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10 Ways To Become a Millionaire by Age 30

10 Ways To Become a Millionaire by Age 30

It may seem like an impossible goal to be a millionaire at any stage of your life. However, that isn’t true. The earlier you start making smart financial decisions, the more likely you are destined to being a part of the millionaires club later in life. However, we are in an age where simply storing money away doesn’t garner more in the future. You have to employ a combination of methods that not only set aside money you contribute, but also compounds it with interest. Today, we will talk about ten ways you can grow your net worth for a more stable future.

If you’re born poor, it’s not your mistake. But if you die poor, it is your mistake.”

– Bill Gates

Increase Your Income

The first step to becoming a millionaire is having the capital to fund your investments that will compound your money. To get this money, legally, you’ll need a stable job. You should work to always make yourself marketable as a way of not only maintaining your current job, but moving up the ladder to a better position or company. If you are in the technology sector, consider to stay on top of tech news and improvements. Even if you are outside of the tech industry, learning a few technical skills can improve your income. Always focus on increasing your income, even if you are currently comfortable.

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Live Frugally

You may feel that individuals who are millionaires are the ones who drive flashy cars and own the latest gadgets. That isn’t true in most cases, and shouldn’t be in your case if you are looking to work your way to millionaire status. To maintain your income’s growth, this is the time when you have to seek out the clearance rack or sales. Never accept retail price, it simply isn’t worth it. This is the case in grocery stores, shopping malls, the internet, or even club/gym memberships.

Plan to Invest

You may feel that your piggy bank of savings is smart saving. However, it truly isn’t. All you are doing is have your money sit there unproductively. It isn’t gaining interest. This is the case even for many standard savings accounts. Simply having a savings account isn’t enough, but it is a good start.

When saving it is important to remember to save to invest, not save to save. Look into ways in which you can get started creating a portfolio of investments for yourself. Etrade is a great start that is easy to navigate. Acorns is also an up-and-coming option that makes diversified investing more approachable for the common individual.

Shed Unproductive Debt

There is no such thing as good debt. Even “good debt” as some coin it is still money that you don’t have easy access to and doesn’t have the 100% guarantee is materializing into a profit later on (a house, for example). However, there are examples of productive and unproductive debt as I will coin it. Productive debt can be a credit card. Yes, every time you swipe a credit card, you are creating debt because it doesn’t get paid off until you pay your statement.

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However, if you spend within your means or only on certain expenses, many credit cards come with reward dollars or cash-back. This is the credit card (one, not multiple), that you should seek. It’s technically free money ($6 back on $200 of groceries, for example). These reward and cash-back dollars add up and can result in savings. Below is a list of three great cash-back credit cards:

Manage Your Money

The only way to grow your money is to know where it all is and where it’s going out. Download the Mint application for your smartphone. This will allow you to stay on top of your (almost) total net worth from your bank accounts, credit cards, and investments. While not all financial services and institutions are supported yet, it gives you a detailed look at the financial aspects of your daily life. Set up isn’t very lengthy and once set up, it updates automatically whenever you open the application. Having a holistic look at your finances makes savings easier and even offers an incentive to save.

Follow the 50/20/30 Budget

Once you get your pay check, every cent of your money should be earmarked or you’ll find yourself spending like crazy. You may feel it’s daunting to have to spend every cent of your pay check each month. However, to spend in this case isn’t to hit the stores. Instead, allocating is a better term. With the 50/20/30 budget created by Elizabeth Warren, 50 percent of your income goes to the essentials (groceries, rent, essential utilities), 20 percent goes to savings (savings account, portfolio additions, Roth IRA contributions etc), and the remaining 30 percent goes to what is considered “lifestyle choices). This includes restaurants, your cell phone, clothing, etc. Below, we have an example for a individual earning $51,000 a year:

Base Salary – $51,000

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After Taxes (25%) – $38,250

  • Essentials (50%) – $1593.75/month
    • Utilities – $80
    • Groceries – $250
    • Gas – $80
    • Rent – $1000
  • Savings (20%) – $637.50/month
  • Savings Account – $300
  • Loan Repayments – $200
  • IRA/Portfolio Fund – $100
  • Discretionary Spending (30%) – $956.25/month

Grab the Free Money

It is amazing how much free money is ignored by individuals. One of the most common ignored sources of free money are programs offered through your employer. Some can be in the form of student loan payment assistance. For other employers, there is the option of a 401K contribution match.

For example, if you contribute X amount each month, your employer will match the contribution either by 100 percent or even at least 50 percent. While usually to a certain limit, around $6000, that’s six thousand dollars you didn’t have before and wouldn’t have had if you didn’t ask. Make sure you stay informed on these options, not just before getting hired, but also periodically. Many times, such programs can be added later on.

Keep Accounts Manageable

As we mentioned before, managing your accounts through services like Mint is smart. However, having a ton of multiple accounts and cards can not only be confusing, it could hinder you from becoming a millionaire sooner. While diversifying income streams is great, outgoing streams should be kept as simple as possible. Multiple credit cards can mean having to keep up with multiple due dates, and in many cases, multiple credit pulls. Along with possible monthly or yearly fees, these multiple outgoing streams can even encourage you to spend more than you intend.

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Save for the Right Reasons

Just as we mentioned before, to save for investments, it is also important to ensure that you saving in multiple departments with a goal in mind. While you savings and investment accounts are multiplying with the goal of becoming a millionaire by 30, you day-to-day savings should have a reason as well. You may remember the multiple times you encounter a sell on shoes and because it is 25 percent off last week’s price, you feel that you are making a good economic decision by buying this sale item.

Not exactly! Those shoes aren’t something you necessarily need, and the $X you spend on your shoes is still an outgoing expense that could be saved or utilized elsewhere. While enjoying that 30 percent of your 50/20/30 budget is important, it’s still important to bargain hunt with a purpose. Gain satisfaction through the deals you gain on bills, groceries, and household necessities, not clothing or other expenses that wouldn’t have been in your scope of attention before the sale appeared.

Be Committed

In the end, you have to be committed to this goal. It is a long-term goal that will continue to go on well after you make your first $1 Million. It’s important to not live with the hope of dying with $1 Million net worth, but to have a $10 Million or even $15 Million net worth.

Aiming high ($10 Million) makes still exceptional goals ($1 Million) more possible. Having an individual (a family member or friend) who you can attest is doing well financially can be a great way to ensure you are on the right track. Everything they say can’t be taken word-for-word, everyone’s economic situation is subjective. But having them as a role model will ensure that you aren’t in this alone.

Let us know in the comments below which way to $1,000,000 by 30 is easy for you to take on today.

Featured photo credit: Wallpapers AX via wallpapersax.com

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Last Updated on August 20, 2019

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

5 Steps to Set Financial Goals

Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

1. Be Clear About the Objectives

Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

2. Keep Them Realistic

It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

4. Short Term vs Long Term

Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

More on this later when we talk about how to achieve financial goals.

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5. To Each to His Own

The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

11 Ways to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a 2 step process –

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

Ensuring Healthy Savings

Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

3. Make a Plan and Vow to Stick with It

Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Rise Again Even If You Fall

Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

5. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

If you are travelling buff, try to travel during off season. Your outlay will be much less.

If you go out for shopping, always look out for coupons and see where can you get the best deal.

So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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6. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

7. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

Making Smart Investments

Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

8. Consult a Financial Advisor

Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

9. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

Do you remember we talked about bifurcating financial goals in short term and long term?

It is here where that classification will help.

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So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

10. Compounding Is the Eighth Wonder

Einstein once remarked about compounding,

Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

Start investing early so that time is on your side to help you bear the fruits of compounding.

11. Measure, Measure, Measure

All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

The Bottom Line

This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

As you can see, all it requires is discipline. But guess that’s the most difficult part!

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Featured photo credit: rawpixel via unsplash.com

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