Even if you strive to be non-materialistic, most of us like the idea of making more money (and having more money). Money makes you feel more secure, can solve most problems, and enables you to do all the things you want to do.
There’s currently a feeling of pessimism in the general public that making a lot of money is difficult, or even impossible, for most of the population. But the truth is, there are more than 11 million millionaire households in the United States, and with the right strategy, there’s little stopping you from eventually becoming a millionaire in your own right.
Small Beginnings
It may seem audacious to imply that almost anyone in the United States can become a millionaire, but the idea hinges on one central premise; that even small investments, generated from a small salary and frugal spending habits, can eventually compound to massive amounts.
Experiment with any compound interest calculator to see the results for yourself. If you make investments that generate even a modest return, it only takes a few years for your savings to snowball. If you start young and invest consistently, the results are incredible.
For example, the annualized average return of the S&P 500 index over the last 90 years is 9.8 percent. If you manage to save a little over $500 per month (which is certainly possible, if you’re willing to make cuts), or $7,000 a year, a 9.8 percent rate of return would make you a millionaire in less than 28 years. If you start after graduating college at age 21, that means you could become a millionaire by 50—and even faster, if you’re willing to invest more per year.
Obviously, rates of return vary, and there’s no guarantee you’ll be able to squirrel away $7,000 per year—but this example demonstrates how the right investments and consistent savings can help anyone build a path to becoming a millionaire.
Choosing Your Investments
One of the biggest factors for your success will be choosing the right investments. There are several different options here, each with strengths and weaknesses.
For example, you could invest in stocks, which represent fractional shares of ownership in publicly traded companies. If the company’s performance improves and profitability and revenue grow, the price per share will likely rise over time. Depending on the company you pick, you may also be entitled to a quarterly dividend, which is a distribution of the company’s profit to shareholders. These assets tend to be high-growth, but they can also be risky, since stock prices tend to fall when a company’s performance declines. If you want to balance your risk and reward, choose index funds, which allow you to invest in many different companies, or even an entire sector, simultaneously.
You could also turn to real estate. Investing in properties allows you to cash in on property appreciation over time, or generate monthly cash flow by renting your property out to tenants. You’ll need to learn more about real estate investing before you get started, since it’s a strategy that’s not friendly to novices—but with enough time, patience, and experience, you can make your real estate investments even more profitable than stocks.
No matter what, it’s important to diversify your holdings. Only investing in stocks, real estate, or another single type of asset will expose you to too much risk. You’ll need to mix in other investments, like bonds, mutual funds, and possibly even commodities, to protect your assets and maximize your chances of long-term growth.
Cutting Expenses
Another factor for your success is your ability to cut expenses. If you’re making $3,000 per month and you’re spending $2,950, you won’t generate enough savings to start your path toward becoming a millionaire.
One of your highest priorities should be eliminating your high-interest debt, but to do that, you may need to reduce expenses in other areas. For example, you can eliminate entertainment expenses (like subscription streaming services), cook at home instead of eating out and move to a cheaper area of the city.
Increasing Revenue
If you’re still struggling to save a meaningful amount of money every month, you can make up the difference by increasing your revenue. Over time, you can work to earn a promotion or a raise at your current job, or transition to a different career. Even better, you can pick up a side gig, and make the few hundred extra dollars per month you need to close the gap.
Not everyone can become a millionaire, but most people have a very good chance—as long as they’re willing to make sacrifices and put in the work. It might take a few decades for your wealth to grow, but even a modest salary can make it happen.
