Today (May 20th) is Be a Millionaire Day. If you want to build wealth and eventually become a millionaire, here’s what you need to know.
When I look back at my earnings over the last 10 years or so, I realize that I’ve made more than $1 million. However, I’m far from being a millionaire right. I can’t save every penny that comes in my way — I’ve got bills to pay and I like to eat.
However, the realization that I’ve already made a million dollars in my lifetime has me thinking: It’s possible for me to be a millionaire someday, as long as I keep my head and I’m smart about the way I prepare for the future.
If you want to be a millionaire someday, here are 5 strategies to start following right now:
1. Live Within Your Means
Your first step is to live within your means. Even though I’ve earned more than a million dollars in the course of the last decade, I haven’t spent a million dollars. Make sure that you live within your means, whether that means creating a spending plan or budget, or contriving some other means to ensure that you stay out of debt and have extra money to set aside for the future.
2. Prepare for Emergencies
It’s not enough to live within your means since sometimes you are faced with financial stress that is outside your budget abilities. This is where it is handy to have an emergency fund. Make sure you have liquid funds available to cover emergencies without the need to go into debt. Use a high-yield savings account, or set up a CD ladder. A Discover Certificate of Deposit can provide you with different term options that allow you to set up an emergency CD ladder that works for you.
3. Obtain Proper Insurance Coverage
Don’t forget to obtain proper insurance coverage. This seems like an odd strategy if you want to be a millionaire, but consider that the wealthy are ready to spread their risk around. This includes getting the right insurance so that a car accident or destruction of your home doesn’t result in financial devastation. The right health insurance can also be a big help since hospital stays can be devastating financially. Don’t forget about liability insurance as well. And, as your assets increase, you might want to consider an umbrella policy to help protect your finances from lawsuits.
4. Invest for the Future
While cash products can be useful as you save for the future and build your net worth so you can be a millionaire, the reality is that they rarely provide you the growth you need to build wealth over time. A Discover Individual Retirement Account CD and similar products can be helpful for the cash portion of your portfolio, but these cash products shouldn’t be your main hope for future growth. Instead, you need to invest in other assets.
Stocks are an important part of your growing portfolio. Make sure to take advantage of benefits at work, such as a matching contribution to your employer’s retirement plan. Set aside as much as you can in tax-advantaged investment accounts, and make sure to include a large portion of stocks. You won’t see the growth needed to beat inflation and build the retirement account you need without the help of stocks.
Other investments that can help you be a millionaire include real estate, bonds, and businesses. Just make sure your asset allocation makes sense for your situation and risk tolerance, and that it is adequate for growth.
5. Minimize Fees and Taxes
No, you don’t want to do anything illegal. We’re not talking about tax evasion here. However, there are strategies you can follow to reduce your tax liability. And there is no reason to pay outrageous fees on your investments. Taxes and fees cut into your real returns. Millionaires know how to legally manage these costs so that they don’t drain away wealth. You’ll build your wealth faster if you can employ strategies to capture more of your returns and put that money to work for you through the power of compound interest.
Once you get these 5 strategies in place in your life, you can start building wealth and, over time, you might be surprised to discover that it really is possible for you to be a millionaire.
Disclosure: This blog post was written as part of a sponsored program for Discover Financial Services. All views expressed are entirely my own and were not influenced or directed by Discover Financial Services.