There are specific actions that must be taken to become a millionaire; depending on your age and expected rate of return, you can determine the dollar amount you need to save each month to become a millionaire by a certain age. If you’re older or have a substantial amount already saved, you may already be a millionaire or on track to become one without saving a penny more. The actions required to become a millionaire are simple, but maintaining the discipline and mindset needed to build wealth isn’t easy. Here’s a few things to focus on throughout your wealth-building journey.
Build knowledge and discipline
No matter how much any of us know about money now, we aren’t born knowing about Roth IRAs and 401(k)s. If you are early in your financial journey, there’s no shame in spending time learning the basics. There’s a plethora of financial knowledge available for free; online there are podcasts, YouTube videos, blog posts, and forums. Your local library will have books and magazines about money available for check-out. If you have friends or family members who are good with money, they can help guide you through the early stages of building wealth.
Once you are armed with the knowledge of how to build wealth (remember, it may seem simple, but it isn’t easy), the next step is to put that knowledge into action and start building good financial habits. Follow the Financial Order of Operations; work towards making sure your risks are appropriately covered and you are saving what you should be saving for retirement. Don’t subject something as important as saving for retirement to human error; automate your retirement account contributions. After a while, it will become second nature.
It is never easy to save a substantial portion of your income for retirement. There are always other, seemingly more pressing expenditures in your financial life. In your 20s, it’s easy to avoid saving for retirement since you’re probably saving for a car, college, or once-in-a-lifetime trips. Once you reach your 30s, your monthly budget will be dominated by kids, a family, and perhaps a house. The point is there’s never an easy time to start saving; our wants are unlimited but our resources are limited. You must prioritize saving for retirement and work towards reaching that target 20% to 25% savings rate as soon as you can. No matter your income, sacrifices must be made to save money for retirement, but your future self will thank you for every dollar you are able to save now.
Stay the course
In addition to ordinary life events that can distract you from saving, there are certain financial events that could derail your financial journey. A solid financial plan should be able to withstand almost anything that is thrown at it: job loss, recession, or unexpected financial loss. Uncertainty is scary, especially when uncertainty exists around your financial future, but staying the course will be rewarding in the long-term.
When you experience the first sharp decline in your investment portfolio (you may have experienced this earlier this year), you’ll likely be tempted to take action and do something about it. Standing by and doing nothing while your portfolio declines 20% or 30% can make you feel helpless, but it may be the best thing to do long-term. Divesting from the stock market when it reaches a bottom is about the worst thing you can do. When you get back into the market, you’ll likely be buying in at a higher price and have missed out on the recovery.
Don’t forget what you’re saving for
Becoming a millionaire just to say you are a millionaire will not be fulfilling or satisfying. Always keep in mind what you’re saving for; it will be a powerful motivating tool as you’re building wealth. Early retirees always know what they are retiring from, but don’t as often know what they are retiring to. Don’t be afraid to dream big when planning out your future financial goals and milestones, and know what you are saving for.
Who wouldn’t want to be a millionaire? Everyone strives for financial success, but achieving long-term, fulfilling wealth is often elusive. Learn exactly how much you need to save to become a millionaire, by age, and the behaviors and habits you need to build along the way. Watch our latest show on YouTube below.