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So you want to become a millionaire. You know your goal, but maybe it seems too far off in the distance, too improbable, too unattainable, for an everyday person like you to reach. You’ve seen the success stories on TV, but those people inherited their money, had high-paying jobs, or hit it big with the lottery. Maybe you find yourself thinking: If only I was that lucky.
Well, I’ve got good news for you. You can become a millionaire—and it has nothing to do with your family’s money or your education. It has everything to do with you.
If you follow these eight principles, you’ll be on your way to becoming a millionaire. Are you ready?
Steer Clear of Debt
From cars to clothes to houses to jewelry, you can get a loan for pretty much anything nowadays. There’s this idea floating around our culture that you should get what you want when you want it. Get it now, pay for it later. And pay more later.
But hear me say this: Debt is quicksand to your financial dreams. Every time you buy something on credit, you’re digging a deeper hole for yourself. That money you’re sending to lenders is money you could be putting toward your future!
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For example, take the average car loan, which has a monthly payment of $523 and a term length of five years and nine months.(1) If you were to invest $500 a month for five years instead, you could have $40,000. And look at this: If you invested that $40,000 for another 20 years, you could have almost $270,000! Now where’s that car in 25 years? Most likely in a junkyard somewhere.
Bottom line—avoid debt at all costs. And if you already have some, get rid of it as soon as possible.
In addition to steering clear of debt, investing early can help you become a millionaire.
If you start putting away $300 a month beginning at age 25, you could reach millionaire status by age 60—and be sitting pretty on a $2 million nest egg come retirement (age 67). That’s just $300 a month! If you waited until age 35 to start investing, you’d have to put away $800 a month to hit the million-dollar mark by age 60.
Let’s look at it a different way.
If you invested $300 a month for 40 years (age 25 to age 65), you could have $1.75 million. If you invested that $300 a month for 30 years instead (age 35 to age 65), you’d only have $651,400. You’d have to work an extra 10 years (to age 70) to hit $1 million. And you’d have to work until age 75 to hit $1.75 million. Do you want to wait until you’re 75 to become a millionaire? Me neither.
So, start investing as much as you can as soon as you can.
Get Serious About Your Savings
If you’ve started investing, great! But keep in mind, if you want to become a millionaire, the percentage you invest is just as important as the actual act of investing.
The average personal savings rate in the U.S., including retirement savings and emergency funds, is 5.5%.(2) If we apply that percentage to the median household income of approximately $59,000, it works out to $3,245 a year or around $270 a month.(3) Invested over 30 years, assuming a 10% rate of return, that money could turn into $586,256. That number looks great, right?
It might, until you find out the average couple will need $280,000 for medical expenses in retirement, and that doesn’t include long-term care.(4) If you subtract that amount from your investment total, you’d only have about $306,000 left. Can you live off that for two decades? It ends up being only $15,300 a year. Yikes.
Let me give you a much better scenario. If you invested 15% of that $59,000 income, you would be putting away $8,850 a year or around $737 a month. Over 30 years, that could grow to $1.6 million, assuming a 10% return. And if you waited just five more years, you’d be sitting on over $2.3 million. That beats $15,300 a year, don’t you think?
Increase Your Income to Reach Your Goal Faster
When I talk about how to become a millionaire, people often say, "But Chris, I don’t make that much money. I can’t save enough." Let’s get something straight here: You don’t need a six-figure salary to become a millionaire. However, if you’re crunching the numbers and realize you still can’t put away the recommended 15%, you do need to increase your income so you can.
How do you do that? You can get a job that pays more. You can take on a second job temporarily. Or you can get training to increase your skills, demand and earning potential.
For example, let’s look at the field of nursing. You can become a Nursing Assistant (CNA), Licensed Practical Nurse (LPN), Registered Nurse (RN), or an Advanced Practice Registered Nurse (APRN). Each of those jobs requires a different level of training and testing, and their salaries all vary. An LPN makes around $45,000 a year, while an RN makes around $70,000.(5,6)
Do you see where I’m going with this? When you increase your skills and expertise, you can increase your salary. That may mean getting additional education, but the payoff is worth the effort. If you’re worried about paying for it, apply for scholarships and grants. The money is out there. Just don’t ever take out student loans!
Cut Unnecessary Expenses
As you work toward becoming a millionaire, you also want to make sure your money is being spent with intention. So, sit down and evaluate your expenses regularly. Look at your budgets from previous months to see where money may be leaking or where you could cut expenses. That’s money you could be investing and putting toward your 15%!
Here are a few areas to evaluate:
- Insurance – Can you bundle car and homeowner’s insurance? Can you get better rates? Look around and find out. Sit down with an independent agent who can show you areas where you can save.
- Cable/Satellite – With the competition among streaming services like Hulu and Netflix, you can probably get the shows and stations you want without cable. No need to pay $100 a month for four channels of C-SPAN!
- Gifts – Don’t give in to the cultural pressure to buy extravagant gifts for family or close friends. If you do, you’re putting pressure on them to return the favor! And don’t get me started on kids’ birthdays. Let’s take it down a notch, people. It’s a birthday, not a presidential inauguration!
- Restaurants – Try an experiment with me. For one month, eat every meal at home—even that coffee on the way to work. See what happens. I guarantee your budget will feel better in 30 days!
- Automatic Renewals – Look at gym memberships, streaming music services, and magazine subscriptions. How many of those do you really use? Be honest.
If your budget has been cut to the bone and you still can’t put away 15% of your gross income every month, don’t get discouraged! There are other things you can do to cut expenses. You could downsize to another home with a smaller mortgage payment and cheaper utility bills. Or you could move to another part of town or even to another city altogether where the cost of living is more affordable. Those options are a bit more extreme, but if you want to become a millionaire, they can help you get there!
Here’s my point: You control your expenses. You don’t dictate how much you’re charged per watt of electricity, but you do control the thermostat!
Keep Your Millionaire Goal Front and Center
The steps to becoming a millionaire run counter to most people’s behavior, which means you’ll see friends and family going places, doing things, and buying stuff. And if you focus on what they’re doing, you could be in trouble financially. Just this year, a study showed that 57% of Millennials said they spent money they hadn’t planned to because of what they saw on social media. And 88% of them, along with 71% of Gen Xers and 54% of Baby Boomers, believe social media creates a comparison problem.(7)
We live in a comparison culture, people. We buy stuff we don’t need to impress people we don’t even know. Who are you trying to impress? Seriously. It’s a good question to ask yourself when you’re tempted to buy something you don’t need.
The people I know who have become millionaires didn’t get there by playing the comparison game. They stayed focused on their own goals and didn’t worry about what other people were thinking or doing.
With that in mind, here’s my challenge to you: Instead of obsessing over what you don’t have, focus on the valuable but intangible gifts in your life—family and friends; your church; work that matters; the legacy you’ll leave your children. Those will bring you much greater and longer lasting joy than a new car or a destination vacation.
And know that it’s okay to still enjoy stuff—just make sure it doesn’t derail your larger plan to become a millionaire.
Work With an Investing Professional
There comes a moment in life when parents realize the value of a teacher. That moment comes when they’re helping their kids do homework. You know what I’m talking about! Whether it’s English or math, you reach a point as a parent when you say, "You know what? Let’s find someone who’s better at this than I am."
Working with a financial pro is no different. Yes, you could manage your investment portfolio on your own. You could do the research, figure it out, and be okay. But wouldn’t it make more sense to work with someone who has the training, experience and knowledge? The statistics tell us working with a financial advisor makes a difference.
One study from John Hancock showed that 70% of people who work with a financial pro are on track or ahead in saving for retirement, compared to just 33% of those who don’t use an advisor.(8) And another study found that people who have no retirement plan have, on average, around $45,700 in retirement savings. In comparison, those who have a written plan prepared by a professional advisor have, on average, about $203,000 saved for retirement.(9)
Those numbers are proof enough to convince me that working with a financial professional is in my best interest. If you don’t currently work with a pro, check out our SmartVestor service. It’s easy to use, and it’ll help you find investing pros in your area.
Put Your Plan on Repeat
To become a millionaire, you need to let time and compound growth work. That’s why you’ll often hear me say that investing is a marathon, not a sprint. For you to achieve your big financial goals, you have to stay focused on small actions for decades. You have to stay out of debt. You have to keep investing. You have to avoid the "I deserve" trap. And you have to continue working with a pro. Year after year after year. And guess what? You’ll keep doing those things even after you hit that million-dollar mark, because that’s what money-smart people do.
But there’s one more thing I hope you’ll be doing—enjoying life as a millionaire!
Want more information on how to become a millionaire? Preorder my new book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth—and How You Can Too. My team and I studied 10,000 millionaires—the most ever—to find out what it takes to become a millionaire. What we discovered might surprise you!
About Chris Hogan
Chris Hogan is a #1 national best-selling author, dynamic speaker and financial expert. For more than a decade, Hogan has served at Ramsey Solutions, spreading a message of hope to audiences across the country as a financial coach and Ramsey Personality. Hogan challenges and equips people to take control of their money and reach their financial goals, using The Chris Hogan Show, his national TV appearances, and live events across the nation. His second book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth—And How You Can Too is based on the largest study of millionaires ever conducted. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at chrishogan360.com or facebook.com/chrishogan360.