one of the many Americans whose biggest financial regret is not having saved enough money for retirement or unexpected expenses advises Hamrick.
3. Budget your money
If it will limit the amount of money you can save and invest, getting a big house or a pricey car is too much to pay.
This is indeed one of Hamrick’s favorite financial maxims. Too many people, or consumers, have been conditioned to believe — or permit themselves to believe — that their sense of worth is somehow connected to their material possessions.
Hamrick presents a different way of thinking.
But wouldn’t we prefer it if people admired our ingenuity and wealth creation more than our expenditure, he asks. “How we handle our money will, to a considerable extent, determine our financial success, not how much we spend,”
People who are committed to reaching financial security through millionaire status are less inclined to waste money on flashy purchases like designer clothes and extravagant trips.
And they won’t purchase a home that puts too much strain on their financial situation. Find out how much house you can afford with the help of Bankrate’s housing calculator.
4. Remain debt-free.
It is preferable to pay oneself rather than a bank or credit card business. Your adversary is debt.
Since you must pay your bills and taxes before you can utilize any of your money for yourself, progress toward protecting your financial future is difficult when you are in debt, according to Legacy Partners’ Flurry.
Flurry advises avoiding “stupid debt,” which includes credit cards, auto loans, and the majority of college loans.
Pay down your credit card bills if you have a stack of them and only keep one or two. Do your best to avoid charging anything to your cards that will take longer than two or three months to pay off.
Debt ‘holds people back’,’ claims Flurry. “They purchase liabilities and make the payments in perpetuity.”
5. Make investments that benefit you.
To begin investing, you don’t need a lot of capital. Create a mutual fund account with a business that offers no-load funds and low expense ratios.
Additionally, you can invest your money in the stock market by using a zero-commission online broker like TD Ameritrade or E-Trade.
Consider investing in real estate if you have the funds to do so. Leasing a rental property allows you to generate extra income while also taking advantage of the increase in value.
Avoid putting all of your money into one venture. Owning a variety of investments reduces risk and will make the journey more comfortable.
“Don’t follow your friends’ lead; stick to the fundamentals (a combination of stocks, bonds, cash, and real estate). Everybody’s circumstances are unique, according to Seattle-based Twight Financial Education founder Dana Twight, CFP.
A good starting point is frequently your employer’s retirement plan, advises Twight. It has automatic contributions, so you can invest without worrying about the news of the day.
Consider passive income options like rental property or peer-to-peer lending if you wish to expand your investments or diversify more.
To withstand all the storms, floods, and quiet intervals in between, Twight advises investing in many asset types.
Over the long term, you can realistically anticipate earning 10% yearly on your equity investments if you build a diverse stock portfolio.
6. Launch your own company
Two-thirds of millionaires are self-employed, with entrepreneurs making up the majority of that group, according to Thomas Stanley and William Danko’s book “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy.”
The authors point out that the majority of millionaires have put in a lot of work, budgeted their spending, saved money, and made wise investments.
The majority of the nation’s wealth is generated by entrepreneurs. Self-made millionaires made up fewer than half of the people on the Forbes 400 list of the wealthiest Americans in 1984, but by 2018, they accounted for 67 percent of the list.