Getting rich quick is the dream of many, but losing money fast is no doubt the nightmare of others. If you are one of those who are saving to become a millionaire in 5 years, I’m sure you would want to know exactly how much you need to save so that you don’t have to start over at all.
We all want to become millionaires. But how do we get there? The goal of this article is to determine how much you need to save each month to become a millionaire in 5 years.
$1 Million the Easy Way
A short-term plan for creating wealth certainly includes these personality traits, but it often includes factors such as timing, luck, and/or possessing an incredibly valuable idea and knowing how to implement and market it. If you know you’re closer to average, consider a more traditional, more attainable approach.
The longer-term road to wealth involves such time-honored tactics as avoiding consumer debt, diversifying your investments, minimizing your investment fees, tax planning, minimizing housing expenses, and, for two-earner households, living on one income.
Putting aside someone’s $40,000 in take-home pay every year—and earning that 10% return as described above—will get you to millionaire status in about 15 years. Halve those savings and you’re still only looking at 20 years. It will take more work for sure, but it’s a lot faster than 51.
How to try to Become a Millionaire
Avoid Unnecessary Spending and Debt
Stop buying things you don’t need. Before you tap your card, ask yourself the following:
- “Is this something I really need?”
- “Do I have something similar already?”
- “Do I want this more than I want to become a millionaire?”
Every dollar you spend on something you don’t need is one less dollar you can invest. Here’s a reality check. If you invest an extra $25 a week for those same 40 years, you would end up with an additional $277,693.
Can you cut $25 of unnecessary spending out of your weekly budget? Maybe, maybe not. But if you can, it will go a long way toward helping you reach your $1 million goals.
Make More Money
Granted, this is easier said than done. If you don’t make enough to stash 15% of your income, it will be difficult to become a millionaire. But you do have a few options available to you, such as:
- Asking for a pay increase (if you think you’re due for one)
- Working extra hours
- Getting a second job
- Getting training to increase your earnings potential
Additional training pays off the most in the long run. Let’s say you’re a Licensed Practical Nurse (LPN). The median income is $48,820 per year in 2020.3 Registered nurses, on the other hand, earn about $80,010 a year—over $30,000 more.4 Of course, it takes one to three years longer to become an RN.4 But that extra money every year can really help you reach your financial goals—especially if one of them is to become a millionaire.
Get Help if You Need It
Planning for retirement can be very stressful, partly because of all the investment options available not to mention all the unknowns that await you. In fact, as many as 60% of working people said they feel uneasy about retirement planning. It’s no wonder that 25% of Americans say they’re confident that they’re doing what they need to when it comes to retirement planning.5
That’s why it’s so important to get help from a professional. Only 29% of Americans reported working with a financial adviser while 65% said they aren’t getting any financial advice.6 Unless you’re a financial rock star, it’s worth the money to work with a qualified financial adviser.
An adviser can help you choose investments, set up a budget, and make plans to reach your goals. And once you’re ready to start spending some of that money, they can help you make it last.
Increase your income
It tends to be easier to increase your income than reduce your expenses. You can only cut your expenses so much without drastically adjusting your lifestyle. Yet, there are many opportunities to boost your income.
If you are employed, talk to your boss about a raise. Sometimes, it just requires a conversation about the value you bring to the organization. When you discuss your career with your boss, you’ll know where you stand and come away with a game plan to boost your paycheck. If there aren’t opportunities at your current job, start searching for a new one that offers a higher wage or the opportunity for promotions.
Your job isn’t the only way to increase your income. Side hustles are a great way to supplement your income in your spare time. Many side hustles, like driving for a rideshare company or making grocery deliveries, don’t require a huge time commitment. You can even learn how to make $1,000 a day if you strategically stack your side hustles.
Building passive income is the best way to boost your income in the long term. Passive income is money you earn that isn’t tied to the number of hours you work. Passive income strategies include:
- Selling an eBook or a course on a topic that you are an expert in
- Purchasing rental properties and hiring a property manager
- Investing in stocks, bonds, and mutual funds
- Affiliate marketing through your website or social media
There are a lot of ways to earn passive income. Although some can take time to ramp up, once they’re in motion, you’ll make money even when you’re not working.
Pro-tip: When leveraging the reach of your social media, consider how you can make money on Instagram.
Pay off your debt
Becoming a millionaire isn’t just about having a portfolio with $1 million in it. It is also about boosting your net worth. Net worth is the amount left over when you subtract what you owe from what you own.
Every dollar of debt that you pay off not only increases your net worth, but it also saves you from paying interest to a lender. That savings can then be invested toward your goal of becoming a millionaire. So work toward eliminating things like student loans and credit card debt.
Max out your retirement contributions each year
The government encourages people to invest for their retirement by giving valuable tax breaks on retirement accounts. The best way to take advantage of these programs is by maxing them out each and every year. This ensures that as much of your money as possible is receiving these tax advantages.
Because the tax advantages are so powerful, there are limits to how much you can invest in your retirement accounts each year. In 2020, Traditional and Roth IRA limits are $6,000 per year ($7,000 if over the age of 50), and company retirement plans are $19,500 ($26,000 if over 50).
Open a high-yield savings account
In addition to retirement and brokerage accounts, it helps to have an emergency fund in a savings account. High-yield savings accounts offer better interest rates than a traditional bank while offering quick access in case you need the money to cover an unexpected bill.
Network with millionaires
Motivational speaker Jim Rohn says we are the average of the five people we spend the most time with. We’re not saying you need to ditch your current friends, but you do need to spend time with successful people.
One good way to connect with wealthy people is to join the board of a charitable organization. Charities always need volunteers, and while you’re there, you may also pick up some new skills. By donating your time, you could meet current and retired executives who are also on the board. Or you might get a chance to rub elbows with wealthy donors who would love to share stories of their success.
If you’re having trouble networking with millionaires, the next best thing is to read about them. Buying a book or borrowing one from the library is the least expensive way to gain the best information a millionaire has to share.
Whether it’s networking with successful people or reading about them in a book, the important thing is to continue to invest in yourself by upgrading your knowledge and learning from those you admire.
Create a wealth vision
“When riches begin to come they come so quickly, in such great abundance, that one wonders where they have been hiding during all those lean years.” — Napoleon Hill
Step one of becoming financially successful is to actually create a vision for yourself financially. Einstein said that imagination is more important than knowledge. Arden said creativity is more important than experience.
How much imagination do you have for your future?
Do you see huge potential and possibility for your life?
Or, do you see a pretty average life?
Creating a vision is an iterative process. You don’t just create a vision once and then never look at it again.
You continually create and write your vision — every single day.
Look at any area of your life in which you’re doing well, and you’ll find it’s because you see something beyond what you currently have. By that same token, look at any area of your life that isn’t exceptional, and you’ll find that you don’t see something beyond what you currently have.
Most people are living in and repeating the past.
Having a vision is focused on the future.
Your life and behavior immediately shift when you begin imagining a different future and stridently strive for it.
In order to do this, you must obliterate your need for consistency. From a psychological perspective, people generally feel the need to be viewed by others as consistent. This need causes people to retain behavioral patterns, environments, and relationships that are ultimately destructive and unsatisfying for far too long.
Instead, you could abandon your need to be viewed as consistent by others. You can be OK with the fact that you’re not perfect. You can be OK with messing up. You can be OK with having values you stand for and goals you want to accomplish, regardless of what those around you think.
Having a vision for your life means you no longer care what other people think of you. It means you’re ready to begin actually living the life you want. It means you’re no longer going to just go with the flow, as you have for most of your life. It means that regardless of what your parents, peers, and social environment have presented to you thus far, you’re going to create the life you want.
The more detailed your vision the better. The more quantifiable your vision the better.
Your brain really loves numbers and events. These are tangible. Thus, your vision should center around specific numbers and key events.
For example:
- “I will be making $1,000,000/year by January 1, 2022.”
- “I will get a check for over $100,000 by October 2020.”
- “I will take a six week vacation in Thailand in the next six months.”
Quantify it.
Measure it.
Get excited by it.
The more detailed the vision in your mind, the more believable it will be to you.
It’s OK if you don’t know exactly what you want right now. Having more money, creating powerful experiences, and continually growing as a person are all goals that will push you in the right direction.
As you build confidence through successive, small wins over time, your vision and imagination will expand.
Thus, in order for your vision to become clarified and congruent with your values and genuine desires, you’ll need to start building confidence.
Conclusion
Have you ever dreamed of becoming a millionaire? It’s a great goal to have because it helps keep your progress motivated. Millionaires have a higher net worth than just dollars and cents. They have a higher state of mind too. In this article I will show you how much you need to save each month in order to achieve this goal in 5 years or less.