How many people have you heard talking about the newest way get rich quick. The program often promises to make you rich overnight, with no work and no (read minimal) investment required! If you’re like me you have heard your fair share of stories. Hopefully you’ve had the willpower to steer yourself clear of these half-baked ideas and thinly veiled Ponzi schemes. Aside from winning the lottery there is nothing you can do to get rich quick without effort.
The basics
Identify your assets and debt
If you want to increase your wealth you should start by taking stock of your assets. This is important because it will give you a clear idea of where you stand and what you have to work with. Those with extra cash can put it to good use, in either investment or savings. If you are in a tough spot and facing financial difficulties you will likely be in the red. This is okay! Identifying where you stand will give you a clear picture of what you need to do to climb out of debt. Many people are afraid of facing their financial problems and prefer the “out of sight, out of mind” technique. This policy will result in greater financial incompetence and debt.
Stick to a budget
Once you have an idea of where you stand it would be a good idea to make a budget. Your budget should be reasonable but strict if you want to increase your savings. Working for a salary and saving money will probably never help you make a million dollars, but it will help you build the capital needed for future wealth-building investments. In addition, keeping a budget can actually have positive health benefits as well.
Build an emergency fund
The first step you should take towards financial stability is to establish a savings account with 3 months of living expenses. By saving up this money you protect yourself against unexpected layoffs, illness, and any other sudden loss of income. This will also provide you with some peace of mind and should reduce your finance related stress.
How can you save money, let alone 3-months worth, if you live paycheck-to-paycheck? Well, this step wont be easy. It will require you to eliminate some of the discretionary spending (like movies and date nights) that we all love. The 3 months of living expenses is an arbitrary number and you may wish to put away more money if you feel unsure about your future.
Making the right choices
What is the next phase of how to make a million dollars? Now that you have some money saved up, and hopefully some positive cash flow, you should start looking for ways to make more money.
Stocks and Funds
The most common way suggestion on how to make a million dollars is to invest your money in a stock or fund. Stocks can be volatile at times and naturally carry risk. That’s why education and risk management are key if you plan do any investing. Let’s say you don’t have experience investing in stocks, go for a fund right? Well, there are an overwhelming number of funds (and fund categories) to choose from. How do you find the right choice for your hard-earned money? The best way would be to talk with a financial advisor or stock broker. They would be able to help you pick the best one for the amount of risk you are willing to stomach. Personally I prefer low-risk stocks/funds with moderate returns and a long history of consistency. Remember, getting rich is about the long game, there is nothing worse than losing money by jumping on the latest ‘hot stock’.
Open an IRA
By opening an IRA account you are banking on the power of compounding interest. The numbers are staggering when left to accrue interest over decades. If you are younger you really can’t afford to NOT drop money in this account. You can read up about the difference between ROTH IRA and Traditional IRA here. There is a maximum contribution of $5,500 per year with an IRA as well as a number of other rules that are important to learn before setting up an account. Having an IRA is a good step towards long-term retirement planning.
Start a business
If starting a business sounds daunting, time-consuming, and risky you’re probably right. Opening a business would be a terrible decision for a great many people. My advice would be not to open a brick and mortar shop but, rather, to market any skills you may have. There are numerous money-making opportunities to be found is you look for it. Some (relatively) easy ways to make money during your down time can be found on websites like upwork. You can still do this even if you have skills that don’t transfer particularly well to the net. If you are good at fixing cars you could advertise your services around town. The point is to make money during your down time, the time we usually spend at home watching TV.
How to make a million dollars
As you can see, the question of ‘how to make a million dollars’ is answered by hard work and dedication. Your plan to get rich and save for retirement will possibly require decades of smart choices and planning. Experts say the average person should be saving 10% of their income for retirement. This will vary based on your age and income and might not be possible for everyone. Even if 10% is out of reach, you should still look for ways to maximize your savings. Remember, stay away from get rich quick scams, save as much as you can afford, put your money in good investments, and most importantly show your friends and family how to make a million dollars.
