(Because once you make your first million you’re bound to rejoice under a waterfall with a rainbow, right?)
If a million dollars’ worth of investments sounds unattainable, you haven’t done your research. A seven-figure portfolio is absolutely doable if you start saving early, make sane lifestyle choices and avoid some common psychological traps.
Don’t limit your thinking to making a mere million over your lifetime. Aim for $10 million. Your only way to get there is to educate yourself about investing from reliable, been-there sources. After that, make a plan and stick to it.
Start with a millionaire mindset.
Building wealth begins in the brain. There are some beliefs and behaviors that you simply must avoid – taking on consumer debt, keeping up with the Joneses, trying to take shortcuts or falling for get-rich-quick schemes. True wealth takes time and hard work.
Adopt a spendthrift lifestyle.
When millionaires are studied, they surprise researchers. They’re not living in upscale neighborhoods and driving fancy cars. They treat their income like a business: spending the least possible and investing the rest. It’s not unheard of for future millionaires to invest half of their household income.
Make money from your hobby.
If there’s something you could do all day, every day, do it. The trick is finding a way to make your passion into a profitable enterprise. You can expect to fail along the way, but getting back up to try again is what separates millionaires from middle managers. Don’t be afraid to spend hours and weekends on your “side business” – it might be your bread and butter someday.
Start saving right now.
It’s all about doing the math. Most millionaires invested in the stock market for a long time, reinvesting dividends and letting compound interest do all the work.
Find an online calculator and figure out how much you’ll need to invest each month to be a millionaire by the time you’re 60, assuming you’re earning an average 7 percent return. You might be surprised.
Keep cool and play the long game.
Impatience is the enemy of wealth. It makes people buy and sell too often, and it makes them abandon promising businesses that don’t explode into success overnight.
It takes a while for investments to start ballooning into real money, and even then, you’re going to want to leave them alone. If it were easy to run your own business, everyone would do it. So take a deep breath and realize you’ve got a long way to go.
Always be hustling for more income.
If you’re not a natural entrepreneur, consider investing in real estate. A rental property that will bring in more money than you pay to maintain it is a great investment. Do some research to figure out the up-and-coming neighborhoods in your area. The quicker you own your rental property outright, the quicker you’ll be looking at steeper profits.
Your 401(k) is your tax-free friend.
You might as well take advantage of the federal government’s wealth-building program: the 401(k) account. First, put in the maximum amount allowed by law ($18,000 a year as of 2016). Leave it in there, earning compound interest, and if your mutual funds return a 7 percent profit while you’re socking away that $18,000 a year, you’ll be a millionaire in 23 years. If you can’t afford to put away $18K a year, put away as much as possible.