The thought of “becoming a millionaire fast” appeals to nearly everyone, but it is actually a rarity.
While some speculators may get lucky and hit it big, more often than not those trying to get rich quickly fail – oftentimes losing everything. Nevertheless, this does not mean that becoming a millionaire is a daydream.
In fact, many experts offer a path to becoming a millionaire that while requiring diligence does not involve any extraordinary effort, or taking on undue risk.
While each person’s definition of “fast” may vary, these tips can put you on the path to becoming a millionaire well before the traditional retirement age.
Here are some of the most important.
1. Get Out of Debt
Financial experts often emphasize what a killer debt is to your long-term financial goals. Rather than setting money aside for savings or investments, when you have debt, it essentially just goes down the drain. In addition, with the high-interest rates that credit cards charge, your debt can become a runaway problem in a very short period.
According to a recent study, 9 out of 10 millionaires never took out a business loan, and 73% never carried a credit card balance in their entire life. Each time you go into debt, you dig yourself into a deeper hole financially. Since your most powerful wealth-building tool is your income, you do not want to be sending it to creditors instead of investing it for yourself.
2. Build an Emergency Fund
The primary reason for having an emergency fund is that unexpected financial surprises can and do occur. If you do not have an emergency fund to cover those expenses, you will have to take out a loan or go into credit card debt.
Since debt is a huge step backward when it comes to becoming a millionaire, it is a situation you want to avoid. The first thing you want to do is build an emergency fund with at least $1,000 in it. After that, you will want to build up an emergency fund covering three to six months of your expenses.
3. Make a Budget
You cannot understand where your money is going unless you track it. The best way to do this is via a detailed budget. While making a budget won’t by itself turn you into a millionaire, it’s the road map you can use to ensure that your expenses are covered, that you aren’t making unnecessary expenditures, and that you are saving enough for your retirement goal.
It’s reported that 9 out of 10 millionaires spend less than they make and stick to their budgets every month. Reviewing your budget regularly can also help you identify areas where you can trim unnecessary expenses, such as gym memberships you do not use or magazine subscriptions giving you the information you can readily find for free online.
4. Invest as Early as Possible
Although it is important to pay off debt and build up an emergency fund first, it is also critical to invest as early as possible. This is due to the power of compounding returns.
For example, if you invest $300 per month at an 11% annual return starting at age 37, you will have about $260,000 by age 57. However, if you instead start at age 25, you will instead be a millionaire by age 57. In other words, investing the same amount of money but starting 12 years earlier can quadruple your retirement nest egg with little-to-no effort on your part.
5. Be Consistent, Not Speculative
If you are just starting out in the investment world, it might seem like you will need to take speculative risks to ever reach millionaire status. However, that could not be further from the truth.
In fact, being too aggressive with your investments may actually result in significant losses. The simple but boring way to become a millionaire is to invest regularly and consistently over a long period.
75% of millionaires become millionaires through regular, consistent investing which means that the stories you hear about people becoming millionaires overnight are the exception.
Hope you find this helpful!