This is the dream of most people on the planet, but few have the knowledge or fortitude to make it happen. It takes planning every step of the way, and those people who stick to it, even in the face of financial or personal reversals, can become millionaires in less time than they realize. Read on, because some of the ideas might surprise you.
Find out how much you are worth today because you cannot get where you are going without knowing where you start. Add up the value of all your assets. If you own a home, what's it worth? How about your investments and savings accounts? And don't forget the money you have in your 401(k) and Individual Retirement Accounts. Once you have added up today's value of all you have, the result is your current net worth, and you are probably worth more than you realized.
Stay in good health, or become that way. Research done by "Smart Money" magazine found that people with good health can save more than $80,000 in 10 years. That happens not only because they earn more, but they will spend less on the cost of health-related expenditures as well as insurance costs.
Cut your expenses if you are intent on becoming a millionaire. For instance, let's say that you and your family spend about $75,000 each year on everything from your mortgage to that family get-away. If you reduce your spending by as little as $250 each month, with compound interest you will have more than $50,000 in 10 years.
Milk your 401(k) and your IRA for all they're worth. Without a doubt, those government-sanctioned savings plans are the most powerful weapons you may have at your disposal. Not only do you not owe any income tax on contributions to them until you begin making withdrawals, most employers will match up to half of your contributions to your 401(k). Until you become a “certified” millionaire, make the largest contribution you can to those plans.
Build your investment portfolio to provide you with maximum growth potential at a low cost. By staying in good health and reducing your expenses as suggested above, you will have a certain amount of money each month to invest. Automatically, you will be “dollar-averaging” your portfolio if you add to the existing holdings each month. And if there is a downturn in the economy, resist the temptation to cash in your holdings because, as someone once said, “This too shall pass.”
Throw away the rule that says you have to be smart to be a millionaire. Dr. Jay Zagorsky, a researcher at Ohio State University, states that there is no connection between having a high IQ and becoming rich. Dr. Zagorsky's research indicates that people with higher IQs tend to make more money but that is overridden by how well they build their estates.