Who Wants to Be a Millionaire?

Tuesday, 6th May 2008 (by Kristy) -

I know, I know. You’re asking yourself, “is that a trick question?” because the obvious answer is yes. But seriously, do you want to be a millionaire? From where I’m sitting, most people are saying yes, but their actions speak louder than words. So, I thought it would be fun to jump in and offer some help.

First, if you haven’t read Ginger’s “Picking Apart the Millionaire Mindset” over at Girls Just Wanna Have Funds, do yourself a favor and check it out! She breaks down common factors from several how-to millionaire books and the info she provides is paramount to reaching your goals.

Now that you’ve gotten into the mindset of becoming a millionaire, let’s talk about how to do it. Let’s be clear about something, though. You will NOT become a millionaire over night - unless you win the lottery. Even then, if you don’t know what to do with that money, you won’t stay a millionaire long. Most millionaires become so by working hard and sticking to their plan for the long-run. If you’re looking for a get-rich-quick scheme you’re in the wrong place.

Steps to becoming a millionaire

1.) Don’t be afraid to negotiate your salary. Whether you’re just starting out or you’ve been there a while, you can negotiate. Studies have shown that those who do negotiate have increased their salaries by as much as 7.4% over those who don’t negotiate. But be prepared to show how your skills are an asset to the company and why they should value you. Don’t just show up asking for money, just ‘cuz.

2.) Keep your eyes open to better ways of doing your job. Employers look for people that go above and beyond the call of duty. Become an expert in a particular field of your job, streamline a procedure, or find general ways to save the company money. This kind of work will get you noticed when it comes time for promotions and raises.

3.) Don’t be afraid to move on if and when the time comes. There may come a time when the company you work for can no longer offer you what you need to reach your goals. Perhaps you’ve hit the ceiling on what your position will offer pay wise. Or perhaps there are structural changes that you don’t agree with and find it hard to stomach every day. Whatever the case, don’t be afraid to consider other options. Be creative and don’t underestimate the power of social networking! For example, you could create a professional looking page on myspace that gives prospective employers and network connections an idea of your qualifications.

4.) Make a realistic budget that has you living within your means. Sit down and make a budget that includes all of your necessary bills. Include setting money aside for yourself as a necessary bill - if you establish the mindset that you HAVE to pay yourself first, you will find it much easier to part with that money. Additionally, find areas that you can cut. For example, if you want to be a millionaire do you really NEED that super-duper premium cable package with channels you’ve never even watched? Probably not.

5.) Live within your means. This is simple enough, right? Well, unfortunately, for many of us this particular step is the most elusive. There are new toys to be had and fun to be planned. So, a decision must be made. Do you want material things now, or do you want to be a millionaire?

6.) Maximize your benefits at work. Contribute as much as you can to your 401(k) and utilize flexible spending accounts. These will help you build wealth and save on taxes. For example, if you’re in the 25% federal tax bracket, every $1000 you contribute to your 401(k) trims your taxes by $250.

7.) Review your tax withholding. If you expect a refund every April, you’re having too much tax withheld. Basically, you’re giving good ol’ Uncle Sam a tax free loan, a gesture that will never be extending back to you. Furthermore, if you really want to become a millionaire, this isn’t the way to do it. That money you get back usually is relegated to paying bills and not for saving purposes. Use withholding calculators, like Kiplinger’s, and find out how much you should be withholding and how much you should be keeping to save.

8.) Roth IRAs are your friend. I personally recommend that you have both a Roth and a Traditional IRA if you can. They each have their benefits. However, as far as building wealth goes, a Roth is much better at helping you achieve that end. That’s because any withdrawals you take out in retirement are tax-free - including decades of compounded earnings.

9.) Start investing now. It is easier to start investing when you’re younger because you have more time to recover if there is a loss. However, understand that investing is meant to be a long-term vehicle and not a short-term, get-rich-quick scheme. You can lose money in the stock market; however, over the long run you’ll probably make it back and then some. The sooner you start, the sooner you’ll reach your goal. The average 25 year old that invests about $300 a month at 8% will have a million dollars by the time they’re 65. Guess what, savings and CDs are barely paying 3% right now, so if you want to be a millionaire, you need to consider the option of investing. Playing it safe won’t get you to the coveted millionaire status!

10.) Keep it simple. Watch out for the get-rich-quick schemes and the sales pitches for complicated investments. Most millionaires got there by sticking with a balanced investment portfolio over the long haul. Getting into something you don’t understand will hinder your success more than it will ever help you.

And that’s it. Attaining the title of millionaire isn’t really that hard to do. It takes time and commitment, but beyond that, there isn’t much else to it. The hardest part about becoming a millionaire is convincing ourselves that we can achieve it, that we deserve to achieve it. Once you get it into your mind that you really want it, everything else will happen.