How to Become a Millionaire from Nothing: A Data-Driven Guide
Saving money on become millionaire from nothing does not have to be complicated. We rounded up the essentials so you can spend less and skip the guesswork.
Key Takeaways
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- This guide uses data to show you how to become a millionaire from nothing.
This guide uses data to show you how to become a millionaire from nothing. The goal is to reverse engineer what research has said about what gives someone the best chance.
There’s certainly a lot of bad advice on the idea, such as following millionaires on social media and obsessively focusing on developing multiple income streams.
These are attention-grabbing tips, but the data says they’re not what actually works.
Here’s a step-by-step approach.
Table of Contents
Toggle#1. Set the Goal
Key takeaway: Set a goal of becoming a millionaire. This is the first and most crucial step.
One of the first people who aimed to reverse engineer how to become a millionaire was Napoleon Hill. In his multi-generational bestselling book Think and Grow Rich (originally published in 1937), Hill extensively interviewed over 500 millionaires to try and understand their success.
While numerous principles in the book are timeless, one theme that arose repeatedly was the importance of setting a goal. It was so key that it’s number one in Hill’s list of “Six Steps to Accumulate Riches.”
As Hill wrote:
“Fix in your mind the exact amount of money you desire. It is not sufficient merely to say ‘I want plenty of money.’ Be definite as to the amount.”
Today, research has widely backed the importance of setting clear goals. A study conducted by Gail Matthews of Dominican University in California found that you’re 42% more likely to achieve your goal if you write it down (and 76% more likely if you share goal progress reports with a friend).
One widely accepted financial goal-setting framework is the SMART model, which stands for Specific, Measurable, Achievable, Realistic and Timely.
When you set your goal, it should contain all these characteristics.
For example, “I want to be a millionaire” is not a SMART goal because it lacks a time-bound aspect.
On the other hand, for someone who is 25, “I will have a liquid net worth of $1 million by the age of 35” is considered specific, measurable, achievable, realistic and timely.
#2. Build Your Human Capital
Key takeaway: Invest in yourself in a way that increases your future earning power.
What you should be thinking about today is how you can go about building valuable skills and connections that allow you to maximize your earning power.
The goal isn’t just to invest in yourself by reading personal development books or attending conferences, but to invest in yourself in a way that leads to a more productive career.
The path to building career capital is going to be different for everyone.
For some, it may make sense to pursue educational opportunities that lead to a better-paying job. These can even be short-term opportunities, like a certificate program or boot camp.
Another strategy is to work for someone who is already doing the things you want to achieve. I did a lot of freelance writing and work for publishers before I started The Ways to Wealth. I learned much more than I did from any blogging course, and got paid well in the process.
The best strategy is to think about what you want to do in your future and then build the skills and make the connections required to do so.
#3. Spend Less Than You Earn
Key takeaway: You’ll never become a millionaire if you’re constantly spending more than you earn.
Decades after Napoleon Hill interviewed numerous of the world’s wealthiest individuals, Thomas J. Stanley and William D. Danko extended that research. While Hill interviewed the likes of Andrew Carnegie, Henry Ford and Charles M. Schwab, Stanley and Danko aimed to find and interview millionaires among everyday people.
While they started their search in the most affluent neighborhoods, they found that the rich were not who they expected. Instead, they were clustered in middle-class and blue-collar areas.
The difference between the actual millionaires versus those who had a rich lifestyle was their savings rate.
As their research goes on to say:
“Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”
No matter your income, if you’re spending more than you earn, your net worth decreases. It’s a simple concept but frequently lost on people. You can make a good income and still have a negative net worth if you spend more than you earn.
#4. Use Compound Interest to Grow Your Money Fast
Key takeaway: Compounding average returns over a long time period is the surest path to becoming a millionaire.
There are a lot of ways to become a millionaire. To name a few, you can start a business, invest in real estate or win the lottery.
The odds of you achieving your goal vary depending on your strategy. Data from the U.S. Beauru of Labor Statistics shows that only 25% of businesses make it to 15 years. That’s pretty good compared to the lottery, in which you have a 1 out of 292.2 million chance of winning the Powerball.
So what strategy gives you the highest chance of becoming a millionaire?
While widely-known for his shareholder memos , which Warren Buffett has called his favorite investing writing , Howard Marks is quite the investor.
The firm he co-founded, Oaktree Capital Management, has over $150 billion in assets under management, which has allowed his net worth to surpass $2.1 billion.
Marks gave a tremendous interview on the Invest Like the Best podcast, where he tells the story of a client he met early in his career that went on to guide his investment strategy:
“ […] I ran into a clien
Final Thoughts
Before you check out, double-check become millionaire from nothing against current offers and any coupons you can stack. Small habits like this add up to real savings over a year.
Originally published at thewaystowealth.com.
R.J. Weiss
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