Thanks to inflation, a million dollars isn’t what it used to be. However, even so, the idea of becoming a millionaire — of having that kind of net worth — is appealing to many people. After all, those of us in the middle class often look up to millionaires. For many people, a million dollars is the benchmark they use to define being wealthy.
But how do you become a millionaire? What does it take to end up with a million-dollar net worth? In many ways, the answers are fairly straightforward and simple, even if it isn’t always easy to achieve.
Live Within Your Means
The first step to becoming a millionaire is living within your means. This means having the discipline and focus to avoid outrunning your income. It also makes sense to understand your household’s cash flow. Understand where your money comes from, and where it is going, and make sure you know when all of this is happening.
You also need to understand what kind of debt makes sense for your situation. High-interest credit card debt is rarely a good idea, while other types of low-interest debt, such as mortgages and some education loans, are ways of leveraging what you have for greater overall value down the road. Even with these types of debt, though, it’s important to be careful not to borrow more than you can afford to pay back.
The #1 rule of personal finance has always been to earn more than you spend, and if don’t observe this rule, you’ll never end up with a million-dollar net worth.
You also need to invest wisely. The reality is that you need to take some risks if you want to become a millionaire, and that means calculated investing. The reality is that you aren’t going to get rich by putting your money in a savings account with a low yield. Instead, if you want to build wealth effectively, you need to be willing to take a few well-thought-out risks. Your potential for compounding returns increases if you are willing to take a few risks on carefully chosen investments.
This doesn’t mean you make big bets on margin in the commodity futures market (not unless you have the money to lose). This means you carefully choose investments that are likely to provide reasonable returns in exchange for the risk you are taking. Even just steady index fund investing can lead to eventual wealth, if you do it right.
But don’t forget about other investments. You can invest in yourself and your own development, as well as investing in side hustles that are likely to provide passive income over time. Think about how you can invest wisely, and then use some of your financial resources to make those moves.
Cultivate Millionaire Traits
While you are building your net worth, it makes sense to cultivate millionaire traits. Learn about what self-made millionaires do in order to make money and manage what they have more effectively. Sites like Eventual Millionaire can provide you insight into what makes millionaires, well, millionaires. From traits like hard work, discipline, focus, and a willingness to learn, there are ways for you to develop the same traits that millionaires have. Start cultivating those traits even as you build your wealth, and you can develop what it takes to be a millionaire.
Do you want to be a millionaire? What are you doing to make that dream a reality?