Who doesn't want to become a millionaire?
Even though the value of a million bucks is debatable -- since inflation continues to erode wealth -- many of us would still like to reach that millionaire status. For many 'regular' folks, that number is magical. A net worth of $1 million still has a certain cachet attached to it.
But can anyone become a millionaire? I don't see why not. If teachers can become millionaires, chances are that you can, too.
It's not just going to happen, though. If you want to become a millionaire, you need to follow these five steps. They're fairly simple -- but they might not be as easy as you think:
1. Create A Plan.
Your first step to becoming a millionaire is to create a plan. A financial plan is essential if you want to build wealth. Without a plan, it's like you're wandering around on back roads without guidance and without purpose.
You're not going to arrive anywhere important; you're just going to keep on driving. If you're lucky, you might end up someplace nice, but chances are you're just going to run out of gas in the middle of nowhere.
The same thing is true of becoming a millionaire. A written financial plan will provide you with something concrete to turn to. If you need the help, talk with a financial planner who can help you with an integrated plan for reaching your goals.
2. Prioritize Your Spending.
If you want to become a millionaire, you have to live within your means now. It sounds simple, but for many people it's tougher than you think. That means sometimes you have to make hard decisions. Make sure the most important expenses are taken care of first. If it's not that important, or you can't afford it, drop it off the list. You don't want to go into debt now if it's going to keep you from becoming a millionaire later.
While there are certain types of leveraged debt that won't hinder your millionaire journey if used correctly -- debt taken on to start a business or buy a home, for example -- most high-interest consumer debt is just going to drag you down.
3. Earn More.
One of the money sayings that I don't really like is 'spend less than you earn.' To me, that seems like a more passive way of going about things. It implies that you should cut costs and that there isn't anything you can do to boost your income.
I'd rather flip that saying so that it puts you in the driver's seat: 'Earn more than you spend.' It may seem like an insignificant change, but to me, it's about the mindset. Saying that you will earn more puts you in control of your income. And it's true: You can always earn more money.
Start a side hustle. Improve your marketable skills so that you qualify for a raise or promotion. Sell your unwanted stuff on eBay. There are plenty of ways that you can boost your income so that you make more money that can be used to help you reach your goal of becoming a millionaire.
4. Invest.
Let's face it: You're probably not going to become a millionaire unless you invest. Compound interest works on your behalf, since your money is earning money. The great thing about investing is the potential to grow your wealth over time without the need for a ton of capital.
You don't need a lump sum to make it work, either. Dollar-cost averaging is an investment strategy that anyone -- even someone with only $25 a week to start out -- can use to help accelerate wealth growth. You do need a plan to invest more than that as time progresses, but getting started is the key. As you earn more money and make investing a higher priority, you can boost your contributions to various investment accounts (tax-advantaged retirement accounts are great resources), and increase your chances of becoming a millionaire.
Dividend reinvesting is another great strategy. It's one of the pillars of my colleague Amy Calistri's strategy with her Daily Paycheck newsletter. It's helped her collect more than $1,400 per month in dividend checks. And while you may not be able to get there right off the bat, with some patience and consistency, you can. (Click here to learn more about her strategy.)
5. Protect Your Assets.
Make sure that you are protecting your growing wealth. One of the simplest things you can do is make sure that you have adequate insurance. The right insurance policies for your home, car and health can reduce the chances that an unexpected event will drain your finances dry. As you grow your wealth, consider an umbrella insurance policy that can further protect you from liability problems and protect your assets in the event of certain lawsuits.
You can also protect your assets for your family with the help of life insurance and estate planning tactics.
The Investing Answer: If you really want to become a millionaire, you need to start planning right now.
See a financial professional (who doesn't get paid based on selling you certain products) who can help you plan your course. Learn to make the tough decisions, and look for ways to compound your wealth. With a good plan, you'll be on the millionaire path in no time.
