One of the most sought after goals for anyone who closely manages their personal finances is to eventually become a ‘millionaire’.
But just how feasible is it to reach such a coveted milestone?
How to calculate your millionaire status?
The first thing that we need to understand is what constitutes being a millionaire.
It might seem like a funny thing to say but some people do look at this from different angles.
My view is that you are a millionaire when you have a ‘Net Worth’ of over 1 million.
This means that when you sum up all your assets, savings and investments – then remove your debts, you are left with a number over £1m.
There are many people that I have met who define being a millionaire as being able to log into your bank and show a balance of over £1m – whilst it is true that this person clearly is a millionaire by this definition I think that is an unrealistic goal to be aiming for – and clearly that person need to get better at investing their wealth and making it work harder for them!
How do you become a millionaire?
Now onto the hard bit!
The secret is that there is no secret to becoming a millionaire.
What you need is a source or sources of income, patience, discipline and in many cases a healthy slice of luck
For me there are four key steps to take to help you on your journey to becoming a millionaire:
Create a Budget
If you don’t already have a budget then now is the time to start making and sticking to one.
Having a budget will allow you to get a better picture of how much you spend on a monthly basis and more importantly how much you can save/invest in your journey.
Without any form of financial planning you will not know if you are living within your means or be able to estimate how long it will take you to become a millionaire.
Increase your income
With your budget in place you should now be in a position to assess if your income is enough to help you meet your plans.
If you are finding that there is not much money available in your budget to save/invest then it is likely that you need to look into increasing your income.
This can be done in three ways. You can either push your current boss to give you a payrise, never be afraid to ask for one if you feel that your work deserves more reward.
You also have the option to go out and look for a new job, it is often the case that people who move jobs more often have higher salaries than those that do not so don’t worry about getting cosy in your current roles – move around!
Finally if neither of the two above are an option, or if you have done those and still want more, you can launch a ‘side hustle’. A side hustle can be creating and selling goods/services online in your spare time, getting paid to mow your neighbours lawn or any other way you can think of to use any skills you have to bring in some extra money on the side of your current job.
There are literally thousands of options for side hustles and even earning £250 a month extra can go a long way! That would be £3,000 extra a year, that can be invested in your future!
Once you have a good budget in place and have maximise your earning potential you now need to look at how and where you save/invest to generate the best returns for your money.
There are far too many options to list in a post and saving/investing deserves a post if it’s own.
What you need to do is take all the money you have per month to save/invest and put it into the area that will work hardest for you.
Initially for many people this will be paying off their debts and/or overpaying on their mortgage.
Once you are debt free you can then look at investing in savings accounts, into property or in stocks & shares trackers that deliver the best annual returns for the amount you have available.
Take some time to research your best options.
The most important area for sure!
Even some of the most well off people I know are still frugal!
Where possible always look to get the best deals on anything you purchase and avoid wasting money on luxuries that you simply do not need. Drive a sensible car rather than throwing money away on fancy cars. Live in a house that is big enough but not too big.
The biggest reason many people do not achieve the millionaire mark is because they waste their money, it is as simple as that! Make sure your budget surplus is always put to work for you by investing and saving wisely so that you can retire early and enjoy the fruits of your hard work!
How long does it take to become a millionaire?
There is no simple answer here.
It will vary from family to family as it will depend on your current net worth, earnings and how much you are able to save/invest.
A good starting block is to work out your current net worth.
Once you know how far away you are from this goal you will get an idea of the scale of your task.
You then need to save as hard as you can every year to get this number up. Remember that good savings/investments will compound well over the years and property prices continue to rise which will naturally help you on your way as well.
Don’t be put off by the task ahead of you! You will be surprised at how quickly your savings can grow as well as your assets. Even if you do not get to the £1m mark you are still putting yourself in a fantastic position financially.
I have always been good with money – I budget well, avoid making impulse purchases and attempt to adopt a frugal lifestyle as much as possible. I love to share my personal finance tips with you to help you achieve your financial freedom as well.