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how to become a millionaire

How to Become a Millionaire

In this article I am going to explain how to become a millionaire in 9 simple steps! Read on to find out how!

 

Tip: Save the image above to Pinterest so that you can easily find this article on how to become a millionaire with just $200 a month later!

 

How to Become a Millionaire with Just $200 a Month!

That magical number—$1 million. Even though a million dollars isn’t what it used to be, having a million dollar net worth will still allow you to live a comfortable (and awesome!) retirement.

And, sadly, it is still something most Americans won’t attain. But you can do it; it’s really not hard! It takes a little bit of discipline and dedication, but all it takes is $200 a month! And saving $200 a month is very doable for most families if they make it a priority.

So how does $200 a month become $1 million for retirement? The answer is compound interest. Albert Einstein called compound interest the eighth wonder of the world. When I first learned about the amazing power of compound interest in an extracurricular class I took with my husband while he was in college, I got hooked on personal finance.

I then began a serious study of personal finance, and it’s something I’m still passionate about, more than a decade later. Even if math isn’t your favorite or your best subject, like it wasn’t for me, you can still rock your personal finances. And I’m here to help you do it.

 

Practical Advice for How to Become a Millionaire

In a later section in this article I give very concrete, practical, simple steps you can take to have the money available that you need (as little as $200 a month!) to become a millionaire.

But before I talk about those steps to become a millionaire, though, I want to mention some other habits that are essential for those on the path to becoming millionaires.

 

1. Decide to spend and save intentionally.

In order to become a millionaire, you have to have a little bit of money to invest.

It does not take a ton of money to become a millionaire when you invest regularly over the long term (as you will see below). But you do have to be intentional with your money in order to have some money to invest.

 

2. Start from a solid foundation.

Before you begin investing, you should have some money set aside for the inevitable financial setbacks that happen in life.

The reasons are pretty simple. If you do not have an emergency fund, when something bad happens (and it really is a matter of when, not just if), then you will have to stop investing to take care of the emergency—or worse yet, you might even feel tempted to pull money from your 401(k) or other retirement or investment accounts to take care of the emergency.

And that is something that you definitely do not want to do! So before you begin investing for retirement, start with a solid foundation. And part of that solid foundation is to have an adequate emergency fund.

Before beginning to invest, you really should have an adequate emergency fund. (That simply means that you have money saved in a separate savings account that is designated for emergencies only.)

A great place to park your emergency fund is with CIT Bank, which offers one of the best savings interest rates around. And right now, you can earn up to $300 when you open a Savings Builder account! Learn more or open your CIT Bank Savings Builder account here.

Learn how to build an emergency fund.

Tired of tiny interest rates on your savings?

Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

Then you should check out CIT Bank. We love our CIT savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)! It is a great place to put your emegency fund and other savings.

And right now you can get up to $300 when you open a Savings Builder account! Click here to learn more and open your savings account today!

3. Create a spending plan.

In order to spend and save intentionally, you have to have a spending plan (aka, a budget).

If you want any money available to save and invest, that means that you cannot spend it all on living expenses. And that is where a budget comes in.

Even though a budget might seem restrictive, once you start doing it, you will actually feel like you got a raise! And that is because you will start finding places in your budget where you can reduce your spending.

Having a spending (and saving and investing) plan really is the only way to win with your money and build wealth over time.

You can find the complete beginners guide to budgeting here.

 

4. Begin looking for ways to reduce your spending.

As you begin to budget, you will find places where you can cut your spending. I will talk in much more detail below about 9 areas where you can reduce your spending in order to find the $200 a month you need to invest to become a millionaire, but here are a few quick ideas to start you thinking about it:

  • Think of ways you can cut your grocery spending.
  • Reduce the amount you spend eating out.
  • Spend less on entertainment.
  • Find ways to reduce your transportation costs.
  • Slash your utility bill.
  • Cut your housing expenses.

 

5. Find ways to increase your income.

Finding ways to reduce your spending in order to have money to invest is powerful, but finding ways to increase your income is potentially even more powerful!

And the reason is simple: there is only so much that you can do to cut your spending, but your ability to increase your income is nearly limitless!

For example, you could work to get a promotion or a raise.

You could start an awesome side hustle such as blogging to earn extra money on your own terms. Learn how I make $1,500–$2,000 a month as a newer blogger with these different ways that bloggers make money (and there are many, many other bloggers who make $10,000+ a month working part time or full time from home).

You could get a second job or work overtime.

For even more ideas, check out these awesome ideas for how to make more money

 

6. Start investing as soon as you can.

I will discuss this in greater detail below, as well, but because of the amazing power of compound interest, the sooner you can get your emergency fund in place and begin budgeting and reducing your expenses to have money available to invest, the better.

Why Become a Millionaire?

As I said above, even though a million dollars is definitely not worth what it was 50 years ago, it is definitely enough to provide a comfortable lifestyle in retirement if you spend that money wisely.

And fortunately, because of the many ways that you can make money today, becoming a millionaire has likely never been easier than it is today. For example, there are many side hustles that you can do from home that can give you a great additional income that you could use to invest potentially even more money toward your awesome retirement.

Interested in starting an awesome side hustle that you can do from home to make a great part-time or full-time income doing something that you love and working for yourself on your own schedule? Learn more about how to make money blogging here.

 

Tip: Learn more about how to save for retiremnt here.

By having retirement savings of at least $1 million, you can open up a lot of opportuntunities that you otherwise would not have.

With $1 million or more, you can definitely have financial freedom. You will not have to work into your 70s. You will be able to do some travel and give to worthy causes and pursue other hobbies and pastimes. Depending on the type of lifestyle you want to have and where you choose to live, you may even be able to retire early or semi-retire early if you choose to.

No matter what it is that you are passionate about and what you want to accomplish in life, your path to get there will be easier if you have prepared well financially by setting and working toward those goals. You can learn more about how to reach large financial goals here.

How $200 a Month Becomes $1 Million

It definitely is realistic to become a millionaire by investing just $200 a month! If you graduate from high school or college and begin investing $200 a month by age 25 and work until age 65, and you earn a 10 percent average annual rate of return (very doable over the long-term with good growth stock mutual funds), then you would retire with $1,168,444.

If you are reading this article a little late in the game and you are already 30, you can still easily become a millionaire by retirement! If you saved $200 a month from age 30 to age 67 and earned an 11 percent average annual rate of return, still very doable with good growth stock mutual funds over the long term, you would have $1,126,825!

Don’t want to work till you are 67? No worries! Just up your monthly retirement contribution to $250, assuming you earn an 11 percent average annual rate of return, and you can still retire at at 65 (if you started investing at age 30) with $1,137,492!

And what if you are starting even a little bit later in life than that? You can still become a millionaire with just $200 a month! By saving $200 a month from age 35 to age 69, if you earn a 12 percent average annual rate of return, still realistic over the long term with good growth stock mutual funds, you would have $1,033,592! 

And again, if you don’t want to work till age 69 but want to retire at age 65, then up your monthly retirement contribution to $310, and if you earn an average annual rate of return of 12 percent, then you would have $1,0005,488 at retirement! Or if you like to stick with round numbers, if you contributed $300 a month from age 35 to age 65 and earned an average annual rate of return of 12 percent, you would have $973,053!

So don’t give up on the awesome goal to become a millionaire by retirement! Becoming a millionaire is a great goal to help ensure you reach financial freedom later in life! And if you make those monthly contributions into a Roth 401(k) or Roth IRA, then all of that money will be tax free when you withdraw it too! That means no paying Uncle Sam again in retirement. Woo hoo!

Note: Are you new to investing and want to know how to start saving for retirement? Do you want to know, generally, what kinds of retirement plans to invest in, how much to invest, what types of investments I would recommend for retirement, and more? Then check out this article with 5 simple steps to start investing for retirement.  

Check out these related articles:

How to Invest Your $200 a Month to Become a Millionaire

If you have a company 401(k) or other retirement plan where you receive a match, take advantage of it, and invest at least enough money to receive the full match in your company plan. If you don’t receive a company match, then you will probably be better off investing in a Roth IRA than investing in your company 401(k) because you will generally have many more options in an IRA. (And with many more options you are likely to find mutual funds that offer a track record of better long-term rates of return.)

To help you adequately diversify your retirement account, I recommend spreading your investing equally among four categories: large cap (large company), mid cap (mid-sized company), small cap (small company), and international mutual funds.

We have investment accounts through both Schwab and Vanguard, and they are both good brokerage companies. My Roth IRA is with Schwab, and personally I prefer them over Vanguard. Fidelity is another good option.

If you would like to know how we choose the mutual funds that we invest in, fill out the information below, and I’ll be happy to send you the information. No strings attached, and I don’t sell anything related to stocks or make any money off of sending you this information. It’s just the kind of thing I really wish I would have known 15 years ago when we started investing for retirement.

how to become a millionaire

Ways to Save $200 a Month to Become a Millionaire

In order to find $200 a month in your budget, see if you can reduce your spending or save more money in one or more of the following areas.

1. Cut back on eating out to help you become a millionaire.

The average American family spends about $3,000 a year on eating out. Even though you’ll have to replace some of that cost with the cost of buying groceries to eat at home, the savings here can be amazing. (To learn how to save money on your grocery shopping, read this article with more than 70 tips for slashing your grocery spending.)

For more than 10 years we’ve spent less than $300 a year on eating out for our family, and I know that that has been part of the reason that we’ve been able to reach other financial goals that we’ve set. Read this article to learn how we save money eating out (when we do eat out :)).

2. Slash your grocery budget.

The grocery budget is one of the areas where most people can save a lot of money if they choose to because there are so many options involved and because the difference between what is expensive and what is cheap is so drastic sometimes.

For example, the local discount store where we buy most of our groceries regularly sells frozen boneless skinless chicken breasts for $1 a pound. And yet you can also easily spend $5 to $10 a pound or more on expensive cuts of meat. The same goes for produce in season versus produce that is not in season. People spend a lot of money (a lot of money) on junk food and soda and alcohol and other nonessential items; that’s another area where you can likely trim substantially.

This article shares more than 70 ideas for reducing your grocery spending.

One of the best ways that I have found to save money shopping and grocery shopping in particular is to comparison shop. Grab your free grocery price comparison cheat sheet to help you slash your own grocery budget!

You can also save a ton of money by meal planning effectively! Sign up below to receive the free weekly meal planning sheet to help you save time and money with your grocery shopping and meal planning!

3. Cut your cable or satellite.

There are a lot of free or cheaper alternatives to cable and satellite, so try pulling the plug on these services and banking the savings. The average cost of paid TV in the U.S. is close to $70 a month, so if you will cut your cable or satellite and invest the money each month instead, you will be one-third of the way to saving your $200 a month to become a millionaire right there!

With digital TV through a standard antenna, there are many channels available just on your regular TV—for free. If you haven’t checked them out for a long time, you should. And if you can be a little patient, the library also carries many of the programs and movies you regularly watch, for free. But if neither of those options works for you, you can try Netflix, Hulu, Sling, or other similar options.

4. Save money on other entertainment to help you become a millionaire.

Another area where you can reduce your spending is with entertainment. To save money on entertainment, find things to do with your spouse or family that are free or cheap. There are so many fun activities that you can do for little or no money that reducing spending in this area really isn’t very hard. Check out this huge list of over 90 free activities you can do with your family.

As part of saving money on your entertainment, don’t forget to take a look at the money you spend monthly for your cell phone plan. The average family in the U.S. spends over $1,000 a year (about $90 a month) on their cell phone bill. But you can save a considerable amount if you’re willing to reduce the amount of data you use (or research new data plans with your carrier in case prices have dropped) or switch carriers.

Since September 2018, we’ve been using Xfinity Mobile for our cell phone carrier! If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider; it is then set to go to $65 a month, but you can bet we’re going to try to negotiate that down!), and the cell phone plan is virtually free.

Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere!), we pay only $3.16 a month for taxes and fees for each smartphone line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month after that, or $45 per month for unlimited.) It’s such an awesome deal!

And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S. You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in learning more or signing up? Use this referral code to save up to $100 when you sign up: 1RQ4SP

Don’t have Xfinity in your area? Before Xfinity we were with Republic Wireless for over two years. They were a great company, and they are so much cheaper than having service with one of the Big Four cell phone carriers. I spent about $13 a month for my smartphone data plan. Isn’t that amazing? Check out their website to learn about their plans and pricing, and start saving today!

If you use more that 1 or 2 GBs of data, also consider Mint Mobile, which offers plans starting with 2 GB of 4G data and then unlimited LTE data for just $15 per month. That’s an incredible deal. Visit their website to learn more.

Also find ways you can save money on your current cell phone plan with these ideas to slash your cell phone bill here.

Read this article for even more ideas on how you can spend less on entertainment in various areas to help you become a millionaire.

 

5. Save money on vacation.

To save money when vacationing, try going on a staycation, where you vacation at or near your home. No matter where you live, you can still find tons of fun things to do in your own backyard! Chances are there are tons of things that travelers come to your area to do that you have never done—so check them out!

Read this article to find more than 50 awesome ideas for things to do during a staycation!

You can also save money by staying at people’s homes through Airbnb and by staying in hostels. And by camping.

We’ve been staying at places through Airbnb for the last couple of years, and it’s been great. It’s how we’ve done most of our vacationing during that time—even more than camping. I love using Airbnb because the hosts are wonderful and the price is awesome. And so are the amenities (my favorite places are those with pools and hot tubs :)). Read five awesome ways that you can save money by using Airbnb here.

Sign up now for an Airbnb account and receive $40 to use toward your first stay. Pretty sweet!

 

You can also find many ideas for ways to save money on your family vacations here.

 

Check out these related articles:

6. Get rid of your car payment to really make progress on becoming a millionaire.

The best make and model of car to own is the one that doesn’t have any payments. 🙂 Of course for the longer-term you want something that is reasonably safe and reasonably comfortable and that you don’t have to worry too much about breaking down on you.

But for the shorter-term, if you have car payments on a vehicle and it’s squeezing your budget and you can’t increase your income soon, you should look at selling it. Especially if you won’t likely be able to pay off the car in the next 18 to 24 months at the most, I would strongly encourage you to sell the vehicle.

Even if that means selling the car at a little bit of a loss (when you’re upside down on it) and taking out a small loan for the difference if needed, I would encourage you to do it. And then sell some stuff or work extra or even borrow a little extra money from your credit union or local small bank to be able to buy a $1,000 to $3,000 car that you can get around in for a while till you can save up money to buy a more expensive vehicle.

Because having $3,000 to $5,000 of debt on a personal loan and inexpensive car is a better option than keeping a large debt on your current automobile. And then you can save up and buy a vehicle you can afford—with cash! Learn how to buy a (nice) car with cash here.

If you will commit to buy cars with cash from now on and invest some of the money you were spending on car payments in your own awesome financial future instead, you will be well on your way to retiring with dignity and comfort. Let’s work on building your wealth instead of the bank’s, shall we? 🙂

Learn how to get (and stay!) out of debt here.

 

7. Find other ways to save money on transportation.

You can also save money on transportation by driving less through carpooling or biking or telecommuting, saving money on gas with apps like GasBuddy, saving money on car maintenance and car repairs, driving the speed limit :), finding cheaper auto insurance or saving money on your current auto insurance by taking advantage of discounts, and more. Find more than 30 ideas on how to save money on transportation here.

 

More money-saving tips: Do you want even more ideas on how to reduce your spending in order to find your $200 a month to invest? You can find ways to save money on housing, save money on utilities, and save money on clothing.

Also read this article that has more than 20 ideas for ways to reduce your spending in nearly every budget category.

 

8. Increase your income to help you become a millionaire.

Even though I spend a lot of time teaching people how to spend less money, and I honestly feel that learning to control your spending is the more important of the two factors when it comes to gaining financial stability and building wealth, I feel that earning more income has the greatest potential impact. And let’s be honest—it’s just more interesting and more fun. Because there are only so many things that you can do to reduce your spending (but check out this article to learn more than 20 ways to reduce your spending), but the opportunities to increase your income are nearly limitless!

You can potentially increase your income in many ways, from seeking a raise or promotion at your current job to starting your own business to getting a second job or finding a side hustle to starting a profitable podcast or YouTube channel or starting a money-making blog! 🙂

You can learn awesome, realistic tips for how to increase your income here.

If you are ready to earn more money (and who isn’t?!), then sign up for my free 10-day Earn More Money, Change Your Life challenge below.

 

9. Automate your investing.

Automating your investing for retirement will help ensure you reach your financial goals. This is so important! So just do it! If you have a 401(k), make sure you have a percentage of your income at least equal to the company match automatically withdrawn from the paycheck and invest in your 401(k). If you don’t have a 401(k) available, then open and set up automatic investing for your IRA through a brokerage company such as Schwab.

When you automate your finances it not only saves time but makes life much simpler—and it ensures that you stick to your financial goals! To learn more about how to automate your finances to simplify your life and start to build wealth, I recommend The Automatic Millionaire by David Bach. It’s one of my favorite personal finance books because it gives simple, actionable steps you can follow.

Learn how to automate your finances to build wealth.

 

 

Conclusion

With these 9 simple steps not only do you know how to become a millionaire, but if you follow them, you really will become a millionaire! It really will be your financial future!

When you think about it, it’s pretty amazing that for less money than most American households spend on eating out each month, you can set yourself up to be a millionaire, to be financially stable and live comfortably throughout your retirement! The fact that you can retire in comfort for $200 a month is really pretty incredible. So get started today!

To learn more about how to become a millionaire by investing for retirement, read this article.

Want to Track Your Financial Progress?

Check out the free app Personal Capital, which allows you to track how your investments as well as checking and savings accounts are doing and also view your account history to see how your accounts and overall portfolio have done over time. It’s a great tool! Sign up for your free Personal Capital account here.

 

Check out these related articles:

What are your best tips for how to become a millionaire? Are you working toward that goal now? Or have these tips inspired to you work to become a millionaire? What questions do you have? Leave a comment below and let me know your thoughts!

 

Invitation to Share

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