There’s little magic involved in becoming a millionaire. It’s more about discipline.
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?
Here’s what we know about millionaires
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.
1. Build an emergency savings account
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.
2. Earn more than you spend
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 fighting debt
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 …….