The pandemic has impacted the economy a lot. It has also caused many to feel a lack of financial security. This can be a strong motivator to inspire people to achieve more. Becoming a millionaire is easier now than ever in this current age of technology.
However, the standards of a “millionaire” can vary. That is why institutions like Ramsey Solutions like to use the term “net worth millionaire”. Some people consider a millionaire to be anyone that has at least $1 million in assets. Other people may consider a millionaire to be someone that has at least $1 million in assets after all debts are paid off. The standards vary.
Being a millionaire isn’t as common as you may think. According to Credit-Suisse, as of 2020 there were 20.27 million people that were considered millionaires in the United States. When you take into account the total population of the United States which is just above 331 million, roughly 6% of the population is a millionaire. That leaves 94% of people who do not meet that threshold.
There are also a lot of misconceptions when it comes to being a millionaire. That is why you should educate yourself before deciding to pursue this path. If you want to learn about what makes a millionaire and how to become a millionaire in 10 years then keep reading!
Common Misconceptions Debunked About Millionaires
You Don’t Need to Come From a Rich Family to be a Millionaire
Many people think that millionaires get their success just from being born into a rich family. However, that’s not the case. Millionaires are often self-made. In fact, according to The Millionaire Next Door by Thomas J. Stanley and William D. Danko, there are just 19% of millionaires that get wealth from a trust fund or estate. This is even further proven by Fidelity Investments that found 88% of millionaires are self made. This should give you some hope that it is achievable even if you don’t come from money.
Advanced Degrees are Not Required to Become a Millionaire
It is true that having a higher education increases your chances of wealth in your lifetime. However, you don’t need a degree in order to get that amount of money. In fact, you can have no degree and still become a millionaire if you go down the right path!
It’s Okay if You are Not a Stock Market Expert
Investing can be a great source of income. It can also be a difficult thing to learn about. That’s okay! You may think that millionaires are all very savvy when it comes to investment knowledge. But that’s not true! In fact, many millionaires still have a lot to learn about investments. So you don’t necessarily need that knowledge to achieve your goal, but it is useful!
A High Paying Job Isn’t Necessarily Required
Don’t count yourself out, even if you don’t have a high paying job! Your savings is a valuable asset in your financial journey. Millionaires can be self-employed. Owning a successful company means that you found a way to make money. That job may be a service like pest removal which wouldn’t be classified as a high-paying, cushy job.
A solid savings plan could also lead you to the millionaire’s club. If you calculate your expenses, you may be able to achieve that goal without sacrificing your job path!
Becoming a Millionaire Does Not Mean You Can be Financially Irresponsible
Let’s say you grow your net worth to $1 million. That does not mean you can just stop handling your money with care. Millionaire status is maintained by good financial habits. Even though it seems like a world of money, it won’t last as long as you may think.
Money Doesn’t Necessarily Make You Happy
While money can alleviate stress that comes from financial difficulty, it doesn’t mean you will feel happy. Money can provide a security net for your life, but you still need to live it. That is why it is important to make sure you do not sacrifice your own happiness on your journey of trying to become a millionaire.
How to Become a Millionaire
If you could become a millionaire overnight then almost everyone would be a millionaire. Unfortunately it can take decades to become a millionaire. On the other hand, it could take less time than that. Many people aim to become a millionaire in 10 years. Luckily, understanding how to become a millionaire in 10 years may be more achievable than you realize. There are some ways to prepare yourself to achieve millionaire status. From there, you can tweak your plan to achieve becoming a millionaire in 10 years.
How to Prepare Your Finances to Become a Millionaire
When you start your journey of trying to be a millionaire, you need to do some preparation. This may include laying down a proper financial foundation. There are some steps that you can take to strengthen your financial standing before deciding to become a millionaire in 10 years.
Step #1: Get a Financial Plan Together
You need to have a financial plan if you want to reach your goals. In order to create a proper plan, you need to have an accurate budget. Your budget should consist of your current income after taxes are removed, and your current expenses. This can give you a clear idea of what your financial obligations are as well as your flow of income. Any additional income can be used towards achieving your goals.
You want to have milestones in order. Each milestone should have a detailed goal that you can aim for. Setting a goal is easier when you consider factors like:
- A deadline to reach your milestone.
- The amount you want to get.
- Your monthly savings.
- Any risk factors that you may deal with.
These plans can not only provide you good structure, but they can also provide you some comfort. If you are getting to your milestone before your deadline, you can take that as a chance to relax.
Step #2: Increase Your Income
You have two options to optimize your budget. You can either increase your income or reduce your expenses. It will likely be easier to find a way to increase your income instead of reducing your expenses. Luckily, there are many opportunities for you to increase your income. Maybe more than you think!
Ask for a Raise
The first place to look for additional income is at your current place of employment. You can talk to your employer to see if they would be willing to give you a raise. When going into this discussion you want to have proof as to why you deserve a raise. Expense reports, the amount of value you bring to the company, and more can help persuade your employer.
Consider a Side Hustle
If your primary source of income won’t pay more, you can get a source of side income. Many people increase their income by having multiple sources. A side hustle can be flexible around your schedule as an easy way to boost the amount of money you make a month.
Consider a passive income. This is a form of income that is very easy to manage. Even though some work is required at first to establish this source of income, it pays off. After the initial work, you can let the income come in with no additional work necessary. That is what makes this income passive. Some forms of passive income include:
- Renting off old textbooks. You can use platforms that allow you to rent out your old textbooks to current students. Every semester can bring you in some extra cash!
- Becoming a rental property owner. You can then hire a property manager and reap the benefits of the property without having to do the work.
- Investing! In the age of advancing technology, it is easy to become familiar with the stock market. You don’t even need a lot of money to start. You can first consider investment apps that start investing just using your spare change.
- Affiliate marketing. This is a great way to generate revenue through your social media. You can get a lot of money if you properly manage this opportunity for passive income!
Those are just some ways that you can earn a passive income. However, there are countless more. The best passive income will fit your financial situation.
Step #3: Change Your Lifestyle (To An Extent!)
This is not to say that you should start living in unfit conditions. That is not how you should handle that at all! Instead, just maybe live a bit more conservatively. For example, if you get your nails done every two weeks. Instead of going to a nail salon, you can do your nails from home! It may take practice. However with enough discipline it will be easy to change!
Another way that you can change your lifestyle is with how often you go out to eat. Instead of constantly buying food from restaurants you can cook at home! Cooking at home every week can save you a decent amount of money.
Some more drastic changes to your lifestyle can also lead to some serious savings. You could consider getting a roommate. If rent on your own is $2,000, you could cut that in half with a roommate. That means you would only be responsible for $1,000 a month. That additional $1,000 that you save can go directly towards your financial goals.
Step #4: Handle Your Debts
If you want to be a millionaire in 10 years then you will need to handle your debts first. When you handle your debts, you increase your net worth since you don’t owe anyone money. You also can save on the costs of interest that you could accrue. It is easy to get into debt, and can be tricky to get out of. That is why there are services available that can help you deal with your debt in a manageable way. These services may be free so it is worth looking into.
Step #5: Be Good with Retirement Contributions Every Year
The government provides incentives for people to take advantage of their retirement accounts. That is why it would be beneficial to reach the maximum amount of contributions every year. This ensures that you can comfortably qualify for tax advantages that are offered.
Since the government offers tax advantages that can help a lot, there are limits for how much you can contribute to your retirement account. For example, in 2021 both Traditional and Roth IRA accounts have limits of $6,000 a year. This limit gets increased to $7,000 if the account holder is over the age of 50.
Step #6: You Should Open a High-Yield Savings Account
There are many financial accounts that you want to have when you are preparing your finances to become a millionaire in 10 years. One of these accounts is a high-yield savings account. You can get better interest rates on the money you put into this account. You can talk to your financial institution to review available account options that they offer.
Step #7: Get an Automatic System in Place for Your Finances
Bills can become overdue if not properly handled. That is why automating your finances can help. You can avoid deadlines when funds are automatically taken from your account. It also helps your savings. You can set a certain amount of money to automatically go towards your savings every month. It is easy to save when you don’t have to think about it!
Step #8: See if You Can Pay Off Your Mortgage Early
When you make a mortgage payment, it is divided between your principal and your interest. Your principal is the amount of money that you borrow from the start. Your interest is the rate that the financial institution charges on top of your principal amount. For the first few years of your loan, a majority of your payment will go towards your interest. As you get towards the end of your loan, a bigger amount will go towards the principal value that you owe.
In order to deal with spending additional money on your interest rate, you can take action. You can apply for additional payments to go towards the principal balance of your mortgage. If you decide to do this, you can reduce the amount of money that you owe interest on before it builds. This could save you thousands of dollars while knocking years off of the length of your mortgage term at the same time!
Step #9: Improve Your Overall Net Worth on Your Journey of Becoming a Millionaire
The best way to achieve millionaire status is to focus on your net worth. That is why you want to handle your expenses and income. When you don’t have many debts to manage, you improve your overall net worth. Improving your net worth may make it easier for you to achieve millionaire status.
If you want to figure out your net worth you can take the sum of your assets minus your total debts. An asset is defined as something that can be physically held or converted for cash value). According to Investopedia, the technical formula to use is: Total Assets minus Total Liabilities minus Intangible Assets equals Tangible Net Worth.
Step #10: Take Your Time to Learn More About the World of Finance
Understanding the finance world can be difficult, especially if you do not have a background in this field. However, if you want to become a millionaire, it is important to research. There are many aspects of the financial world that you want to be more familiar with. The best place to start is with some financial advising sessions. Here you can be provided more context and real life applications of dealing with finances. Many people struggle with financial literacy, you don’t have to be a part of those people!
Step #11: Get Into a Millionaire Mindset
Changing your mindset is actually a very important part in any financial journey that you take on. That is because your mindset is what controls your actions and your attitude. While the millionaire mindset can mean a lot of things, there are a few characteristics that you should try to aim for.
- Think About Planning Ahead: A strong financial plan expects the worst to happen. When you prepare for any unexpected financial obligations to arise in the future, you can be better equipped to handle them.
- A lot of Determination: It can be difficult staying disciplined when it comes to your finances. That is why determination is key. If you have the attitude that it will get done no matter what, you will likely see those results happen.
- Patience is a Virtue: Money doesn’t grow overnight. It takes time for you to reach your financial goals. Even though it is frustrating, you will need to wait to build your finances up to where you want them to be.
- Be Confident: It can be daunting to manage your financial decisions. You want to handle these decisions with confidence. However, it is important to not have a false sense of confidence. You want to be sure that you understand why you are making the decisions that you choose.
- Be Able to be Wrong: While no one likes being wrong, it will happen. You need to have an open mind to failing and learning from your mistakes. When you learn from your mistakes, you can be better prepared for the future.
How to Become a Millionaire in 10 Years
Now that you have a better understanding of how you can get your finances and life in order, you can set a deadline. Deadlines vary by person but an obtainable goal that is still not too far away is the ten year mark. It may be easier than you realize to be a millionaire in 10 years. You will need a lot of commitment to achieve this goal but it is doable. There are some guidelines that you want to follow when aiming to understand how to become a millionaire in 10 years.
Investing is a serious asset that you need to pursue when trying to reach this goal. That is because it is difficult for people to realistically put aside such large sums of money from just their source of income alone. Even with the strictest of budgets, it can be difficult. That is why it is highly recommended to get other sources of income. You can achieve your goals faster this way. Even though it may be stressful, you can get comfort knowing that it won’t last forever.
How Can I Be a Millionaire in 10 Years?
In order to determine your specific plan to achieve millionaire status within 10 years, you may need to get some extra help. Financial advisors can provide you a path of savings that you can follow that is customized to your financial standing. They take into consideration all aspects of your current budget and plan how long it will take you to achieve your goals.
You can also create this plan yourself. If you do not account for any unexpected expenses, you can make a timeline of when you think you could become a millionaire. Life can be full of surprises. So even if you are making great progress for a few years, a financial obligation can make you start from square one. That is why it is important to begin the journey as soon as possible.
How Much Do I Need to Invest to Make a Million in 10 Years?
Investing is a key component to reaching your goal of becoming a millionaire. A system of saving and investing can lead you to the goal that you are trying to achieve. The path to becoming a millionaire in terms of investments takes into consideration a few factors.
The first factor you want to consider is how long you will leave your money in the stock market. If your goal is to become a millionaire within 10 years then you know that your goal is to stay within that time frame. Secondly, you will want to consider the amount that you will be able to contribute to your investment portfolio. This can be a very big factor in what determines when you will reach your goal. Finally, you will want to keep in mind the average annual growth of your investments.
You can use free investment calculators online to help you determine your goals. Assuming that you account for 5% growth every year, you can get a few goals in mind. First you need to determine your starting amount. In this example let’s set your starting balance to be $25,000. Assuming that the rate of return is a conservative 5% you can crunch out the numbers.
A starting balance of $25,000 would require an annual contribution of $76,267 over the course of ten years (assuming the rate of return is 5%). This will allow you to achieve the status of millionaire by that ten year mark. Obviously, this goal is a bit unrealistic. If you were to stretch your timeline by another ten years, it becomes a bit more manageable.
If your goal is to become a millionaire in 20 years then you would only need to contribute $28,237 every year for that time frame. That is way more manageable than contributing $76,267 every year towards investing.
The longer you stretch your goals the easier it is to achieve your goal of becoming a millionaire. If you have no reason to set the limit at 10 years, then you should try to do whatever works for your budget.
Do I Need to Be a Millionaire to Reach Financial Independence?
Not necessarily! Everything is about your goals. It depends on how you define financial independence. Everyone has their own interpretation of what financial independence means. Some people consider financial independence to be when they have the personal capability to manage all of their funds. Others consider financial independence achieved just when they reach a certain income level. It really just depends.
Is Becoming a Millionaire the Goal?
Maybe. There is no standard “goal” that people need to achieve. The levels of income that work for their life is based on them. For example, you could be content by having a net worth of $750,000 opposed to $1 million. That may not be a net worth level that someone else is comfortable with. You want to make sure that you keep in mind your lifestyle when determining financial milestones that you want to reach.
Do I Need to Become a Millionaire to Start a Family?
Not at all! While it is pricey to start having children, you don’t need to be a millionaire. The average cost to raise a child without including college expenses is roughly $245,000 according to the U.S. Department of Agriculture (USDA). This is the average so it can vary. That is why you should consider starting a family based on financial milestones.
Some milestones that you may want to consider are with your career, income, financial status, retirement, college expenses, and insurance goals. In your career you want to have a lot of job security and stability. This will allow you to better plan for the future. In regards to your income, you want to see that you have disposable income. You want to make sure that you can spend that extra money on your family. If you are tight on money and do not have available money to use just on your own, a family will be very difficult to manage.
Other requirements like your financial status, retirement, college expenses, and insurance goals are important too. Financially, you want to see that you have an emergency fund available. This is important because your emergency fund should cover the costs of the entire family, not just yourself. You want to make sure you don’t neglect your own goals either. It is important to make sure you have a clear retirement plan before deciding to have kids.
College expenses and insurance goals are also milestones you want to meet. You want to make sure that you properly plan a college fund for your children. A higher education will lead to an increased chance of wealth. However college can be expensive. On average, private colleges are roughly $35,830. That is a lot of money to plan for. It is also important that you plan for insurance costs. This is an additional premium that you will need to handle every month. That is why you should see that you can comfortably handle these costs.
It is very possible to become a millionaire in 10 years. However, while it may be possible, it takes a lot of hard work and planning. If you make a plan that could lead you to success and you have the discipline to follow it through, you will see the results.
Before trying to become a millionaire you want to make sure that you properly prepare your finances. Preparation of your finances can include increasing your income, managing your debts, improving your net worth, and more.
When trying to become a millionaire in ten years, investing is an important aspect. However, it is important to keep in mind that the stock market always comes with some risk. That risk means that there is no guaranteed return on the amount of money you invest. Just as your investment could make you money, it can lose it as well. That is why it is important to properly plan your journey of becoming a millionaire.
Becoming a millionaire takes time. The sooner you begin your journey then the easier it may be. Take your time, research, and find the method that works for you (even if it takes more than ten years to become a millionaire.)