7 steps to becoming a millionaire

Everyone wants to become a millionaire, that’s nothing new. Whilst many will believe that winning the lottery or getting lucky is the only way. 

This is completely wrong, it is well within reach. You may need to make some sacrifices and adopt some habits, but you can achieve it. 

7 steps to becoming a millionaire

1. Develop a written financial plan

I have spent the past 15 years running my own businesses. Whilst I may not (personally) believe in a written business plan, I believe in writing a financial plan. 

Writing down your financial goals is key. Just saying you want to be wealthy is completely meaningless. You need to devise a plan, one that can be put on paper.

When you have a plan written down in your hands, it focuses you to stay true to your plan. 

Write down what you need to earn, what to invest in and how much you need to invest. The plan is everything, the dream, the goal, the contingencies and all.

The end goal should be something tangible, you need to know when you have reached it. An example might be “Have an investment portfolio worth $1 million and 7 sources of income by X date.”

Developing a budget to stick to would also be a great idea too!

2. Save, Save, Save!

Saving is necessary for investing. The more you can save, and the less you have to spend means the more you can invest. 

However, you need to have some money set aside. Set aside a small portion of your income as a rainy day fund. This will give you a safety net in case your finances take a turn from the worse. 

Every time you get pay rise, try to save all of it. 

Always look at the savings account, don’t settle for a 0.5% interest account. You will need to do some research, but if you do this, you could get 3% interest! 

You will need to plan for your retirement. If you don’t want to max out your Roth IRA or 401(k), maximise your investments. 

Diversify your portfolio, however, you need to be weary of over diversification. It is one of the most important things to remember. Whilst diversification an be a life saver, over diversification can be devastating to your portfolio.

3. Live below your means

As we have mentioned before, if you want to be rich, you need to live below your means. 

If you choose to live according to the “treat yourself” philosophy, you’ll lose. Not only can it lead to debt, but it can lead to many unnecessary liabilities.

People don’t understand this, the choose to wear designer clothes, shoes, sunglasses and jewellery. 

4. Go easy on the credit

Whilst getting credit may be useful, if left unchecked, it can be more harm than good. 

A common saying is: “If you can’t eat it, don’t put it on your credit card.” This is advice you should live by. 

If you can, don’t use your credit card at all. If you can’t, try to only put purchases on your card that you can pay off in 1-2 months.

You don’t need a credit card, however, one or two credit cards are the maximum. If you have many credit cards, pay them off. 

Remember: the more debt you have now, the less money you have.

5. Start your own business 

Think about the richest people on Forbes. Bill Gates, Warren Buffett, Mark Zuckerberg etc. what do they all have in common?

They run their own businesses.

In a study of 100 millionaires, 80% were self-employed! The majority of those self-employed were entrepreneurs. 

Entrepreneurs create the most wealth of the group. Fidelity Investments performed a study, 8 out of 10 made their money on their own. 

6. Invest in what works for you

It’s often said “You need money to make money.” However, it is a misconception to say that you need lots of money to start investing. 

When I began investing (at 14) I started with $350. When Warren Buffett started, he started with $228 ($4000 in 2019). 

If doing your own research and picking your own stocks doesn’t appeal, try a mutual fund. 

If doing your own searching and picking your own stocks does appeal, try to build a diverse portfolio. You should own between 3 and 10 companies, and you can expect to earn 8-10% annually. 

If you have a lot saved up, consider investing in real estate. Real estate allows you to rent, live and earn long term appreciation. 

If you don’t have enough saved up or don’t like the idea of real estate, try investing in the stock market. This can be done quite easily with investment apps such as Degiro or Robinhood.

You can increase the amount you invest based on your personal circumstances. 

If you want to diversity your portfolio, you should consider looking into passive income sources. Something like a side gig that doesn’t take up much time can help boost your portfolio. 

7. Seek professional advice 

A good financial planner can work miracles, a bad financial planner can be disastrous. A good financial planner can point out which investments to dump and which to buy more of. 

Fidelity reports that 6 out of 10 millionaire investors had a financial adviser. Finding the right financial adviser can help you to get a seven figure portfolio. 

What is the best way to become a millionaire?

The best way to become a millionaire is to be consistent. Investing every month, without failure is key. 

Many people think that investing is a one off activity from the get go. Whilst this may be true for millionaire investors, for regular investors, this is not true. Regular investors need to invest every single month. Not invest one month and then forget about it for 6 months!

You will need to associate with other millionaires. As is commonly said “You are the average of the 4 people you spend the most time with.” By this, if you spend most of your time with poor people, you will likely end up poor. But, if you spend most of your time with millionaires, you will likely end up as a millionaire. 

Are there any other steps to becoming a millionaire that you think I missed? Tell me in the comments!