Doing so lets you take advantage of the power of compounding. Try to invest!

Start Saving Early

Ask these questions before you want to buy something.<ul><li>Is this something I need?</li><li>Do I have something similar already?</li><li>Do I want this more than I want to become a millionaire?</li></ul>

Avoid Unnecessary Spending and Debt

Although there's no correct answer here, most <a href="https://www.investopedia.com/terms/f/financialplanner.asp">financial planners</a> say that, depending on your age, you should save at least 15% of your annual <a href="https://www.investopedia.com/terms/g/grossincome.asp">gross income</a> if you're aiming for a nest egg for retirement.

Save 15% of Your Income

<ul><li>Asking for a pay increase (if you think you're due for one)</li><li>Working extra hours</li><li>Getting a second job</li><li>Getting training to increase your earnings potential</li></ul>

Make More Money

<a href="https://www.investopedia.com/articles/personal-finance/092313/how-manage-lifestyle-inflation.asp">Lifestyle inflation</a> happens when you spend more money just because you have more to spend.

Don't Give In to Lifestyle Inflation

An advisor can help you choose investments, set up a budget, and make plans to reach your goals.

Get Help if You Need It

I hope everyone can manage their money wisely

It's easy for some people to become millionaires. But what if you don't have a high-paying job or family money? You still can.

career

Career

moneyandinvestments

Money & Investments

You don't need a six-figure job or family money to become a millionaire. Instead, you need to start saving early and be mindful of every dollar you spend. Here are some tips for building that million you need to retire in style or to retire early.

The easiest way to build your savings is to <a href="https://www.investopedia.com/articles/personal-finance/040315/why-save-retirement-your-20s.asp">start early </a>. Doing so lets you take advantage of the power of <a href="https://www.investopedia.com/terms/c/compounding.asp">compounding </a>. Say you're 20 years old. If you contribute $6,000 to an <a href="https://www.investopedia.com/terms/i/ira.asp">individual retirement account </a>(IRA) every year ($500 a month) for 40 years, your total investment would be $240,000.

But because of the power of compounding, your investment would grow to more than $1.37 million, assuming a 7% return. And you'd be a millionaire by age 57, just by saving $500 a month.

<a href="https://www.investopedia.com/articles/pf/08/buy-sell-online.asp">Stop buying things you don't need </a>. Before you tap your card, ask yourself the following:

<ul><li>"Is this something I really need?" </li><li>"Do I have something similar already?" </li><li>"Do I want this more than I want to become a millionaire?" </li> </ul>

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 <a href="https://www.investopedia.com/terms/b/budget.asp">budget </a>? Maybe, maybe not. But if you can, it will go a long way toward helping you reach your goal.

The personal <a href="https://www.investopedia.com/terms/s/savings-rate.asp">savings rate </a>is the percentage of income left over after people spend money and pay taxes. That rate dropped to 7.3% in October 2021, according to data from the <a href="https://www.investopedia.com/terms/b/bea.asp">Bureau of Economic Analysis </a>(BEA).

According to experts, that's not enough to save for retirement, let alone for anyone trying to become a millionaire.

You should consider putting away at least 20% of your income toward savings, which includes retirement and money you may need for a rainy day.

Exactly how much should you save? Although there's no correct answer here, most <a href="https://www.investopedia.com/terms/f/financialplanner.asp">financial planners </a>say that, depending on your age, you should save at least 15% of your annual <a href="https://www.investopedia.com/terms/g/grossincome.asp">gross income </a>if you're aiming for a nest egg for retirement. This figure may sound unattainable for many, but in reality, it's not. Suppose your employer <a href="https://www.investopedia.com/terms/m/matchingcontribution.asp">matches contributions </a>of up to 6% of your salary, you need to save only 9%.

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:

<ul><li>Asking for a pay increase (if you think you're due for one) </li><li>Working extra hours </li><li>Getting a second job </li><li>Getting training to increase your earnings potential </li> </ul>

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.

Registered nurses, on the other hand, earn about $75,330 a year—almost $30,000 more. Of course, it takes one to three years longer to become an RN.

But that extra money every year can really help you reach your financial goals—especially if one of them is to become a millionaire.

<a href="https://www.investopedia.com/articles/personal-finance/092313/how-manage-lifestyle-inflation.asp">Lifestyle inflation </a>happens when you spend more money just because you have more to spend. Say you live in a comfortable apartment in a great location for $1,000 a month. You get a raise at work and move to a better apartment that costs $1,500 a month. Did you really need to move?

If you want to become a millionaire, resist the urge to give in to lifestyle inflation. Instead of spending more—just because you can—save and invest more. You'll reach your financial goals a lot faster.

Planning for <a href="https://www.investopedia.com/terms/r/retirement.asp">retirement </a>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 only 25% of Americans say they're confident that they're doing what they need to when it comes to <a href="https://www.investopedia.com/terms/r/retirement-planning.asp">retirement planning </a>.

That's why it's so important to get help from a professional. Only 29% of Americans reported working with a <a href="https://www.investopedia.com/terms/f/financial-advisor.asp">financial advisor </a>, while 65% said they aren't getting any financial advice.

Unless you're a financial rock star, it's worth the money to work with a qualified financial advisor.

An advisor 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 <a href="https://www.investopedia.com/retirement/how-to-manage-timing-and-sources-of-income-retirement/">can help you make it last </a>.

Here's a quick look at how retirement savings accounts can help you reach your goals:

401(k), 403(b), and Other Employer-Sponsored Retirement Plans

These are perhaps the best savings vehicles for most workers. It's a good idea to take advantage of your company plan if one is available—especially if there's an employer match.

You can deduct your contributions, and the earnings in the account grow <a href="https://www.investopedia.com/terms/t/taxdeferred.asp">tax-deferred </a>. For 2021, the elective deferral limit is $19,500, or $26,000 if you're age 50 or older. For 2022, it is $20,500, or $27,000 if you're age 50 or older.

Most people with earned income can contribute to a <a href="https://www.investopedia.com/retirement/roth-vs-traditional-ira-which-is-right-for-you/">traditional or Roth IRA </a>. The major difference between the two IRAs is when you pay taxes. With traditional IRAs, you can deduct your contributions the year you make them. You pay taxes when you withdraw the money in retirement.

Roth IRAs work differently. You don't get the upfront <a href="https://www.investopedia.com/terms/t/tax-break.asp">tax break </a>. But qualified withdrawals in retirement are tax-free. Those are made when you're 59½ or older and it's been <a href="https://www.investopedia.com/ask/answers/05/waitingperiodroth.asp">at least five years since you first contributed to a Roth </a>.

No matter what type of IRA you have, the <a href="https://www.investopedia.com/retirement/ira-contribution-limits/">contribution limit is the same </a>. For 2021 and 2022, you can contribute up to a total of $6,000, or $7,000 if you're age 50 or older.

Simplified Employee Pension (SEP) and SIMPLE IRAs

The <a href="https://www.investopedia.com/terms/s/simple.asp">SIMPLE IRA </a>is a tax-favored retirement plan that certain small employers (including the self-employed) can set up for the benefit of themselves and their employees.

<a href="https://www.investopedia.com/ask/answers/102714/how-does-simplified-employee-pension-sep-ira-work.asp">SEP IRAs </a>can be established by the self-employed and those who have a few employees in a small business. The SEP lets you make contributions to an IRA on behalf of yourself and your employees. Both <a href="https://www.investopedia.com/ask/answers/102714/what-are-main-differences-between-simplified-employee-pension-sep-ira-and-simple-ira.asp">SEP and SIMPLE IRAs </a>are popular because they're simple to set up, require little paperwork, and allow investment earnings to grow tax-deferred.

For 2022, you can put away as much as $61,000 in your SEP IRA account and $14,000 in a SIMPLE IRA.

Taxable <a href="https://www.investopedia.com/terms/b/brokerageaccount.asp">brokerage accounts </a>provide a way to invest additional funds after you max out your retirement accounts. Be aware that you need to pay taxes on the income generated in these accounts in the year you receive it.

If you start early and save regularly, you can make a million dollars by contributing to your retirement savings accounts. To take full advantage, try to <a href="https://www.investopedia.com/401-k-vs-ira-contribution-limits-4770068">contribute the maximum limit </a>.

Let's take a look at how an average person, let's call him Joe, can reach this million-dollar goal by the time he retires at age 67. Let's assume Joe:

<ul><li>Is single and age 33 </li><li>Makes $50,000 per year </li><li>Has a 401(k) plan with a 5% employer match </li><li>Saves $4,000 a year in a Roth IRA </li> </ul>

We'll assume his investments have a 7% return.

Joe takes full advantage of the employer match and defers 5%, or $2,500, of his salary each year. His employer contributes $2,500 each year as the match. For the purposes of this example, we'll assume Joe's salary remains the same until retirement. Of course, in real life, he'd likely get a raise and his nest egg would grow even more. Here's the breakdown of his savings over the 34 years.

That's a grand total of $1,235,132. Welcome to the Millionaire Club, Joe! If he started his plan at a different age, here's what his results would look like:

What Is the Easiest Way to Become a Millionaire?

The easiest way to become a millionaire is to take advantage of compounding by starting to save your money as soon as possible. The earlier you save, the more interest you accumulate. And you'll earn more money on the interest you earn. You should aim for at least 15% of your income. You can also reach your million-dollar goal by cutting down on unnecessary spending and getting financial advice from a professional. If you're able to, consider upgrading your work skills or getting a second job.

How Much Do I Need to Invest to Become a Millionaire?

The amount you'll need to invest to become a millionaire depends on where you are in your life. You can afford to sock away less money when you're younger because you have more time to accumulate your wealth and you can tolerate more risk. If you put off saving until you're older, you'll have to put away more money every month.

Unless you come from a very wealthy family, are expecting to win the lottery, or are on the verge of getting a patent on the next great invention, there's very little chance that you can become rich by doing nothing. You'll need discipline, a plan, and, in some cases, good advice from a registered professional who can help push you in the right direction to reaching your goal of becoming a millionaire.

Of course, how much you actually earn depends on how well your investments do. At younger ages, you have the time to be a little riskier with your investments and seek out choices that have the potential to get you that 7% return or even more.

That means not putting much of your money in low-earning <a href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">certificates of deposit </a>(CDs) and money-market investments. Instead, you should consider choices like equities to achieve returns that can outpace inflation—and grow your savings.

The key is to start while you're young, stay disciplined, and make and keep a long-term financial plan. The ride may be slow, but you'll be pleased with the long-term results. Making your first million won't be easy—but it doesn't need to be impossible.

*Annual percentage yield (variable) is as of 09/12/2022. Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities.

6 Steps To Become a Millionaire by 30

Start Saving Early

Avoid Unnecessary Spending and Debt

Save 15% of Your Income

Make More Money

Don't Give In to Lifestyle Inflation

Get Help if You Need It

Karin Patricia's ideas are part of this journey:

Related collections

Similar ideas