A lot of people want to join the $1 million club… very few are able to. Worse, some people believe they’d only manage it if lady luck is on their side so they spend silly amounts of money in the hopes of winning the lottery.
Trust us, there are better and more efficient ways to make join the 2-comma club and they don’t rely on you wishing upon a star, finding a four-leaf clover, or stumbling over a pot of gold at the end of the rainbow.
No, our tips work. You just have to get into certain habits that will not only boost your savings but also increase your earnings exponentially. That’s what becoming wealthy really is. Without those two elements, you’ll never make it.
So here are our 6 habits that you absolutely have to try in order to make $1 million dollars. It’s not impossible!
1. Save 40% to 50% of Your Paycheck
Obviously, the first thing you need to do is generate more income. Easier said than done, but if you start small you’ll eventually snowball into a supersaver!
There are two parts to getting rich, like we mentioned earlier. First, you need to save between 40% and 50% of your salary. If this sounds impossible then you need to take a good hard look at your expenses and ruthlessly start looking for places where you could be spending less, such as rent or groceries.
A good rule of thumb is to keep living like a student- obviously without the crippling student loans!
The second part is what’s really going to close the gap between your savings now and the $1 million you crave- invest, invest, invest!
Since you’ll have 40% to 50% of your salary ready to go, put that money towards a diversified portfolio. We’re talking stocks, bonds, mutual funds, and real estate. Leave no stone unturned. That’s because you don’t want to lose all your money if disaster strikes- honestly, it’s a terrible idea to put all your money in one place.
On that note, you should invest in an IPO, an initial public offering. Take Facebook for example. Stock originally sold for $38 per share. At the time of writing this, it’s worth $214.67.
Talk to a financial adviser about any major investments first!
2. Don’t Waste Money
“Well, duh!” we can already hear you saying from the other side of the screen. Hear us out before you roll your eyes. Not wasting money is a no brainer but embracing minimalism isn’t, at least not for a lot of people.
If you live by ‘less is more’ you’ll soon find that you’ll stop craving certain items that you definitely no need such as new decorative items for every season or clothes that you’ll end up wearing once or twice only to later lose at the back of your wardrobe.
But before you even start thinking about a minimalist lifestyle you have to get rid of so, so many things. While donating them might be noble, you should try to sell instead. Do so online or set up a yard sale and you’ll at least generate a few dollars.
You also need to keep a very important thing in mind. Minimalism isn’t for everyone. If you can’t stand the thought of only having two towels and three shirts tops, don’t stress yourself out. If you try got dive into extreme minimalism you’ll be more likely to bounce back into overspending, so only cut down things you know you’ll comfortably get rid of.
Then, avoid buying like you used to. The more often you stop yourself from making new purchases the easier it’ll be for you to save money in the long run.
3. Don’t Be House Poor
When someone is house poor it means they live in a home that is eating up all their income. If you find yourself in a position in which you’re able to pay your mortgage but can’t contribute to an emergency fund at the same time, it’s time to rethink your housing situation. Worse, if you’ve got credit card debt then a change needs to be made right now!
You have two options going forward. Either buy a house that isn’t bigger or more lavish than you need or keep paying rent.
Houses are clever investments and, depending on where you live, your mortgage payments could be smaller than what you’d pay a landlord. This also depends on your downpayment.
For some, renting is far more affordable. The rule of thumb is to keep it below 30% of your income. Anything higher will ruin your 40% to 50% income savings when you also consider all your other utilities plus grocery shopping, insurance, fun money, etc. Ideally, you should really look for rent that is between 20% or 25% of your income.
4. Properly Insure Your Stuff and Yourself
There’s a fine line between too much insurance and too little. You want to make sure you don’t blow your coffers when disaster strikes but you also don’t want to spend too much on insurance you genuinely don’t need. Shopping around typically takes care of this latter issue.
Don’t forget to check our renters insurance, too!
Secondly, insure yourself! For example, disability insurance will replace some or most of your income if you suddenly can’t work anymore for a period of time.
Your car insurance will cover you in case of an accident, as you may very well know. But do you know how to make the most out of it? Check these 8 Clever Ways to Save Money on Car Insurance.
Alternatively, read up on 7 Ways to Get the Best Out of Your Car Insurance.
As your net worth grows you have to learn how to properly protect your assets so start looking into an umbrella liability insurance policy that fits your pockets and lifestyle just right!
5. Renegotiate Everything
No matter how tight you think a spot is, don’t let big companies fool you into thinking you can’t renegotiate a deal. Take service providers such as cable, phone or internet companies. If you tell them you’re going to jump ship just watch how quickly they’ll offer you a better deal just to keep you on board.
Don’t believe us? Here’s one very good example on how to cut your cable bill significantly: 7 Guaranteed Ways to Cut Your Cable Bill Right Now. Do this for your phone bill too but for extra tips check this article out: 10 Tips That Will Help Lower Your Phone Bill.
Even your credit card issuer will be willing to discuss these things with you! If they aren’t willing to give you a lower rate, take your business elsewhere the moment your contract is set to expire.
Remember to automate your savings too as this will “put a leash” on how you spend money. Now, not only are you paying less for services you know and love but you also don’t have to convince yourself to set money aside every month. The automation process will do it for you so you’ll know how much money you can spend without feeling guilty about it.
6. Earn Your Bonus or Raise
Do you think you deserve a bonus or raise? Then don’t be afraid to ask for one. If you’ve put your best foot forward and helped the company then we don’t blame you for being compensated for the effort.
Just make sure you’re ready when you do. You have to prove yourself either with past projects that you’ve helped with or initiative, a desire to bring something new, exciting and potentially profitable to the table!
And when you do get that bonus or that raise make sure to keep your spending under control. A lot of people find this part very difficult. But you’ve already proven you can live comfortably on whatever amount of money you’re making now, so why go out of your way to spend more when you can save more!?
The only way you can save $1 million is if you’re careful about how you spend your money, especially after a raise or bonus.
Which of these money-making habits do you think will be toughest to crack? Let us know in the comments down below and share your own tips and tricks with our other readers!