11 Steps To Reach Millionaire Status in 5 Years (or Less)
Many of us think that millionaires are tech innovators and celebrities who live large. That is not true for the majority of millionaires in the U.S.A. In fact, the U.S. has over 20 million millionaires, which is the largest number in the world. Many of those millionaires are those living next door, driving those Toyotas, living super frugal lives. They have created wealth through multiple income streams like stocks, bonds, real estate, personal businesses, and maxing out their 401Ks.
If you, too, want to be a millionaire, here are eleven steps to achieve that status in 5 years or less. It could also take 10 years, but these steps will help you supercharge your money.
1. Investing in Yourself
Not all of us are blessed to be given a golden spoon when born. Many people inherit money, which is like starting on third base; with a single, you have already scored big.
Fidelity did a study that found 88% of millionaires are self-made. That means many of us who did not inherit money have a chance to hit it big. It all starts with investing in yourself. Warren Buffett famously said, “The most important investment you can make is in yourself.” That means to increase your skills, you need to learn how to do them better, take a class, read some books, and then apply these new skills to get job advancements.
So, if you want to earn more money, learn more and advance your skills. Then, negotiate raises to get paid more.
2. Creating a Wealth-Building Plan
Failure to plan is planning to fail. If we do not have goals or a way to accomplish what we want, we may be spiraling in circles and not advancing as we should. That means it is time to create a plan. It could be a five-year plan to hit a salary of x amount or even invest x amount every month and slightly increase that. With a plan, you track your progress and make adjustments along the way.
3. Invest in Index Funds
Many people do not know where to start with investing. There is always that hot stock that is rising in the markets, but we cannot always be able to invest in those due to their price and volatility. It is a simple approach to investing in a simple market index fund or ETF. A great ETF could be VOO, SPY, or VTI. These track the S&P 500, and VTI tracks the entire U.S. stock market. It is hard enough to pick the right stocks, so why not pick them all?
Warren Buffett owns SPY and VOO in his portfolio and suggests that the best way to invest your money is to buy a simple index fund ETF like one that follows the S&P 500.
4. Grabbing That 401K Match
One of the most powerful wealth-building tools is the 401K match. Be mindful that many 401Ks could have a vestment period of anywhere between a few months to possibly three years. That just means that the match from the company may not be your money until after that vestment period.
Either way, it is always best to grab that 401K match. The company is offering you money to invest in your 401K. That is hard to turn down. As I worked at a company in 2017, several coworkers chose not to open the 401K and grab a match. They were basically missing out on a $50-100 bonus every week.
Step number 4: grab that match and let the compounding grow on your retirement money.
5. Starting a Side Hustle
Do you like dogs, sports, or have other hobbies that don’t make you any money? It is time to change that. People are looking for others with skills. It can be as easy as house sitting for a friend or neighbor and getting paid for it.
Starting a side hustle is a great way to earn extra money. Your job may not pay as much as you would like, so if you can bring in a bit of extra money, then the money could be extra beneficial. Now, you can save more and put that money towards a business or investments or create that emergency fund you needed a couple of months ago.
6. Starting Your Own Business
A side hustle can easily become a business. If you have the skills and the knowledge, you, too, could be a business owner. It may not be easy, but it could provide an infinite ability to earn much more money.
In 2023, my side business was making more than my job, so I quit and went full-time. This just means I now have the ability to create, work full time on the business, and earn a larger income. It may not be easy as clocking in and out at a 9-5 job, but there are some benefits to running your own business. It is hard work, but it can be totally worth it.
7. Increase Your Savings Rate
If you are spending all of your money each month, it is hard to hit that millionaire status. So, it is time to start increasing that savings rate. That can all start with tracking your spending and creating a budget. The word budget stings people for some odd reason, but tracking your spending can be huge. You can then see where all your money is going and cut back a bit to save more.
One other way to get a higher savings rate is to save first and then spend the rest. Start off with having some automation to your savings account, like 10% or even higher, like 20%, and learn to live off of 80% of your money. Then, you can slightly increase it to save even more money. After that, try to increase your income to get a larger savings rate.
8. Get Rid of Bad Debt
Debt is something that slows the progress of creating wealth. Most people could have debt in the form of a mortgage, which is not necessarily bad debt (unless your mortgage is way high). Debt, like credit card debt, which is 26% or even higher in interest, can be devastating. It is best to eliminate this bad debt and focus on living below your means.
9. Stop Impulse Spending
Some people like shopping therapy. You know, when you feel down about yourself, and shopping helps perk you up. That is also impulse shopping as well. The spending could get out of control and cause bad debt, less money in your account, and a spiral that could cause you to wreck your wealth-building plan.
Shopping is not bad. It is best to avoid those impulse shopping trips to save more and spend less.
10. Create Multiple Income Streams
Our main hustle (or income) is our day job. That brings in the money we need to sustain life. If that income is gone, what will you do? That is why having multiple income streams is so important. Creating a side hustle that brings in income can help if you lose a job. Make an investment plan in which your stocks and bonds generate necessary income. Even investing in your retirement accounts helps to offset shortcomings when you hit retirement.
The average millionaire has about seven streams of income. So, it is best to start diversifying your income and creating other streams.
11. Stay Patient
The post talks about hitting a millionaire status in five years. A lot can happen in five years. The market could crash, you could lose your job, or even little setbacks and blow your plan up. The key is staying patient. If you plant a lemon tree in your yard, it is not expected to produce twenty lemons in the next year. It may produce a couple. In a few years, that tree will mature and start producing so many lemons that you will pat your back for your patience.
Take some time and be patient, adjust your plan accordingly, and take action.
Millionaire Status
Five years sounds too quick to hit millionaire status. You know, that does sound pretty hard for most people. How about twenty years? That sounds more like it. In twenty years, you can invest $1,500 a month at 10% (7% return and 3% inflation) and hit that millionaire status. If you want to do it quicker, save and invest more money. You need to start. Starting is the hardest part, but these 11 steps will be a great guide to get you started.
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