Do you often find yourself dreaming about what you would do if you were a millionaire? Maybe you fantasize about retiring early and traveling the world. Or maybe what excites you is being able to donate to a bunch of causes you care about.
No matter how you would spend your dough if you joined the ranks of young millionaires, you might suspect the only way you’ll ever be that rich is if you win the lottery.
But the road to wealth isn’t that narrow—there are many ways to become a millionaire. Sure, winning the lottery would make it simpler, but some middle-class workers retire with over a million dollars in savings because they made good financial decisions and have luck on their side.
Others may have started businesses that brought them success, advanced their careers so that they made enough to save seven figures, or made smart and successful investments.
Though there are no guarantees, here are some ideas that could help put you on the path toward becoming a millionaire:
Getting a Good Job and Increasing Your Income
You can’t join the ranks of the young millionaires if you’re not bringing in more money than you need for your basic necessities. But getting a good job and increasing your income isn’t always as easy as it sounds.
If you haven’t gone to college yet, going could increase your potential income. You could also go back to college for a master’s degree or even a doctorate to up your earning potential, or take on a side hustle.
If you don’t want to get more schooling or spend your nights and weekends hustling, you could look at people who have your degree who have become very successful.
Maybe they’ve figured out how to use it in unexpected ways or maybe they’re great at chasing opportunities for professional advancement. You could invite them out for coffee to learn from them!
Another way to potentially increase your income could be to start your own business. While starting a business is risky , since 20% of businesses fail in their first year and 50% fail by their fifth year, if you’re able to find the right product for your market, then you could potentially make a lot of money.
That’s how some young millionaires made their first millions—people like Grant Sabatier, who made his money by founding Millennial Money , said in an interview with Money Magazine that you need to keep searching until you find something to do that, “you like the most that makes you the most money.”
Eliminating Debt
One thing that could be holding you back from becoming a millionaire is debt—especially if that debt is “bad debt,” a term often used for high-interest debt. Eliminating your debt could be key because it’s difficult to build wealth if you’re paying a significant portion of your income toward interest.
That’s what billionaire Mark Cuban does. He’s said in the past that, “if you’ve got $25,000, $50,000, $100,000, you’re better off paying off any debt you have because that’s a guaranteed return.”
Paying off debt could help free up money to invest and help you build wealth. One way to pay off debt is the debt avalanche method, which suggests paying off the debts with the highest interest rates first and then focusing on debts with the next highest interest rates (while still making minimum payments on all of the debt, of course). A financial tracking program is just one method that could help you plan ways to pay off debt.
Eliminating debt isn’t just about paying off existing debt, it’s also about reducing the chances of going into debt in the future. Part of a debt payoff strategy could involve reducing spending so that, for example, you don’t need to rely on credit—or by setting a strict budget and paying with cash whenever possible.
You also might want to create an emergency fund by setting aside a certain amount every month so that if you have a financial setback, you don’t have to go into credit card debt.
Cutting Overspending and Saving Your Money
Getting control of your spending is critical to building wealth. One way to potentially become a millionaire is to save aggressively.
That doesn’t mean that you have to cut back on everything that gives you pleasure, but you could consider the happiness return on investment you get from the money that you spend. How big of an apartment or home do you truly need to be happy? What kind of car do you need? Do you need to buy a coffee every morning?
You could find ways to cut back on the things that don’t matter so much, but not skimping to the point that you miss out on things you love. For example, maybe you need your morning latte, but you can do without spin classes.
Or maybe coffee shop beverages can fall to the wayside, but you can’t get by without the fun of weekly Zumba. Also, you could focus on cutting back on big expenses instead of those that won’t have a huge impact on your budget.
For example, dining out only once a month, adjusting your thermostat higher or lower depending on the season, or finding a cheaper, smaller home to save a significant amount of money.
While cutting back can be hard, Sebatier told Money Magazine that it’s all about how you look at it. “You have to cut back, but you should view saving as an opportunity, not a sacrifice.”
One way to stay on top of managing your money is to create a debt reduction plan.
Making Smart Investments
When it comes to how to become a millionaire, getting your money to work for you is a common refrain. But investing is not a get rich quick scheme. Just as billionaire and investing wunderkind Warren Buffett says, “Successful investing takes time, discipline, and patience.”
Investing your money can seem complicated since there are so many ways you could invest your cash, but there are a few rules to know that could help you improve your chances of becoming a millionaire.
First, compound interest can make all the difference. Compound interest is what happens when the interest you earn on your investments starts earning interest.
The more time your money has to compound, the more it will grow. That’s why some save aggressively starting when they’re young.
Saving $100,000 by the time you’re 30 might not be possible for everyone, but the more you save when you’re young, the greater impact it could have on your net worth.
There are other ways to become a millionaire. Another option to help you on the road to $1 million could be to reduce the amount you spend on investment fees. High investment fees can have a big impact on your returns, so you might want to look into low-fee investments. If you’re new to investing a robo-advisor might be the right fit for you and could cost you no management fees.
Finally, you might want to make sure that you invest in a way that’s right for you throughout your life—which could mean investing more aggressively when you’re younger and gradually becoming more conservative in your investments as you age.
Ready to Get Started Investing?
Everyone might dream of becoming a millionaire, but that doesn’t mean it’s always possible. Becoming a young millionaire might involve a lot of sacrifices and luck—especially if you aren’t getting help from family members with deep pockets.
But becoming wealthy is still possible if you didn’t grow up with a silver spoon. You could start with these tips and see how far they take you on your path to being a young millionaire.
You can start investing your money with SoFi Invest. You can do it yourself by choosing stocks, ETFs, and cryptocurrency account, or let SoFi build a portfolio for you with automated investing.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
SOMN19174
