How to Become a Millionaire – From a Stay-at-Home Mom
How to Become a Millionaire at Any Age
Do you want to become a Millionaire? I know, silly question. I mean, who wouldn’t, and contrary to popular belief ANYONE can become one, AND you don’t need to earn a six-figure income either. I know you may think this sounds crazy but let me show you How to Become a Millionaire.
Let me first explain what I mean when I talk about becoming a millionaire. I’m not going to talk about the many ways you can make a million dollars, but I’m going to talk about how you can save a million dollars and live off of that income. It’s called retiring early.
Later on in this article, I’ll show you exactly what I’m doing to become a millionaire, but first, I have to share what I saw the other day.
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While watching TV, Rachel Ray’s show came on with special guest Chris Hogan. It was a segment about how anyone can become a millionaire at any age.
Chris had everyone in the audience stand to find out how many in the audience were living like Millionaires.
Note: The statistics he brings up come from surveying 10,000 everyday millionaires.
He asked the following questions and for the audience to remain standing if you…
- Use Coupons (According to his studies 93% of Millionaires use coupons)
- Spend $200 or less at restaurants each month (On average Millionaires spend less than $200/mo. Hint: they cook)
- Have a credit card balance that you can pay off immediately (73% of Millionaires don’t carry a credit card balance)
- Use an investment professional or financial planner? (68% of Millionaires use an investment professional so they’re not going at it alone)
As you can imagine there were only about 5 audience members still standing.
If you answered yes, congratulations you are living a millionaire kind of lifestyle and/or have millionaire kind of habits.
He stressed that if you couldn’t answer yes to all of those questions, it’s okay. It’s all about decisions and being intentional with money.
He also made a very good point that 79% of Millionaires did not receive an inheritance, they built wealth themselves. So if you think most millionaires come from money, well, then you’re wrong.
I was also very surprised to hear that 68% of Millionaires avoided student loan debt. They were allergic to debt even with education. Are you surprised too? Sometimes I just assume if you go to a big University you’ll be bringing in the big bucks and forget about the student loan debt they may be drowning in.
Like Chris said, it’s all about decisions.
Can you consider community college for the first two years, go part-time, etc. Consider your options, and if it’s worth the financial burden of the school you attend.
AND get this…1/3 of Millionaires never made a 6-figure income! I was totally shocked by this, and this is why ANYONE can become a millionaire because it all boils down to being disciplined.
Like my girl FIREcracker said, “The key is your expenses. If you don’t earn a 6-figure income, but your expenses are low, you can retire faster than someone who earns way more but has much higher expenses.”
What’s Your Number?
Chris said it best; retirement isn’t an age. It’s a financial number.
For most people who want to retire early or at all, they’ll need to save a million dollars or more.
Chris developed the coolest FREE tool, Retire Inspired Quotient to help you discover when you can retire. He said you can’t chase what you’re not aware of, so let’s check it out.
We’ll use this common example to show you how the tool works.
How to Become a Millionaire from Nothing
Say you make $59,000 a year with nothing saved (like most Americans) and that’s the kind of lifestyle you want to live on, $59,000 a year when you retire.
If you were to retire tomorrow and you were going to live off $59,000 a year, you would need to draw $4,917 each month from your investment portfolio.
So, let’s say you want to retire in 25 years with nothing saved. To live on $59,000 a year the Retirement Inspired Quotient tool says you’ll need to start investing $1,032 each month.
You’re probably thinking $1,032 is a lot of money to save each month, but Chris broke it down. The average car payment a month for most Americans is $578 for an average of 5 years.
If you can attack debt, get that car payment out of your life by paying it off and put that $578 toward your investment fund instead of sending it to the car company then your goal becomes more achievable.
You have to focus on getting out of debt first. Try the Dave Ramsey Snowball approach.
Pay off your debts from smallest to largest. Make the minimum payments on all your debts except the smallest. Pay as much as possible on your smallest debt and then repeat these steps until all your debts are paid in full.
It’s about being intentional. Do you want to retire early or at least prepare?
It’s all about being intentional and frugal. Just because you might have a million dollar portfolio doesn’t mean you should spend frivolously. Remember, for this to work that means you are living on a set income each year, so you’ll need to spend wisely.
Here Are Some Good Articles on Saving:
- 10 Ways to Save on a Tight Budget
- 10 Frugal Things I’m going to Start Doing
- 15 Hacks to Reduce Household Expenses
- 10 Money Saving Hacks
Chris gave one more final tip, “take advantage of your company’s sponsored 401k and Roth IRA it’s a great way to grow money tax-free. You have to put money away in order to have money to spend. You can build wealth; you just have to make decisions and work a plan.”
I’m telling you, after listening to this guy I’m a fan!
How to Become a Millionaire Book
He wrote the book Everyday Millionaires, you’ll have to check it out.
Use this tool to find out what “your number” is and how much you’ll need to save each month until you can retire.
Once you do that, the next big question is, how and where do I save my money for this to work? The answer is, index investing.
Index investing is an inexpensive, effective investment strategy that matches an index fund.
An index fund is a mutual fund (or collection of investments) that follows a market (Stock, bond, real estate, etc.). You’re not investing in one individual stock but the whole index like the ever popular S&P 500 (500 of the largest US companies).
I’m putting my money where my mouth is and I’ve invested my entire 401k and IRA into index funds after leaving my job to stay home with my kids.
I put my money in a very aggressive fund called VSTAX thanks to the advice of legend J.L Collins in his stock series. (This is what I did, make sure you do your own research and choose what’s best for you). I’ll move this money in a more conservative fund as I get older to protect our investments.
Index Investing typically always outperforms actively managed mutual funds and due to its diversified strategy your account will never go red. There is risk in anything you do when it comes to investing, but history has shown if the index has gone down, it will always go back up.
I’m not an expert when it comes to investing, and that’s why I chose to invest in index funds. They are low-cost, low maintenance, and the easiest way to diversify your money.
For more information about what Index funds are CNBC wrote a great article, Here’s exactly what an index fund is—and why it’s Warren Buffett’s favorite way to invest.
I interviewed Kristy aka FIREcracker who blogs at Millineal-Revolution, and she retired at 31 with a million dollar portfolio! She is the reason I’ve become obsessed with achieving financial freedom, and she has a great investment series I’m following that walks you through each step of the process on how to start investing in index funds.
Here is What I’m doing to Become a Millionaire:
- I’ve paid off all my debt except for my mortgage!!! But I’m attacking that debt next (*inserts shimmy*). I used my income tax refunds to help pay off my student loans, car payment, and now my house because it’s a nice lump sum of money that I don’t account for and can be put to good use. You can scroll down to the comment section to see why I’m choosing to pay off my mortgage rather than save first.
- I signed up for Mint.com to track my expenses and create a budget
- Cut Expenses – Using Mint I was able to see where we were spending too much money, so I cut back some expenses and started putting that money toward paying off our house
- Contribute the Max to Roth IRA and Traditional – Following Chris Hogan’s advice, my husband and I are going to contribute the max of $5,500 each to grow our money tax-free.
- Paying off our Mortgage – After we max out our IRA for the year, then we are going to focus on putting any extra money toward paying off our house. Hopefully, we’ll be able to do this by the end of next year so we can focus on contributing to our investments and other passive forms of income. (You can still reach millionaire status without paying off your mortgage, I’m just choosing to do this)
- Investment Workshop – Focus on following Firecracker’s investment workshop after we pay off the house so we can save a million+ dollars!
- Being smart with our money – We live a very frugal lifestyle, but we still enjoy life with our kids. We just do certain things like:
- Use a credit card on everything to take advantage of cashback rewards. We received over $600 in cashback rewards last year because we put EVERYTHING on our credit card and pay the monthly statement off in full (Say No to Interest) so that we can reap the benefits of cash rewards. We don’t spend money on what we can’t afford. If you sign up for the Chase Freedom Credit card as we did you get a $150 bonus if you spend $500 within the first 3 months. That should be easy to do if you use it on everything like us.
- Take advantage of Hand me Downs – We rarely spend money on clothes for our kids because we make it a point to ask family and friends to pass down the clothes whose kids are slightly older than ours.
- Meal Plan – Food is our biggest expense, and I do what I can to save as much as I can. I’ll be writing a post about this soon, subscribe here if you want to stay updated on this. Subscribing to Meal plans has actually saved us money too.
- Savings – We have worked hard to build up our emergency fund (6 months of our monthly expenses) and money if our car breaks down. We don’t want to get into another debt trap and pay interest on something we can’t pay in full.
If you haven’t noticed, I HATE paying interest. I really didn’t care for paying off our mortgage until my husband told me we were barely paying anything on the principal and most of our money was going toward the interest.
It made me sick. I don’t have time to make money just to give it away. So once we pay off our house, I can focus on putting our money towards investments.
Refinancing is also a great option to look into when the rates are low, that way you have the opportunity to take advantage of getting locked into a lower rate to allow you to pay off your mortgage faster.
How Long Until I Achieve Financial Freedom? I don’t know yet and to be honest, I’m doing what I would be doing even if I retired early.
Retiring early is really for my husband and not so he can be home with me all day, but so he can find what he’s passionate about.
I’m a stay at home mom and I make money from my blog, so I’m already living my dream. To be able to raise my kids, be “there” and make money is really all I could ever ask for.
I’m a year into this blogging game and I’m making more money now than when I was a full-time Corporate Marketing Manager. This is the MAIN reason why we can focus on paying off our house and begin contributing to our investments because of my blogging income.
Blogging has given me the freedom to do so much, I just wish I had known about this sooner, but everything has its timing. If you’re interested in starting a blog I wrote a step-by-step guide to get you started.
Let’s Recap the Steps You Need to Take to Become a Millionaire
- Focus on Paying Off any Debts
- Earn More than you Spend
- Invest Early
- Increase Your Income
- Cut Unnecessary Expenses
- Live a Frugal Lifestyle
I hope this article sparked something in you to work toward becoming debt-free, being smart with your money and becoming a millionaire.
Can you do it?
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