12 Best Ways To Become A Millionaire From Nothing
Let’s discuss how to become a millionaire. But what is the point of this?
The point is to build your wealth. One of the ways we measure wealth is by becoming a millionaire. And that sounds pretty good to me.
So the goal of this article is to review 12 tips on becoming a millionaire.
Are you more specifically interested in becoming a “Dividend Millionaire”? Then, here’s a link to a must-read article: How to go about living off dividends in retirement.
Can you become a millionaire by 30? It’s a tough task. Maybe 40 is more realistic. But it is good to set high goals.
So, let’s get started with a little background information.
Disclosure: This post contains referral links.
Is it a big deal to be a millionaire? I think it is. And I want to put some facts behind it. I sourced the chart below from the website DQYDJ.
The chart tells us there are 14.8 million households in the United States that have achieved millionaire status. And if you have a million dollars, you have more money than 88.24% of all the households in the United States.
Let’s unpack this information regarding millionaire demographics.
Millionaires From The United States Only
First, this is only data for the United States. There are certainly millionaires in other parts of the world.
Rolling in the data from around the globe, the world wealth percentile would probably rise. Because the US is a developed country with more American millionaires in the population than other lesser developed countries.
Furthermore, the data represents households, not individuals. It is impossible to split up a household net worth by the individuals that live in that household.
The 1% Are The Wealthiest Millionaires
“We are the 99%” was a popular political slogan. I do not hear about it as much anymore.
The phrase directly refers to the income and wealth inequality in the United States with a concentration of wealth among the top-earning 1%.
According to the chart, you would need to accumulate a little more than $10 million dollars to make it into the 1%.
Finally, some people define the 1% based on income.
I’m a believer in the phrase, “it’s not what you make, it is what you have”. So I define the 1% based on net worth, not income. Just like the chart shows.
What Is A Millionaire?
Then by that definition, a millionaire is a household with at least a $1 million net worth.
What Is Net Worth?
Net worth is defined as the sum of the value of all assets minus any debts owed to others.
The Make-Up Of A Millionaire’s Net Worth
Some millionaires have most of their net worth tied up in their primary residence.
Assets are assets from my perspective. Whether they are held in cash, bonds, stocks, or real estate. The downside of having most of one’s million dollars in a primary residence is a lack of liquidity.
If you need cash in an emergency, it’s hard to sell your house. So some millionaires have more access to cash or liquid assets than others. This is what the phrase “asset rich, cash poor” refers to.
Do you think the average millionaire is living an extravagant lifestyle?
Do they jet around in a private plane and eat dinner out at fancy restaurants every night? I hate to burst your bubble, but they probably are not. If they were, they likely wouldn’t be a millionaire for very long.
As popularized in the classic book The Millionaire Next Door, their lifestyle and habits are mundane but effective for building wealth. It includes a comfortable home, modest automobiles, family vacations, and the like.
What Millionaires Really Have Is…
What millionaires have that others may not is a certain level of financial peace and security.
How To Become A Millionaire
With that background out of the way, let’s get on with the 12 tips on how to become a millionaire.
Many of my findings come from a research project I did last year.
You can find that series of articles right here: The New Millionaires.
1. Most Millionaires Got Rich By Making Money At A Young Age
I may be a little old school about this point. It doesn’t seem like high school kids work side jobs much anymore. I’m not an expert, that’s just my opinion.
Working a side job in high school starts to build a work ethic and responsibility at a young age.
I’m probably an extreme case. At some point in high school, I was:
- Delivering newspapers
- Doing landscape work
- Waiting on tables at a restaurant
It was nice to have cash in my pocket and not be dependent on my parents for spending money.
So, these are just a few ways millionaires make money at a young age.
2. One Of The Best Ways To Become A Millionaire: Increase Main Income
Becoming a millionaire starts with making money. The best way, in my opinion, to make the most money is from your primary career or business.
Get a good education in a marketable field and maximize the earnings potential.
Build millionaire skills both on the job and through formal training. Bring value to your employer or business and demand to be compensated for it.
Say your current employer won’t pay market value for your services? Then clean up your resume and find one that will!
My Perfect Resume is a great tool for creating customized, professional-looking resumes, and cover letters. So, take your job search to the next level.
3. Another Way To Become A Millionaire: Increase Side Incomes
I’m a little old school about this point too. I’m not a big believer in side hustles. I think they can distract from the primary sources of income for the average millionaire in the making.
There is that old expression “jack of all trades, master of none”. Let’s be realistic, you probably won’t become a millionaire because you are walking dogs or driving for Uber on the side.
But that is just my opinion. And I must admit the working world has changed a lot with the rise of the internet and gig economy.
Real estate rentals also seem to be a popular choice. Doing consulting or project work on the side is a good way to go if you have skills that are in demand.
So side hustling is another one of the ways millionaires make money.
Looking for your side hustle to make some extra cash. Check out Survey Junkie.
You won’t make a fortune doing surveys. But you can make your voice heard about new products and services. It’s fun and easy. Why not get paid for giving your opinion?
In my opinion, every dollar counts on your way to becoming a millionaire.
4. You Become A Millionaire By Managing Your Expenses
Research shows that most millionaires prepare a spending plan and stick to it. This is commonly referred to as budgeting. And it is often how millionaires manage their money.
If they don’t have a written budget, they have a solid understanding of where and what they spend their money on.
Most importantly, millionaires spend less than they make.
We all have to spend money. Just be smart about it.
One way I like to save money is by getting cashback on all of my online purchases from Rakuten. It’s free to join and by signing up through this link you get a $10 cash bonus!
That’s just $10 of free money in your pocket. Like I said before, becoming a millionaire means making the most of every dollar.
Read my review: How to save and make money using Rakuten
5. People Become Millionaires By Having A Plan For Every Investment Dollar
So now income is on the rise. And expenses are less than income.
Those elements create excess cash.
Millionaires are adept at putting excess cash to work in intelligent ways. I’m talking about the investing aspects of becoming a millionaire.
But first, everyone needs good information to make a millionaire investing plan.
Personal Capital is the tool I recommend to manage your money and make a plan for it.
And the best part of Personal Capital is that it is completely free to sign up and use.
With Personal Capital, you can:
- Track your net worth
- Track your cash flow
- Monitor your investments
Now you will have a FREE tool to track your net worth and make a plan for your money.
Let’s talk about a few of those ways that people become millionaires through investing.
6. Millionaire Tools Also Include Tax-Advantaged Accounts
The first place for excess cash is tax-advantaged accounts.
You likely know about the ever-popular 401k plan. And the Individual Retirement Account (IRA) in the US and their equivalents in other countries.
Whether it is the tax deduction or the tax-deferred investment gains, these plans are popular choices for millionaires and their investments.
The more money millionaires make typically means higher income taxes. And, they know this. So maximizing contributions to these accounts is a big priority for any millionaire in the making.
You can take total control of your retirement account investments with Rocket Dollar. Rocket dollar allows you to invest in a variety of different assets not offered by a traditional retirement plan.
You can also get a free retirement health account check from Bloom.
7. Becoming A Millionaire Means Minimizing Debt
Most millionaires get rich carry only two types of debt.
Specifically mortgage debt on their primary residence and/or debt related to a business enterprise or other real estate holdings. Once in a while, you might find a millionaire with some remaining student loan debt.
Millionaires prioritize debt reduction with their excess cash.
They target credit card debt and auto loans first, then student loans. Some will pay off the mortgage on their primary residence. Others will keep their mortgage.
My View On Millionaires And Debt
Personally, I have always been very debt-averse.
I recommend allocating excess cash to speed up mortgage reduction.
I like taking the sure thing. And with the recent changes in US tax law; there is less incentive to carry a mortgage if you do not need to.
Not everyone including Certified Financial Planners would agree with me on this. Especially with mortgage interest rates so low. It’s really a personal preference.
8. Become A Millionaire By Investing Money In Taxable Accounts
Now, debt has been minimized and contributions to tax-advantaged plans have been maximized.
Millionaires manage their money at this point by investing in taxable savings and investment accounts. This is money allocated to savings accounts, certificates of deposit, stocks, bonds, mutual funds, and ETFs. Doing this wisely can make you an investment millionaire.
Are you a regular reader here at Dividends Diversify? Then it shouldn’t come as a surprise that I believe people can get rich with dividends.
Often, millionaires in the making invest in dividend stocks for the passive income they provide. Dividends are just one of the best sources of income for the average millionaire.
Sometimes, millionaires like to handle these investment chores themselves.
Millionaire skills often include do it yourself investing. On the other hand, some millionaires prefer to have an investment professional handle this chore.
Do it yourself (DIY) investing is lower cost, but more time consuming and requires basic knowledge of investing principles.
An excellent tool for the DIY investor is an account with M1 Finance.
Or, you might prefer the features and functions of the Webull stock app for buying and selling stock. For a limited time, Webull is offering free stock to anyone who signs up and funds their account.
Both Webull and M1 Finance offer free stock trades. Either is a great way to save money on your investments.
9. Millionaires Manage Their Money Through Automated Savings & Investment
Because most millionaires set and operate against a budget they know how much extra cash they will have each month. This allows for automatic savings and investing taking over.
Savings deductions for tax-advantaged accounts are automatically handled by the millionaire’s employer. And the remaining excess cash is swept to other taxable investment vehicles automatically.
How do millionaires manage their money? No messing around here. Consistency is the key to success.
Millionaires never miss of month of saving and investing. They do it automatically.
10. Another Tip To Becoming A Millionaire: Continuous Improvement
We can boil wealthy habits down to a few key skills.
- Making money
- Spending less than what is made
- Personal finance
Make financial luck come your way. Through reading, learning, and practicing these skills, millionaires learn as much as they can to make more, spend less, and manage their money effectively.
This is one of the best ways to become a millionaire. Millionaires have a continuous improvement mindset. They simply get better at what they do every day. That positive state of mind translates to success, wealth, and good fortune.
11. Making A Millionaire Plan
Armed with the 10 points discussed above, millionaires develop a personal money plan on what they will do in each area. The millionaire’s plan could be in writing or could just be a thoughtful process in their head.
Written plans with action items are a good idea for personal accountability. But not an absolute necessity.
Related Book Review: The Millionaire Master Plan
The Millionaire Master Plan is an interesting “how to become a millionaire book”. The author became a millionaire by building a fortune from nothing. I read it recently and really enjoyed it.
Speaking of enjoyment…
12. Millionairism Means Enjoying The Journey
Yes. Millionairism is a real word. Merriam-Webster defines it as “existence or dominating influence of millionaires”.
When people become millionaires, I doubt their life satisfaction changes the day they reach $1 million in net worth.
So it is very important to enjoy the journey!
Why? Because it takes time to become a millionaire. You probably won’t become a millionaire overnight like some people will have you believe
The wealth building journey is about the process.
Furthermore, it is about learning.
Finally, wealth is about the self-satisfaction money can provide. And the process of improving your financial security each and every day.
Before I wrap up, let’s address a couple of questions.
I just mentioned it’s important to enjoy your journey to millionaire status. Why? Again, because becoming a millionaire takes time. Research has shown the average age to become a millionaire for the first time is 49 years old.
So, let’s run some numbers. And see what it takes to save $1 million in 20 years as an example. And then see how much income that money can generate.
How Can I Save $1 Million in 20 years?
To have a $1 million in 20 years assuming a 9% average annual return on your millionaire investments, you must save and invest $1,497 each month. That is a lot of money to save, for sure.
Now you may better see why the average age of first time millionaires is 49 years old.
Saving $1 million in 30 years is a much more realistic goal. That takes a savings amount of $536 per month.
This is how the majority of people become millionaires by 50. Disciplined savings and investing following the points in this article.
Yes. There are exceptions to these rules. But that’s what they are. Exceptions by the talented and lucky few!
I don’t begrudge them. I congratulate and admire them.
How Much Income Will $1 Million Generate?
$1 million can generate a substantial amount of income. But the amount of income will depend on what you invest the $1 million in.
Let’s assume the $1 million is invested in dividend stocks with moderate dividend yields. Say, 4%.
Then, the $1 million will generate $40,000 in annual income. That is a nice amount of passive dividend income from your millionaire investments.
How To Become A Millionaire: Recap
- Start making money at a young age
- Increase your career or business income
- Increase your side incomes
- Manage spending & live below your means
- Have a plan for every extra dollar
- Maximize savings in tax-advantaged accounts
- Minimize debt
- Invest the rest in taxable accounts
- Automate monthly savings and investment
- Improve your knowledge and skills
- Develop a plan
- Enjoy the journey
Further Reading On Ways To Become A Millionaire
Millionaire Tools: Recap
Throughout the article, I mentioned a number of millionaire tools and resources. They are summarized here for your convenience.
- Build your best resume
- Take surveys for extra cash
- Get cashback on all your online purchases
- Manage all your money like a pro
- Take control with a self-directed retirement account
- Get a free retirement account health check
- Obtain the best loan rates
- Get free stock from the Webull stock app
- Invest using M1 Finance