How To Become A Millionaire (2024)

There are almost two million millionaires in Australia, according to the UBS Credit Suisse Global Wealth Report for 2023, whereas in the US, there are more than 20 million.

Because many of them capture the attention of the press or become pop culture icons, it might seem like becoming a millionaire is impossible for everyday Australians.

The truth is that you don’t need to develop the next tech unicorn or be a mining magnate to become a millionaire. In reality, most millionaires are regular people, not all of whom bring home six- and seven-figure salaries. With a bit of common sense and discipline, you, too, can become a millionaire on an average or above-average income.

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How You Can Be a Millionaire

The first step to becoming a millionaire is to understand the power of compound interest. When you compare a modest rate of monthly savings with a $1 million goal, the challenge seems overwhelming.

But the key is to realize that the vast majority of wealth comes from compounding. That’s when your early returns lead you to earn greater later returns. Think of it this way: If you earn 10% on $1,000, you’d have $1,100 at the end of the first year, a gain of $100. If you earned that same 10% return on your money the next year, you’d have $1,210, a gain of $110. You’re effectively earning interest on interest, hence the term compounding.

What’s great about compound interest is that they are investment gains without having to add more of your own money to your investment (though it’s important to regularly contribute more money to maximise your compounding).

Compounding Returns Example

Now, let’s see how compounding can help you become a millionaire. First, we’ll calculate a possible rate of return on our investment.

According to Vanguard, Australian shares have returned 9.2% over the last 30 years. Which is a storing return, but, we need to factor in inflation, as well, which over the past 70 years has averaged somewhere between 2% to 3%.

Based on this historical data, let’s assume an inflation-adjusted annual rate of return of 6.5%. By using an after-inflation rate of return, the results of our calculations will show an amount of money in today’s dollars.

How much we need to save each month to become a millionaire depends on how long we’ll save and invest. Here it’s important to understand that the longer we have to save and grow our money, the less we have to save each month to reach our goal.

If we want to become a millionaire in 10 years, we would need to save about $6,000 per month. Obviously this is not realistic for most people. But luckily, most people aren’t trying to become millionaires in a decade.

If they’re saving for retirement, they generally have at least a couple of decades to reach millionaire status. As we extend our investing time period to reflect that, we can begin to see the value of investing early and the power of compounding.

If we save and invest for 20 years, our monthly savings amount drops to $2,075. Still unrealistic for many people, but we are moving in the right direction. Here’s how much we would need to save each month for different time periods.

Time PeriodMonthly Savings
30 years$940
40 years$465
45 years$330
50 years$235

It’s important to take a moment to note a couple of things, like the impact of time and compounding. Each decade you wait to start saving roughly doubles the amount you need to contribute to reach your goal. But by the same token, if you start early enough, you can grow your wealth to great sums with only a few hundred dollars a month.

Accounting for the Impact of Fees

The above results do not consider the impact of investment fees. If you invest on your own using low-cost index funds, the small fees charged by these types of investments won’t change the results significantly. For investors that pay an advisor or use expensive actively managed funds, however, the results can vary dramatically.

For example, let’s assume that an investor pays a financial advisor 1% per year to manage their investments. Although 1% may not seem like a lot, it has a dramatic impact on the amount of money that needs to be saved each month to reach our $1 million goal. Here’s how much it would take for them to reach $1 million accounting for that fee.

Time PeriodMonthly Savings Without FeesMonthly Savings With 1% Fee
30 years$940$1,130
40 years$465$600
45 years$330$450
50 years$235$330

If the same advisor uses expensive managed funds charging an additional 1%, as many do, the monthly savings requirement goes even higher. Here’s how things play out as the investor tries to reach their $1 million goal.

Time PeriodMonthly Savings Without FeesMonthly Savings With 2% Fee
30 years$940$1,350
40 years$465$770
45 years$330$590
50 years$235$460

As you can see, investment fees, even ones that seem insignificant, can really add up over time.

Your Super Can Help Make You a Millionaire

Keep in mind that you already have an investment fund that is tax efficient and can help you grow wealth over time: your superannuation account.

You can contribute up to $27,500 of concessional (before tax) tax contributions per year without paying extra tax under salary sacrificing arrangements.

The current superannuation guarantee is 11%, but you may wish to raise that amount to say 14% or 15% to help you reach your million-dollar goal.

You will be taxed on these contributions at the rate of 15% within the fund, which, for most people, is lower than their marginal tax rate so is a highly effective way of building up your retirement savings.

Just watch that you don’t exceed the $27,500 per year in additional contributions otherwise you will be paying a much higher tax rate.

Don’t Let Lifestyle Debt Prevent You from Becoming a Millionaire

If there’s one roadblock on your way to becoming a millionaire, it’s lifestyle debt. This is debt, often charged to a credit card, to purchase everything from holidays to a night out on the town. A reasonable amount of debt that helps us buy something of lasting value, such as a home, can be a smart choice. Going into high interest debt to buy things with no lasting value works against the goal of becoming a millionaire.

Historical Returns Are Not a Promise of Future Success

Our analysis makes a number of key assumptions about the variables that determine how and when you could become a millionaire. These variables will fluctuate over the decades, and some could prevent you from achieving this goal in the time you’ve allotted.

Perhaps the biggest assumption is the after-inflation average rate of return. Over the next several decades, the average rate of return may very well fall short of the benchmark we’ve chosen in this analysis. In addition, how much you can save each month will likely vary over time. And inflation may prove to be more of a headwind than expected.

Financial setbacks are inevitable. The best plans often fall short. While financial planning is important, as Mike Tyson says, everybody’s got a plan until they get punched in the mouth. Sometimes the markets, inflation or personal circumstances punch us in the mouth all at once.

The good news is that even if you fall short of the goal of becoming a millionaire, you can still use the tools and variables we’ve deployed here to meet your other financial goals. If your portfolio grows to “only” $750,000 at retirement, you’d still be far better off than if you had never saved and invested in the first place.

Final Thoughts on How to Become a Millionaire

While the status of millionaire is alluring, aim to achieve financial freedom rather than arbitrarily aiming to reach the two comma club. Financial freedom may require more or less than $1 million, depending on your unique circumstances.

Regardless of the specific financial goals you decide on, your focus should be to save and invest early and consistently while keeping an eye on fees. If you can avoid lifestyle debt at the same time, compound returns will take care of the rest.

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Frequently Asked Questions (FAQs)

What is the fastest way to become a millionaire?

There is no guaranteed fast way to become a millionaire. To give you the best chance of hitting seven figures by retirement, you need to invest steadily over time—we’re talking decades—and take full advantage of compound interest. The one piece of advice that holds true, however: is that the earlier you start, the less you need to invest each month in order to be a millionaire by retirement.

Do millionaires pay off debt or invest?

Generally speaking, wealthy investors classify debt into two categories: good and bad. Bad debt is debt that is accrued because you are spending more than you earn, such as on credit cards, while good debt is the mortgage you own on your property that is appreciating in value over the long term. So while millionaires often don’t mind good debt, they steer clear of bad debt and invest for the long-term.

How to become a millionaire in one year?

It’s going to be tough to become a millionaire in a year’s time as 12 months is a very short investment window and doesn’t allow you to take advantage of the magic of compound interest. In short, however, the if you want to become wealthy in the shortest time possible, you will need to:

  • Start young.
  • Make use of compound interest
  • Reinvest dividends
  • Choose solid stocks and investments and hold for the long term
  • Pay off any lifestyle debts, such as credit cards, car loans, etc
How To Become A Millionaire (2024)

FAQs

How To Become A Millionaire? ›

“Beyond entrepreneurship, no conventional career path — even medicine, law, or engineering — generates a million-dollar income for a newcomer in only a year.” So, aside from a lucky crypto investment or a windfall of some sort, Kellzi said becoming a millionaire is highly improbable.

What is the fast way to become a millionaire? ›

How To Get Rich
  1. Start saving early.
  2. Avoid unnecessary spending and debt.
  3. Save 15% or more of every paycheck.
  4. Increase the money that you earn.
  5. Resist the desire to spend more as you make more money.
  6. Work with a financial professional with the expertise and experience to keep you on track.

How to get rich in 5 years? ›

Here are seven proven steps to get you wealthy in five years:
  1. Build your financial literacy skills. ...
  2. Take control of your finances. ...
  3. Get in the wealthy mindset. ...
  4. Create a budget and live within your means. ...
  5. Step 5: Save to invest. ...
  6. Create multiple income sources. ...
  7. Surround yourself with other wealthy people.
Mar 21, 2024

What is the best job to become a millionaire? ›

10 high-paying jobs
  1. Pilot. ...
  2. Actuary. ...
  3. Computer network architect. ...
  4. Air traffic controller. ...
  5. Petroleum engineer. ...
  6. Lawyer. ...
  7. Physicist. ...
  8. Computer and information systems manager.
Apr 18, 2024

How can I be a millionaire in a year? ›

“Beyond entrepreneurship, no conventional career path — even medicine, law, or engineering — generates a million-dollar income for a newcomer in only a year.” So, aside from a lucky crypto investment or a windfall of some sort, Kellzi said becoming a millionaire is highly improbable.

How can I make $1000000 fast? ›

This can be done by starting a side business, investing in stocks or real estate, doing freelance work, or developing a passive income stream through digital products and online courses. All these options have the potential to generate a substantial income and help you reach your seven-figure goal faster.

How to get rich fast? ›

  1. Invest. The goal of investing is to buy assets that may provide financial growth over time. ...
  2. Take advantage of compound interest. ...
  3. Create a plan and follow it. ...
  4. Start a business. ...
  5. Cut spending. ...
  6. Try taxing yourself. ...
  7. Consider additional education. ...
  8. Take calculated risks.
Mar 1, 2024

Can a 50 year old become a millionaire? ›

It's never too late for anything, not even to become a millionaire later in life. Sure, it's always better to get into the habit of saving, budgeting and planning early in life — even if just to take advantage of compounding interest.

Can I get rich at 55? ›

It is Never Too Late to Build Wealth

And, the average age when people become millionaires is 58.5 for women and 59.3 for men according to a report from Fidelity investments. Don't ever think it is too late.

What jobs pay $1 million a month? ›

Jobs that pay $1 million dollars a month include franchise owners with multiple locations. For example, Shaq owns lots of 24-Hour Fitness clubs. Franchise owner is on the list of jobs that pay $1 million dollars a month because it's achievable if you think big.

What is the easiest job that pays a lot? ›

High-paying simple jobs
  • Garbage truck driver. ...
  • Massage therapist. ...
  • Claims adjuster. ...
  • Customer service representative. ...
  • Chauffeur. ...
  • Sales representative. ...
  • Truck driver. ...
  • Dispatcher.
Apr 18, 2024

Is there a job that pays millions? ›

According to industry reports, managing directors in investment banking can earn between $500,000 and $1 million, with bonuses significantly increasing their total compensation. Corporate Executive Corporate executives, such as CEOs and CFOs, oversee company operations, strategy, and financial performance.

How much money do I need to invest to make $4000 a month? ›

Making $4,000 a month based on your investments alone is not a small feat. For example, if you have an investment or combination of investments with a 9.5% yield, you would have to invest $500,000 or more potentially. This is a high amount, but could almost guarantee you a $4,000 monthly dividend income.

What is the secret to being rich? ›

Make your money work for you

Remember that it's not just about making as much money as possible—it's also about making your money work for you. One of the easiest ways to do this is to invest it in assets such as real estate or stocks and bonds. That way, your money works for you even when you're not actively working.

How to get rich from scratch? ›

  1. Create a Personalized Financial Plan. Let's get real about building wealth: it starts with a plan, your blueprint for the rich life you're aiming for. ...
  2. Start Saving Immediately. ...
  3. Prioritize Debt Management. ...
  4. Increase Your Income. ...
  5. Build an Investment Strategy. ...
  6. Plan for Emergencies. ...
  7. Get Financial Advice.

How quickly can I become a millionaire? ›

The time it takes to become a millionaire depends on how much you save and the return you get on your money. If you invest $1,000 per month and get an 8% annual return, you'll be a millionaire in 25.5 years. The key to being a millionaire is to start investing right away and to be consistent about it.

What is the fastest job to get rich? ›

11 Jobs That Make You Rich Fast
  1. Blogger. We have to mention this high paying job first because it's what we know best and specialize in! ...
  2. SEO Specialist. A SEO Specialist is an SEO expert who works with companies and clients to improve their SEO strategy. ...
  3. Lawyer. ...
  4. Doctor. ...
  5. Entrepreneur. ...
  6. Pro Athlete. ...
  7. Engineer. ...
  8. Actuary.
Mar 17, 2024

How much to invest per month to become a millionaire? ›

If you are starting from scratch, you will need to invest about $4,757 at the end of every month for 10 years. Suppose you already have $100,000. Then you will only need $3,390 at the end of every month to become a millionaire in 10 years.

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