Making a million dollars isn’t just a dream anymore.
It has become a necessity.
Recent studies have shown that for millennials (people born in the early 80s to late 90s) to retire comfortably by their 60s, they have to save around $1.8 to $2.5 million.
Imagine: that amount is just for your nest egg.
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But what if your goal is to become financially free (waaay beyond your retirement fund)?
This post gives you an idea how to earn your first million dollars, and continue building your savings while you’re at the peak of your life.
How to Make a Million Dollars, According to Modern-day Millionaires
There is no single blueprint to reaching your first million dollars, but these guidelines have been used by many self-made, millionaires, so they’re a good starting point.
Depending on your financial standing or unique situation, you can skip some steps, or mix-and-match to reach you goals.
1. Get out of debt
Ask any financial advisor how you can begin your journey to your first million and this step is always a must.
You can’t save, invest, or double your money through any means if you’re knee-deep in debt.
Doing so will be discouraging since every time you go forward, you need to go backward to pay off some debt.
2. Create an emergency fund
One of the easiest ways of going into debt is being unprepared for accidents, hospitalization, and other expenses you didn’t account for.
Having an emergency fund gives you a buffer for unemployment, car repair, appliance replacement, or other unexpected expenses.
Experts recommend building an emergency fund starting with at least three times your monthly expense amount. So if you need about $2,000/month for bills, food, and other day-to-day expenses, then you should try saving up at least $6,000.
When saving money, automate transfers from your payroll account to your savings, emergency fund, or other accounts. This way, you’ll never forget about your savings and you’ll train yourself to just spend what’s left.
3. Develop multiple streams of income
Unfortunately, relying on your salary won’t get you any inch closer to becoming a millionaire (unless of course your job is a CEO of a massive company).
But becoming an entrepreneur and creating multiple streams of income is a realistic way of reaching your goal.
In fact, about 47% of the world’s wealthiest people are business owners.
Business doesn’t mean a brick-and-mortar business either. You can mix the old with new businesses.
Your time is valuable, so set up a business (or multiple businesses) once, perform minimal upkeep and just basically wait for them to earn while you sleep. The revenue you collect from these sources are called passive income.
When choosing between money-generating businesses, pick the business that can bring in passive income. For example:
- Sell your own brand with private label products
- Have an idea for an app? Build an app!
- Don’t have the time to launch a business, but have funds to finance one? Become a silent partner.
- Build an ecommerce website and sell products online.
- Become an expert at affiliate marketing.
- Turn a vacant apartment into an AirBnb rental.
- Write an eBook, convert it into an audiobook and collect double royalties.
- You an artist? Earn money from your creativity
There are plenty of other passive income generating businesses out there. Find which ones would fit your personality, commitment level and fund availability.
4. Become an expert of your craft
Aim to be one of the best in your industry, whether you’re a doctor, graphic designer, copywriter, lawyer, and any other profession.
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When you’re at the top of your game, you can command higher salaries and even land higher positions.
CEOs earn somewhere between $10 to $20 million annually depending on how big the company is.
Investing in your skills also doubles your salary, so earn a MBA, learn a new technology, take up another specialization, and so on.
Your hard work will pay off in the long run.
Here are several things you can do to master your craft:
- Polish communication and negotiation skills (no matter your profession). Comedian Melissa McCarthy talks about how these skills can help you reach your million-dollar goal)
- Completing a MBA, Doctorate degrees automatically ups your value as an employee
- Outsource admin tasks. Know the value of your time by only using it for tasks no one else can perform but you. Hire an assistant for general tasks like email correspondence, calls, bookkeeping, etc.
As an expert of your field, you can even turn your career into a business.
For example, you can offer consultation services, build a blog, write a book about everything you know, become an influencer, and so on.
Filmmaker Spike Lee has made a name for himself in the film industry and knows his value. He told Wealthsimple in 2017 that he has “no problem asking people for money” because he “believes in my talents, my storytelling abilities, and also the people I surround myself with on the projects that I make.”
5. Invest your money
When it comes to investing your money, self-made millionaire and best-selling author (of Personal-finance blog Grow from Acorns) David Bach recommends “diversifying investment, but keeping it boring.”
You invest the money you already have so it could work for you. You don’t need to dig deep into trading stocks or investing in startups, you just have to stick to a solid strategy.
Examples of this include:
- Investing in real estate. If you have extensive knowledge about real estate and construction, you can even flip it for profit.
- Rent out unused homes, apartments, condo units, or even rooms via Airbnb
- Invest in the stock market (learn about index funds and how it could bring in passive income)
- Build a portfolio of high divided stocks and real estate investment trusts (REITs)
- Buy an established blog and resell it 24 times its monthly income.
3 Tips from Millionaires
Earning a million dollars won’t come overnight. It will involve a lot of hard work, so you better buckle up.
To increase your chances at reaching your goal, I cherry-picked three of the most common advice given by millionaires:
1. Build a routine
Millionaires value their time and make sure that every minute counts. Sticking to a routine allows rich people from living their lives as balanced as possible.
Key routines millionaires follow include:
- Wake up early to meditate, exercise, walk, stretch, and other stress-relief activities
- Read (Warren Buffet, Bill Gates and other highly successful people read every day)
- Work smart (delegate, outsource, and focus only on priority work)
- Leave work at the office
- Sleep at least 7 hours a day
Building a routine takes practice. When you find a routine that would work for you and let you become the most productive, then stick to it.
2. Find a mentor
There’s a reason why millionaires spare time for reading – learning through other people who have done it better than you is probably the most valuable resource you can find.
You don’t need to hire a mentor during your journey to earn your first million dollars (but if you can afford it, there’s no reason why not).
Just make sure the mentor you choose is the best resource person in the industry you’re trying to climb up to.
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- Mark Zuckerberg asked the help of Apple founder Steve Jobs during the early days of Facebook.
- Virgin Group founder Richard Branson sought guidance from asked British airline entrepreneur, Sir Freddie Laker.
- Dallas Mavericks owner Mark Cuban credits Paul Terhorst’s book “Cashing in on the American Dream: How to Retire at 35” for helping him earn his first million
- Microsoft co-founder Bill Gates may be good at computers, but had Warren Buffet as his mentor on investments.
How about the smaller guys? TubofCash.com owner Timothy Kim (who earned his first million only in 2017) invested about $70k within a span of six months for a mentorship under several people, including Instagram influencer Jason Stone’s Millionaire Mentor program, real estate mogul Grant Cardone’s 10X Growth Conference, and internet sensation Tai Lopez.
If you don’t have the funds for world-class mentors like these, you can try the next best thing: check out their books, videos, seminars, online courses, and other resources.
3. Spend well
It wouldn’t matter if you’re halfway through your million-dollar goal if you don’t know how to spend your money properly.
Unfortunately, spending is easier than earning, which is why you should follow these personal finance tips:
- Automate savings and bill payment – If you automate paying for monthly expenses and transferring savings between your accounts, you’ll be able to get out of debt and only spend the necessary cash.
- Buy in bulk. Heck even billionaire Mark Cuban buys 2 years’ worth of toothpaste if he encounters 50% off promos.
- Audit expenses and track spending. These things can change over time, so if you’re not using your Hulu or HBO subscription, you can strip it from your expenses and transfer that cash for other more important things.
- Use coupons – Make couponing into a habit. It’s like free cash! Most coupons are available for items we use every day, from shampoo to laundry detergent, pet food to clothes, and a whole lot more.
- Follow a meal plan – Eating out is one of the most common culprits of living beyond your budget. Prep your week’s meals during weekends, so you can avoid eating out and spending extra on a whim.
- Be vigilant with your energy consumption – Consume less energy, so you pay for cheaper electric bill.
Most importantly, don’t fall for the lifestyle creep.
Earning thousands of dollars doesn’t mean you have to start wearing luxury clothing or drive a sports car.
Remember how Steve Jobs only wore his trademark black long-sleeved shirts and jeans for most of his career?
Keep your spending simple.
The Bottom Line
Unfortunately, there isn’t one simple path to take to make a million dollars.
You need to practice both financial and mental discipline.
The 5 methods listed above should help you get started.