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by Dana George | Published on Jan. 3, 2022
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
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There's little magic involved in becoming a millionaire. It's more about discipline.
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Approximately 13.61 million households in the U.S. have a net worth of $1 million or more, excluding the value of their primary residence. Of those, about 20% inherited their money, so we'll knock them off our stats. That leaves over 10 million households who found a way to make their own million(s). They're the folks we're going to look at here. How did they do it?
Most people don't win the lottery or start a Fortune 500 business. Most people who end up with a million dollars in their bank accounts and investments did it the old fashioned way. They came up with a straightforward plan and stuck to the script.
And here's the script: Earn more than you spend (no matter how much that is) and faithfully invest the difference.
Ideally, you will put 15% of your take-home income away each month. Even if you have to start saving 5% (or less), the goal is to build up to 15%. Let’s take a closer look at the three steps to becoming a millionaire.
According to HealthCare.gov, fixing a broken leg can cost up to $7,500 – and that's if you don't need surgery. Whether you have health insurance, paying your portion of the medical costs upfront is less expensive than charging the amount you owe and paying it back with interest.
The same is true if your employer lays you off. Having money in emergency savings for such an event means not borrowing to get by.
If your goal is to become a millionaire, it's the seemingly inconsequential decisions that have the biggest impact. You can earn several hundred thousand dollars a year and make so many poor, small decisions that you end up with nothing invested for your future. Or, you can earn a modest income and through frugal spending, stash away a healthy chunk each month. It is genuinely up to you.
If you're paying off one or two high-interest credit cards, double down on payments, even if it means cutting your budget somewhere else to do so (more on this in a moment). If you're buried in debt, it may be time to work with a non-profit debt counseling service. Not only will a great counseling service work with your creditors to come up with a repayment plan you can stick to, but they will help you understand why the debt grew so large in the first place.
READ MORE: Credit Card Debt: What You Can Do to Get Out
We understand that saving and investing 15% of your pay each month is a big deal. And truly, if you start out saving less, that's okay, as long as you keep your eye on the ball and work up to 15%. What do you do if you don't earn enough? We're going to get real with you here: You'll need to make tough choices.
If your current job does not pay enough, ask for a raise. If the answer is no, look for a job that pays more. Suppose you need additional training to land your dream job. In that case, you can complete a free online certification in a wide range of studies through platforms like Udemy, Udacity, Coursera, and edX. There are also inexpensive courses available (costing as little as $100). If what you need to move into a higher-paying position is more training, it is available.
Rather than cut an expense completely, why not minimize it? For example:
In a nutshell, becoming a millionaire is more about choices than luck. Building wealth of any kind boils down to the decisions you make each day. Today would be a great time to get started.
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. The Ascent's picks of the best online savings accounts can earn you more than 8x the national average savings account rate.
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APY: Up to 0.40%
APY: 0.40%
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Dana has been writing about personal finance for more than 20 years, specializing in loans, debt management, investments, and business.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
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