We tend to think about the road to becoming a millionaire as adventurous, risky, and requiring a great deal of skill or talent. In actuality, most millionaires become rich in a rather, well, boring manner. It's not all about hot tech products or great business ideas -- for most people, acquiring wealth is a much more sedate process.
Becoming a millionaire might be simple, but that doesn't make it easy. It doesn't necessarily require entrepreneurial guts, but it does require patience and fortitude. With these three steps and that willingness to look at the long term, however, almost anyone can do it.
Pay in cash
In other words, do not buy on credit. If you want to accumulate serious wealth, you have to spend less than you earn -- sometimes significantly so -- which means never borrowing for consumption purposes.
To put it in another way: I remember reading somewhere (forgive the vagueness, it was a while back) the comment that being in debt is the opposite of investing. Instead of using your money to make more in the long run, when you take on debt someone is trying to make money on you. That's quite an uncomfortable way of thinking about it, but it makes sense. If you're in debt, you not only have to pay back whatever you borrowed but also interest -- and with the magic of compounding, those totals can add up very quickly.
If you're already in debt, the best thing you can do for yourself is to focus on getting out. This will minimize the damage of paying interest and allow you to kick-start the real work of becoming a millionaire.
Avoid lifestyle inflation
If you're fortunate to be moving up in the world -- getting raises, growing your business -- resist the urge to ratchet up your life accordingly. While it might feel good at first to move into a more luxurious home or drive a nicer car, you'll inevitably get used to it and have to ratchet up again in order to feel good again. This is the sneaky cycle of consumption: The more you buy into it now, the more you'll buy into it later.
Instead, focus on keeping costs down. You can still buy a nice car if you wait until it's a couple of years old, and you can still live a comfortable life in a small house. But whatever you do, focus on costs: Becoming wealthy requires saving money, so the more you can funnel your growing income to savings and investments the better off you'll be.
Better yet, by avoiding the trap of overspending today, you'll make it easier to stay wealthy once you get there.
Become an investor
It's not enough to stuff the money you save under your mattress: Becoming a millionaire is all about investing. With the power of compounding growth you can supercharge your savings and help pave your path to financial freedom.
That means becoming a solid investor and tending to your assets. Whether you prefer to invest in index funds or trade individual stocks, take the time to become educated about investing and build a portfolio that works for you psychologically and practically. There are a few different ways of skinning the investing cat, but the tents that apply to pretty much everyone are simple: diversify, minimize costs, and keep an eye on the long run.
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