What picture comes into your mind when you think about a millionaire?
Maybe you visualize a nicely dressed old man sitting on the balcony of his mansion, which overlooks acres of his investments, as he sips some expensive champagne. Or perhaps you envisage this finely groomed young lady in her thirties, confidently making her way through the streets of New York, on her way to a major corporate meeting where she is going to sign papers of a business deal that will be worth about 40 years of your income.
Have you ever dreamt of carrying the millionaire tag before your old age? Back in the early 19th century, having a million dollars could buy you a mansion with a horde of servants and a nice car. However, inflation has reduced the value of a dollar and $1 million has become the retirement goal of someone with an average portfolio. On the brighter side, it is now easier to make a million dollars than at any time in history. Here are valuable tips on how you can become a millionaire:
- Stop meaningless spending
Have you ever known that it is very simple to spend yourself out of a fortune? Luckily, the opposite is also factual – one can save his or a way to a million. Statistics have shown that most working citizens in the United States make well over a million dollars during their working lives. The key to becoming a millionaire is saving more of what you make by avoiding senseless spending. Imagine if your daily spend on coffee and snacks is $5 and you spend this amount all your working life, you would lose $73,000, which would have gone a long way into making you a millionaire!
- Cut back your purchases
Try to get the best value for your money every time you spend your cash. If you go shopping for something that you had planned to buy and end up purchasing it at a lower price than you had budgeted, then that is a great deal. Before you make large purchases, think about their end use. Do not pay more than you can afford – even Warren Buffet (one of the richest people on the planet) still lives in a humble Omaha home.
- Look at your taxes
The amount of income pay give to the national government is another parasitic hole that you need to cork. While paying your taxes is your responsibility, it is your right as a taxpayer to try to cut down your taxes to the minimum allowed by law. Increase your tax awareness by learning about the allowable deductions, changes in tax limits, and changes to your withholding. This will help you keep more of your income and invest it profit-making ventures.
- Incremental investing
One doesn’t have to jump into the investment market with all his or her life savings in order to make money – an excellent way to go about it is incremental investment. Investing relatively small amounts of your savings can still give you decent returns. When doing this type of investment, remember that capital gain taxes will be deducted annually to any income you make from the investment.
- Try to diversify
This is the proverbial story of not putting all your eggs in one basket. So, if your entire portfolio, is held in stocks, then it is time to diversify by investing in other income generating assets. Investing in different assets gives you opportunities to make more money during times of growth, and it also guarantees that you won’t lose all your income in case one source dries up.
- Consider investing in real estate
Owning real estate does not only provide equity, but also diversity to investments. If you are a homeowner, then paying your rent will build up your equity. If you have invested in real estate, then the rent paid by someone else – the tenant – is what builds up your equity. Of course real estate investment cannot be done by everybody but it has made billions for those people who know how to go about it. Regardless of what you think about real estate, owning your own home is a great idea. Even Peter Lynch, who ranks as one of the best stock investors to have lived, believed that one should first own a home before he enters the murky waters of stock investing.
- Increase your income
Becoming a millionaire while still on a 9am to 5pm job is not what many people would want, but it is possibly the only path available to most of us. Starting your business is not the only way to make a huge income. In fact, you will not need that high income if you have sound spending, saving, and investing habits. You can also take a second job, request for a pay raise, or upgrade your skills. If you love entrepreneurship, you can start a business on the side, as this will reduce your overall tax bill.