Many people dream of becoming a millionaire in their lifetime. If you’re one of them, here’s a little secret — it’s a more attainable goal than you’d think. These simple moves will help you reach millionaire status, even on an average salary.
1. Live below your means
You can’t grow wealth if you spend every dollar you earn. If you want to eventually become a millionaire, you’ll need to get into the habit of not spending every dollar that comes your way. That could mean not buying the most expensive home in your neighborhood, driving an older car, or taking modest vacations instead of fancier ones.
A good way to help ensure that you’re spending modestly enough is to put yourself on a budget. That way, you’ll have your various expenses mapped out for you and you’ll be able to identify those it’s possible to cut back on. Having a budget will also help you prioritize where your money goes so that you’re saving consistently without making yourself too unhappy in the process.
2. Put money into tax-advantaged accounts
Taxes are unavoidable to some degree, but you can work on minimizing them. And the less you pay the IRS, the more of your money you get to keep for yourself.
A good way to grow enough wealth to become a millionaire is to put your money into tax-advantaged savings plans like 401(k)s and IRAs, both of which let you sock away funds for retirement. With a traditional 401(k) or IRA, your contributions go in tax-free and gains in your account are tax-deferred until you take withdrawals. With a Roth 401(k) or IRA, there’s no tax break on contributions, but gains and withdrawals are completely tax-free.
3. Invest your money wisely
Saving money is an important step toward becoming a millionaire, but if you leave your cash in a regular bank account, you’ll hinder its growth (especially given what interest rates look like today). A better bet is to invest your money steadily, namely by buying stocks.
If you don’t know a ton about investing in stocks, a good place to start is to buy index funds. Index funds track existing market indexes in the hopes of matching their performance, and they’re ideal for investors who don’t have the time or knowledge to research companies individually.
Of course, there’s risk involved in buying stocks, but the rewards can more than make up for it. In fact, if you were to save and then invest $500 a month over a 40-year period at an average annual return of 7%, which is several percentage points below the stock market’s average, you’d wind up with about $1.2 million. Make it $750 a month, and you’re looking at close to $1.8 million.
It can be done
Reaching millionaire status may seem impossible — but it’s not. If you get in the habit of living below your means, choose the right home for your money, and put your faith in the stock market, you may be surprised at how easy it is to become a millionaire yourself.
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