By Adam Jusko, ProudMoney.com, adam@proudmoney.com
People become millionaires in many ways, but millionaires also have much in common. If you want to know how to become a millionaire, it’s easy enough to give you the formula (or formulas), but if you’re not willing to put in the work, it’s not going to happen.
In general, there are 3 ways to become a millionaire (though there are a few fluke millionaires out there that didn’t follow these paths, such as lottery winners and inherited fortunes):
- Own a profitable business. (Even better is selling your profitable business.)
- Work in a high-paying profession, such as doctor, banker, corporate attorney, computer engineer, and others.
- Work a decent-paying profession making, say, $50,000 per year, and save a huge amount of everything you make while never marrying, never having children, rarely vacationing, and having almost no luxuries.
If being a millionaire, or at least being well off, is important to you, we would suggest one of the first two paths. The last path is no fun, regardless of how much money you amass. Few of us really want to be the schoolteacher who saves 90% of her earnings and puts them in safe stocks for 50 years and leaves $2 million behind at the expense of having really lived a full life. (A caveat here: in households where both parents work, each can have modest incomes and together achieve millionaire status as a household much easier than a single person with a modest income.)
Where are you now?
Your chances of becoming a millionaire will depend on many factors, including what age you are now, how much you’ve saved, and what career path you’ve taken so far (if any). So, if millionaire-dom is your goal, the first thing to do is assess where you’re at.
Here is my advice on becoming a millionaire, based on the potential scenarios in your life:
- If you are college age or younger, get a degree in a field that pays well and work at least a few years in that field. If you decide later that you don’t like it, or you want to be self-employed, or both, you leave yourself more options. You’ll have more money saved, and you’ll have specialized knowledge that you may be able to leverage into your own business. It won’t be as risky to go it alone, or to change career paths. (However, completely changing career paths will decrease your chances of making it to millionaire status, at least in the short term.)
- If you are an adult under 30 with a job that pays OK but makes it difficult to save, you might want to make a career switch. You’ve got a lot of working years left, and you could still potentially get into a high-earning career field. On the flip side, you could start a side business unrelated to your work. There are a zillion businesses you could start; this article is not going to get into what you could choose to pursue. But one thing we can tell you — saving and scrimping to maximize your current salary isn’t going to get you far. You need to make more money.
- If you’re over 30 with a job that pays OK but makes it difficult to save, forget making a career switch. Your only hope to reach millionaire status is to start your own business. Again, I’m not going to tell you what that business may be, but you need to start something on the side that will give you a little cash and the potential to expand to a point where you quit your day job. If you are older, from your late 40s on, you might want to consider quitting your day job altogether and going for it now. Not everyone with a mortgage and 3 kids can afford to take that risk, obviously. But if you want to be a millionaire, that’s the only way it’s going to happen.
- If you make a lot of money in your job, save and invest it. Easy advice. But realize that even if you save and invest $40,000 after tax every year, it’s probably going to take at least 15 years to turn that into $1 million or more. So, making a lot of money does not guarantee you’ll become a millionaire. You still have to be disciplined with the money you make.
Of course, money is not everything. And $1 million is an arbitrary number. You could potentially be quite content with much less. And your modestly-paying career might be your highest passion, making your economic condition less of a priority. That’s your decision.
But, since you found your way to this article, I’m assuming you want to become a millionaire. And the advice above is the framework to get you there, at whatever age you start.