At first glance, it might seem impossible to build up a net worth of $1 million, but it’s easier than you think. You don’t even need a trust fund or a winning lottery ticket to join this exclusive club.
Your annual salary is important, but how you spend your money is more important. With careful planning, a strong work ethic, smart spending habits, and smart investing, you can grow your money to at least $1 million and much more.
You will have to make some sacrifices to reach this goal, but the feeling of being financially secure is priceless. If you really want to become a millionaire, it’s time to start taking big steps. Put together a good plan by using some or all of these 12 tips, and you’ll be on your way to making your first million dollars.
12 Ways to Make $1 Million Dollars
Your profit margin should go up.
You can also have a profit margin; it’s not just for businesses. The founder of Get Rich Slowly, J.D. Roth, said, “You make a profit the same way a business makes a profit: by making the difference between what you earn and what you spend bigger.” “You can then use this extra money to reach your long-term financial goals.”
Roth said that if you want to save up a million dollars, you’ll need to save a lot more than the normal 10 to 15 percent. He said that you should save half of your income and that you’ll have to make hard decisions like putting off spending now in order to be financially successful in the future. For families with two incomes, he said they should choose to live on one income and save or invest the other income.
Start with $10,000,000.00
“Start with $10 million” is a joke that shows how our brains often trick us into investing in the wrong way. The best way to get around our “inferior mental angels” is to learn about investing, make a plan, and stick to it.
Kirk Chisholm, who is a principal at Innovative Advisory Group, said that our minds often work against us. It’s not hard to make a million dollars through investing, as long as you start young and don’t do things like follow the crowd.
Don’t get in and out of your investments too often. If you make a good plan for investing and stick to it, you can become a millionaire over time. Vanguard Research says that people who buy and sell more often tend to do worse than those who buy and hold.
Make a business out of what you love.
Your first million won’t come from passion alone. Luck and being willing to change can’t be replaced. “Find something you’re really interested in, become the expert on it, and turn it into a business,” said Focus Planning Group wealth advisor Joseph Carbone. “You’ll be happy, and you’ll probably be very successful, too.”
The story of Chipotle shows this. After Steve Ells graduated from culinary school in 1993, he was eager to open a fine-dining restaurant. He didn’t have enough money for the fancy place, so he borrowed a small amount from his father and opened his first Chipotle to make money for the fancy place. After selling 1,000 burritos in the first month, he turned his love of cooking from a high-end restaurant into the popular Chipotle Mexican Grill restaurant chain and a successful way to get rich.
Also, know that you will fail along the way. Don’t be surprised if you hit a few bumps before you get that million-dollar idea.
Make an early investment.
Math can help you figure out how to get rich. It is well known that you can become a millionaire by investing in the stock market over many years, reinvesting your dividends, and letting your money grow and add to itself. But it’s also important to know how much to put into mutual funds, what kinds to choose, and for how long.
With a simple calculator, you can figure out how much you need to invest, for how long, and at what rate of return. Todd Tresidder, who used to run a hedge fund and now runs the website Financial Mentor to help people get rich, made a calculator to help with this. For example, you can figure out that if you invest $500 per month in a diversified stock market index fund like the Fidelity Total Market Index Fund and get an average return of 7% (assuming inflation is 2%), you will be a millionaire in 36 years.
If Henry starts at age 25, he will have a million dollars by the time he is 61. If he waits, he will have to save and invest more money. If Henry chooses investments with lower annual rates of return, such as money market funds or certificates of deposit (CD), he will have to save thousands of dollars more to make up for it.
No matter what you do to become wealthy, it will take time. When you invest in the stock market, your money takes years to grow and compound. It takes time to start a business and make sure it does well. When it comes to the math behind compounding returns, the later years show the most growth in money.
Daniel Zajac, a certified financial planner and partner at the Zajac Group, said, “It usually takes longer to make your first million than your second.” “The first million is often the hardest to get, whether you build a business or save for years and years. Stay determined, be patient, and keep your eyes on the goal.
Don’t let the slow growth at first from compounding or the risks of starting your own business stop you from becoming wealthy in the long run. When you want to make $1 million, fear and impatience can be your worst enemies.
Invest In Real Estate
Putting money into real estate has been a way to get rich for a long time. But it’s much easier to start investing in real estate in places where the cost of living is lower. If you live in San Francisco or New York City, you might want to put your money into a neighbourhood that is growing.
Paula Pant, who runs the personal finance blog Afford Anything, is getting richer by buying and selling real estate. She told me to save enough money for a down payment on a rental property with a strong cash flow. This means you have money left over after paying your bills to put in your bank account.
As you pay off the mortgage over time, you will eventually own the house outright. Pant said to buy one property at a time until you have a million dollars.
Adjust Your Lifestyle
Throw out the idea that all millionaires spend all their money and live like kings. In their award-winning book “The Millionaire Next Door,” Thomas J. Stanley and William D. Danko looked into how people got rich, and what they found was surprising.
They wrote, “Many people who live in expensive homes and drive luxury cars are not actually very rich.” “Then we found out something even more strange: a lot of wealthy people don’t even live in nice neighbourhoods.”
The authors found that having a high salary doesn’t always mean having a lot of money. In fact, Stanley and Danko found that the people who saved the most money were themselves frugal and were married to other frugal people. If you want to learn how to get rich, the difference between what you make and what you spend is a good thing. Realistically, you can’t build wealth if you spend everything you earn, or even worse, if you spend more than you earn.
Max Out Your 401 (k)
The 401(k) account is a gift from the government that helps you build wealth. Here’s how it can help you make your first million dollars:
- Sign up for the programme your employer offers and invest the maximum amount allowed by law, which is $20,500 in 2022 and an extra $6,500 for people over 50.
- When you put money into a 401(k), your taxable income goes down right away (k). So if you make $60,000 and contribute $19,500, only $40,500 of that is taxed.
- As long as the money stays in the account, it grows and makes more money without having to pay taxes.
If you put $19,500 into your 401(k) every year and earn 7% by investing in a typical stock mutual fund, you will be a millionaire in 23 years. If you invest less or get a lower return, it will take you longer to reach $1 million.
Grant Bledsoe, the founder of Three Oaks Capital Management and a blogger at Above the Canopy, said, “You don’t have to be the next Richard Branson to make your first million.” “Just do what the IRS tells you to do.”
Be a hard worker who makes money.
If you want to make your first million, you should find a way to make more money on the side. If your income is just enough to cover rent, food, and utilities, you probably won’t become wealthy. To become a millionaire, you don’t have to be smart, but you do have to be disciplined, hard-working, and creative.
Rich businessman and entrepreneur Mark Cuban started making money streams at the age of 12. Biography says that he sold packages of trash bags so that he could buy the shoes he wanted. He sold stamps and coins to make extra money when he was in high school.
He took college psychology classes during his junior year of high school, then skipped his senior year to go to college full time. This shows how a hustler thinks about making money. He gave up his free time and fun things to do to follow his dreams. Many millionaires can say the same thing.
Avoid thinking in a way that hurts you.
Building wealth is as much about your mind as anything else, so it’s important to get rid of beliefs that will hurt you. If you want to get your first million dollars:
- Don’t think that people owe you a way to live.
- Don’t think you will get something for nothing.
- Don’t borrow money to buy things. If you don’t have enough money to buy something, it’s not something you need.
- Don’t get distracted. If you want to get rich, you have to keep going even when things get hard.
- Don’t try to avoid school. Learn the skills you need to do well in what you want to do.
- Don’t be afraid to get another job on the side.
- Don’t try to be like everyone else. They’re neck-deep in debt.
- Don’t ignore other people. Giving seems to lead to more giving.
If you want to learn how to make your first million dollars, you should start young and be patient. It’s also important to have fun along the way, since that should be the goal.
Make something new.
If you have a lot of great ideas, pick the best one and try to make money off of it. It doesn’t matter if it’s a product or a service, as long as people are willing to pay for the benefit it offers.
For example, Sara Blakely, the founder of Spanx, became the youngest self-made female billionaire in the U.S. by making underwear that looks good with white pants. Forbes says that she is worth $1.1 billion right now.
Ty Warner made a lot of money from his stuffed animal business, which included Beanie Babies. He was smart to make a wide range of products and sell them in small quantities, which made them very popular. Forbes says that the former sales rep for Dakin Toy Company is worth $4.2 billion.
Maybe your invention solves a problem that a lot of people have or makes a lot of people happy. People are willing to spend money on anything that makes their lives better.
Make your inheritance grow.
You might think that a small inheritance, like $25,000 to $75,000, won’t go very far, but if you use the money wisely, you can make a lot of money. Marc Johnston-Roche, co-founder of Annuities HQ, said that it’s tempting to spend your newfound wealth, but he suggested that you invest instead.
He said, “Work with a financial planner to come up with an asset allocation plan that fits your age group.” “This plan will be different depending on how much risk you’re willing to take and how long you plan to invest these funds for. There’s no one-size-fits-all solution, so it’s important to get help from a professional.
Johnston-Roche said that if you want the money to grow a lot, you should leave it alone for the next five to ten years.
“You can also take advantage of compound interest by putting your money to work now and letting it grow,” he said. “Compound interest can add up to a lot over time if you reinvest interest you’ve earned instead of paying it out.”