How do you become a millionaire? It’s not a complicated matter. Instead, it is a matter based on time. Those who start working towards this goal in their 20s have a much better shot at making this happen. You just have to play your cards right. For the time being, you might not be able to live the way you wish, as you will need to set yourself up for success in the future. There are some universal truths that can help you become a millionaire by age 40. It will mostly depend on two factors: your age and your future earning potential.
The sooner you start, the easier it will be, but it is still incredibly hard. Just keep in mind that the longer you wait, the harder it gets. Young adults who want to make this happen must make a real commitment to getting control of their finances. You must be willing to SAVE, which means you can’t always spend. Financial planners often recommend saving between 10% and 15% of your income toward retirement. But what about becoming a millionaire 25 years earlier? This will require a commitment to savings that will be extremely challenging for most people as you will need to save between 30% and 50%. If your average income between the ages of 22 and 40 is $75,000 and you’re able to save 40%, that ends up being $30,000 per year. If the money will be sitting in taxable investments, you can begin withdrawing at age 40, rather than having to wait until the typical retirement age of 62. It depends if you are able to spend roughly 18 years living well beneath your means.
Build a Business
Building a business is certainly difficult but it is one of the most effective paths to making $1 million. Most people literally must build something from nothing, maybe even with just a few hundred dollars. Nowadays, it is easier as you can take advantage of the web to start a blog or create a website to sell products or services and you may not even need inventory or staff. You can purchase the inventory as you get sales or outsource services to contractors. Most blogs are primarily hobbies to the owners, but there are some that are full-fledged businesses if they make enough steady web traffic to produce substantial advertising revenue. The sale price of a business is, on average, twice gross revenues. If the business generates at least $500,000 in annual sales, it has the potential to sell for $1 million or more. With a business that generates that type of revenue, you’ll also be able to save a lot of money along the way, which is why building a business is one of the most reliable ways to bring in that kind of money.
Also, sometimes building a business will allow for substantial cash flow in just a few years, so if you have a clear vision and goal when you’re 30, 32 or even 35, you still have a chance of making a million dollars before turning 40.
Purchase Real Estate
Real estate is truly a time-honored way to become wealthy, but also one of the riskiest, since making big money in real estate involves using a lot of leverage, and the real estate market can experience a downturn. Leveraging enables you to obtain a large asset with a relatively small investment. If the investment pays off, the gains could be huge. But if the investment goes in the wrong direction, the investment can quickly vanish and even if you lose your capital investment, you still must pay the loans you owe.
The real magic with real estate investing is the leverage, for instance if you purchase a $200,000 house with a 5% down payment, you can have ownership of a $200,000 asset with just $10,000.
One limitation is that you won’t be able to buy an investment property with small down payments. Lenders typically require at least a 20% down payment. It may be difficult to acquire a sufficient amount of real estate to become a millionaire if you have to come up with that kind of money for each property.
If you own ten properties worth a total of $2 million by the time you are 35 and each year, after buying another house, you can rent out the previous home to a tenant. The rental income will take care of the costs of the home.
Potentially, you could project that between the purchase of your first home and the time you turn 40, the value of your portfolio of real estate has increased to over $3 million. Even with the mortgages on each property — which will continue to be paid down through the years as an investment in yourself — you’ll be worth well over a million dollars by 40. This is the power that drives real estate investors.
New business ventures are always being launched, with many desperate for capital. Some ventures will never pan out but it is a numbers game. If you’re able to invest a few thousand dollars in 10 or more upstart businesses, if just one or two of them take off, it has the potential to make you a millionaire within a few years.
Some people do this regularly and this can be viewed as a form of investment gambling. Investing in a portfolio of speculative businesses can a very fast, but risky way to come up on some money.
Reaching the million-dollar mark by age 40 won’t be easy. Yes, it’s rare, but it is not impossible. You’ll have to be fully committed to the process to be that 1% who makes it happen with your time, effort, and money.