Retirement
Retirement planning
Save for retirement
10 minute read | February 1, 2024
DoorRamsey
DoorRamsey
So you want to be a millionaire, huh? Fantastic! But is that realistic in this crazy economy? Don't you need a high-paying job or a winning lottery ticket?
Well, we have good news for you. yoube able toBecome a millionaire even when inflation is skyrocketing and the stock market feels more volatile than the rickety roller coaster at your local state fair.
Achieving millionaire status has nothing to do with your family's money – or lack thereof – or where you got your degree. It has everything to do with you and how you deal with itVANmoney. If you're ready to take control of your finances and build wealth, let's talk about some of the most effective ways to reach millionaire status.
8 tips to become a millionaire
NastyThe National Survey of Millionaires,In the largest survey of millionaires ever conducted, we spoke to more than 10,000 millionaires from across the country to learn more about who they are and what they did to reach millionaire status.
It turns out that most millionaires share similar habits and principles. And that means you can build the same habits and follow the same principlesTodayso that one day you can become a millionaire yourself! Here is the list of habits and principles that most millionaires used to build their wealth:
- Stay away from debt
- Invest early and consistently
- Make savings a priority
- Increase your income to reach your goal faster
- Cut unnecessary expenses
- Keep your millionaire goal top of mind
- Work with an investment professional
- Put your plan on repeat
A whole group of millionaires has been calledMillionaires taking small steps-who have lived these eight principles together with those of Dave Ramsey7 babytrinto reach the million mark.
If you follow in their footsteps, you too will be on your way to becoming a millionaire! Are you ready?
1. Stay out of debt
There is an idea floating around in our culture that you have to take big risks to become rich. People think you have to take out business loans and open lines of credit to get ahead, and they justify this by calling it "leveraging" - which is just a fancy word for borrowing money and taking on debt.
But the point is, debt is quicksand for your financial dreams. Every time you buy something on credit or take out a loan, you dig a deeper hole to crawl out of. The money (plus interest) you send to lenders is money you can spend on your future!
People who went on to become millionaires discovered this long ago. They didn't want their most valuable wealth-building tool (their income) tied up in stupid payments every month.
Here are the cold hard facts: 9 out of 10 millionaires have never taken out a business loan and 73% of millionaires have never carried a credit card balancethroughout their lives.1They'll be the first to tell you that one of the biggest ways to reach the million dollar mark is to avoid debt like the plague.
The bottom line: If you want to become a millionaire, avoid debtbeecost. And if you already have some,put it awayand pay it off (Baby Trin 2) as quickly as possible. The only "good debt" isno debts!
2. Invest early and consistently
The sooner you start investing, the greater your chances of becoming a millionaire. It's that simple (thanks,renter's interest)!
If you put aside $300 a month from age 25, assuming an 11% return, you could be a millionaire by age 57. If you were to continue investing and retire ten years later, you would be sitting pretty on your savings pot of $3.2 million. And it's only $300 a month!
How much do you need for your pension? Find out with this free tool!So start investing as soon as you're debt-free (it's fine if you still have a mortgage) and have a fully funded emergency fund. No exceptions!
Maybe you're in your forties or fifties and you're thinking:Good. . It's wonderful for the young people, but I won't go there.We want you to hear us loud and clear: no matter how old or young you are, it's never too late or too early to start. Start where you are!
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3. Make savings a priority
If you have already started investing (Baby Trin 4), well done! When it comes to retirement savings, the goal is to save 15% of your income in tax-advantaged retirement accounts like a 401(k) and Roth IRA. Not 5 percent. Not 10%.Fifteen percent!
Why? Because if you want to become a millionaire,how much moneyyou invest is just as important as the investment itself. We found that it took Baby Steps millionaires who invested 15% of their income toward retirement about 20 years or less to reach millionaire status from the start of their journey! Here's how things would shake out:
The median household income in America is about $68,000.2Let's say you invested 15% of that income in your retirement, which is $10,200 per year, or about $850 per month. If that money were invested over 30 years, assuming an 11% return, it could yield $2.3 million. And that's pretending you don't get an employer match and never got a raise throughout your career (i.ehighunlikely)!
Our research found that 70% of millionaires have saved more than 10% of their income during their working years.3They saved, and they saveda lot of!How could they save so much? This is where the next two principles come into play.
4. Increase your income to reach your goal faster
You don't need a high salary to become a millionaire. After all, a third of all millionairesneverearned a six-figure salary in one year of work!4But if you want to reach millionaire statusfaster, then this is the best way to do itincrease your income. The more money you make, the more you can invest!
How do you do it? You canask for a raise(gulp) or find a new job that pays more. You can start with thatpage congestionyou've always dreamed of selling things that have been collecting dust in your basem*nt. You can go back to school (without worrying).student grants!) or take a training course to increase your skills and earning potential.
One of the defining characteristics of millionaires is that they take personal responsibility for their lives. In other words,they own it.Nearly all millionaires (97%) believe they control their own destiny.5They don't sit around and hope that things will magically change; they go out and do something about it.
So what are you waiting for? If you know you need to increase your income, get out there and do something about it!
5. Cut unnecessary expenses
As you strive to become a millionaire, make sure you spend your money intentionally and with a purpose.
More than 9 in 10 millionaires say they live on less than they earn and stick to the budgets they create every month. And read this: We found that 93% of millionaires still use coupons when shopping!6
So despite what you may have seen on a TV show or heard on cable news, the average millionaire lives a modest life. They don't waste their money on junk and things they can't afford. Instead, they find ways to cut expenses so they can save more for the future. Small sacrifices can lead to big results over time!
So take a moment to review your expenses and compare budgets from previous months. Where are you leaking money? Which budget categories seem to be creeping up over time? Here are a few places to see:
- Insurance: Can you bundle car and home insurance? Can you get better rates with a higher deductible? Look around and find out. Sit down with oneindependent brokerwho can show you where you can save.
- Cable/satellite: Have you ever heard of streaming services like Hulu and Netflix (and about 50 others)? Of course you did. Give them a try, you can probably get the shows you wantwithout cable.
- Gifts: Don't give in to social pressure to buy over-the-top gifts for family or close friends. This puts pressure on them to give something back!
- Restaurants: Here's an experiment worth trying: Eat every meal at home for a month and skip the coffee you get on the way to work every day. You'll be shocked at how much money you can save in 30 days!
- Subscriptions: Gym memberships, streaming music services, magazine subscriptions. . . Honestly, how many of them do you doRealusage? Try to cut some of these monthly subscriptions out of your budget.
Just remember, no matter what you sacrificenot-big or small—will go a long way in helping you achieve your dreams of becoming a millionaire. And you know what? Once you're a millionaire (yes, you will be!), you can just hang in theremoney-saving habits you've started.
6. Keep your millionaire goal top of mind
The steps to becoming a millionaire are the opposite of how most people behave, which means seeing friends and family going places, doing things and buying things. And if you spend too much time focusing on what they do, you could end up in big trouble with your own money.
Nearly half (49%) of millennials say they are influenced by social media to spend their money.7This means they let others' highlights on their social media feed determine how much they spendtheir ownmoney. No thanks! Don't get caught up in the culture of comparison. Fight it with beak and nail. Let's face it: it's time to stop buying things we can't afford to impress people we don't even like!
Millionaires didn't get where they are by playing the comparison game. Only 7% of them feel any pressure to keep up with their friends and family when it comes to spending.8Instead, they stay focused on their own goals and don't care what other people think or do.
Instead of being obsessed with what you aredoesn'thave, concentrate on the things thatRealthings – family and friends, your church, your career goals, the legacy you leave for your children. They will bring you much more joy than a brand new car or a vacation destination ever could.
7. Work with an investment professional
Here's a question for you: If you had heart surgery, would you try to operate on yourself? Of course not. That would be stupid! You would look for the best heart surgeon you can find.
And when it comes to something as important as your retirement future, wouldn't you want to work with someone who knows what he or she is doing? Working with an investment professional is one of the smartest things you can do for your money.
In fact, 68% of millionaires said they have worked with a financial advisor to help them achieve their wealth.9You see? Building wealth is not a solo sport - and it's wise to seek guidance from people who know what they're doing!
If you do not yet have an investment expert, our SmartVestor program will help youfind an investment professional!
8. Put your plan on repeat
To become a millionaire, you have to let time and compound growth do their work. It's a beautiful thing. And if you want to achieve your big financial goals, you need to focus on the small details in the long run.
What are we talking about? Stay out of debt. Continuous investment. Avoid the trap of 'I deserve'. Year after year after year. Wash, rinse, repeat. Guess what? You will continue to do these things even after you reach the million dollar mark because that is what money conscious people do. Continue!
Next step
- To learn more about the plan that helped thousands of people become millionaires, check out Dave Ramsey's best-selling book:Millionaires taking small steps.
- Use oursinvesteringscalculatorto see how much your piggy bank could be worth based on how much you invest each month.
- The SmartVestor program can connect you with investment professionals in your area who can help you invest for the future.
Find an investment professional
Frequently Asked Questions
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What is a millionaire?
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INmillionaireare simply all in onenet worth of $1 million or more.When what youown(your assets) minus what yoube guilty(your liabilities) are equal to more than a million dollars, you are a millionaire. Despite whatever culture makes you believe, being a millionaire isdoesn'tabout how much money you earn in a year, how many rental properties you 'use' or the opinion of your crazy uncle.
Sounds simple enough, right? But let's clear up a few common myths about millionaires.
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Do most millionaires inherit their wealth?
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According toThe National Survey of MillionairesMost millennials (74%) and more than half of baby boomers (52%) believe millionaires have inherited their wealth. But our study on millionaires blows that theory out of the water.
Here are the facts:
- Only 21% of millionaires received an inheritancenot at all.
- Only 16% inherited more than $100,000.
- And get this: Only 3% received an inheritance of $1 million or more!10
Think about it: most people think millionaires simply inherited their wealth, but...the vast majority of millionaires received no inheritance at all- and those who did certainly didn't get enough to make them millionaires!
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How do millionaires get rich quickly?
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It may be surprising, but most are millionairesdoesn'tget rich quick. People who dive into individual stocks, crypto, or their friend's latest rental property scheme looking for a quick and easy way to make money usually only end up with more heartache and less money in their pockets.
So howDoingDo Millionaires Build Their Net Worth? The answer is actually quite boring, but with consistency and patience it works! The main factor that contributed to the high net worth of millionaires was consistently investing in their retirement plans over a long period of time.11It's true! Most millionaires used their 401(k) and IRA to build their wealth.
It's not flashy or luxurious, but it's proven: If you invest 15% of your gross income over 25, 30, or 40 years in tax-advantaged accounts,shallbecome a millionaire!
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Don't most millionaires live a lavish lifestyle?
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We'll let you in on a little secret. . . just because someoneappearancepretending they are millionaires doesn't mean they are. I'm sorry to burst your bubble, but most millionaires look more like your humble neighbor than the celebrities and athletes you see on TV.
In fact, we discovered that the top three car brands driven by millionaires aren't even luxury brands. According toThe National Survey of MillionairesThe two most popular car brands among millionaires were Toyota and Honda, with almost a third of them (31%) driving one of these brands.
Do millionaires spend their money on exclusive brands and dining out on steak and caviar? Nothing. The millionaires in our survey said they spend an average of $117 per month on clothing and less than $200 per month on restaurants.12It is a cheap caviar.
Look, becoming a millionaire is about how you manage your money, not about keeping up with the Joneses. If you want to build wealth and aBaby steps to millionaireStop worrying about what other people think about your clothes, your car or your house. Keep an eye on the prize. Live like no other, so that you can live laterand givelike no other.
This article provides general guidance on investment topics. Your situation may be unique. If you have any questions, please contact oneSmart VestorPro.RamseySolutions is a paid, non-client promoter of participating professionals.
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Ramsey
Since 1992, Ramsey Solutions has been committed to helping people regain control of their money, build wealth, develop their leadership skills and improve their lives through personal development. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and ten podcasts, which have more than 17 million weekly listeners.Learn more.
