5 easy steps to becoming a millionaire
source : Investopedia
Who wouldn't want to be worth a million dollars? Many of us dream of
achieving this goal, more often than not for the sake of the freedom
financial stability would bring. So how can we get there? The answers
are actually much easier than you might expect. Here
are
several easy steps to get you into the millionaires' club. (With a
little discipline and the help of some powerful savings vehicles, anyone
can hit this mark.)
1. Only Marry Once
According to "The
Millionaire Next Door" by Thomas J. Stanley, Ph.D and William D. Danko,
Ph.D, the average millionaire is married with three children. The wives
of these millionaires are good budgeters and most often described as
even more frugal than their husbands. Interestingly, according to
Stanley and Danko's survey, half of these wives do no work outside the
home and of those who do, they are most likely teachers.
One
upside of only marrying once is avoiding the costs of divorce and of
subsequent weddings. The cost of a divorce depends on many factors
including income, attorney fees, court fees, and the assets a couple has
and how they are divided. The average wedding cost in the United States
in 2010, according to The Wedding Report.com, was $24,070.
2. Live Off One Income
One of the advantages of having a life partner is the potential to pull
in two incomes. If you are able, consider structuring your set expenses
based on only one income, and save what comes in from the other income.
Doing so strengthens your financial position in two ways: In case of an
emergency or if one partner loses their job, you will not only have
less set expenses to cover, but you will also have built up your net
worth as a safety measure.
3. Choose the Right Career
According to The Millionaire Next Door, "self-employed people make up
less than 20% of the workers in America but account for two-thirds of
the millionaires." The book goes on to list an average of 45 to 55 hours
spent working per week, so by no means is this the self-employed
fantasy of playing golf while your business grows.
The idea of
the "right" career can encompass a myriad of factors. Ideally, this
would be a career you enjoy, otherwise you likely won't be putting in
the dedication required to be successful. The right career would also
coincide with overall working trends, or at least not work directly
against them. For example, starting a career in typewriter manufacturing
may be something you are passionate about, but it would likely suffer
due to the current technological trends.
4. Put Your Money in Appreciating Assets
According to Stanley and Danko, the millionaires in their survey
invested nearly 20% of their realized household income each year. Nearly
20% of the household's wealth is held in "transaction securities such
as publicly traded stocks and mutual funds" and the millionaires tended
to rarely sell their equities. Only a very small number of the
millionaires surveyed had ever leased a car; few even drove the current
year model. Half of those surveyed had lived in their homes for more
than 20 years, which, as the authors point out, means they have likely
enjoyed "significant increases in the value of their homes."
The end result? These people put a financial priority on assets that
will make them money, from their homes to their businesses.
5. Don't Live the Millionaire Lifestyle
Warren Buffett's frugal lifestyle (especially relative to his net
worth) is the go-to example for this point. The average value of the
surveyed millionaires' homes was $320,000. The bottom line is, those who
spend their money on non-appreciating assets cannot put that same money
in an asset that will net them a return and increase their wealth. If
it is important to you to build your financial worth, stop spending it
on new cars, toys and clothes. (The Oracle of Omaha has a net worth in
the billions, but his lifestyle is not as rich as you may think.)
The Bottom Line
Becoming a millionaire is easier than ever. While this is a dream that
will take work and discipline to achieve, it isn't as far out of reach
as you might think. Be smart with your money and before you know it,
you'll be able to count yourself among the world's wealthier citizens
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