Making your first million seems like an insurmountable task. For some it is, but for the average American it doesn’t need to be. Your first million is easier to make than ever, and there is no reason why you can’t become a millionaire yourself. There are a multitude of methods at your disposal, and all of them can help you on your journey towards your first million and achieving financial independence. We all have our own goals, which drive our lives. We don’t always share the same goals – in fact, we usually don’t.
However, having $1,000,000 is a financial goal that most share and aspire to. If you’ve doubted yourself in the past, don’t anymore. One million is achievable. Just keep your head on straight, stay disciplined, and take notes as we dive into the details behind making your first million (and investing it)!
Use Higher Education
If you’re over eighteen, I’m sure you weighed the pros and cons of college. While it’s not for everyone, it certainly has its uses. STEM majors still offer excellent salaries after graduation, so they can be a great way to level up your income. Now, I’m not saying degrees are everything, or necessary to make good money. In fact, there are tons of jobs with great pay that don’t require a degree.
The main point is this – a degree has the potential to help you make a lot more money. If the return on your investment makes sense (given how much money you can make, and obviously enjoying the profession you do every day), then I’m all for degrees. However, if you have other opportunities, like the ability to start a business, then those may be fine too.
Negotiate Properly
In life, it’s always important to know how to negotiate. In this context, I’m mainly referring to salary negotiations. Just having the guts to ask for more money could net you a 5% increase. Of course, it could backfire if you don’t know what you’re doing. Either way, learn the ins and outs of negotiation and put them to good use. Outside of work, it can help you get great deals that save you extra money, or it can be useful in your business endeavors. When it comes to business-to-business transactions, you’d be surprised how much of it is up for negotiating.
Create A Budget
Obviously, being a proponent of frugal tactics, I’m a fan of a strong budget. Your budget doesn’t need to be complicated, and you can certainly budget in “fun” expenses. Never letting yourself spend money can drain your joy and eventually cause you to crack. It’s best to use a budget to simply keep your spending somewhat in check – and to prevent lifestyle creep.
For those who don’t know about lifestyle creep, it’s when you spend more money as you make more money. That’s generally not a good idea. That extra money could be used to catapult your investments and accelerate your retirement plans.
Use A Lower Cost Of Living Area To Save More
A lot of people don’t realize this, but the difference in cost of living can be absolutely astronomical. Six figures in one city may be upper middle class, whereas that same amount of money in another city could seem like you’re struggling. If you have the ability, live in a lower cost of living area so that you can save more money over the long run. For those who have a job or business where your location doesn’t matter, this can be a huge boon that will help you save an incredible amount.
Start Investing Early And Consistently
Next up, on your path to your first million, is actually investing. The earlier you start investing, the more you’ll have in the end. Compound interest is astonishingly powerful, and money you invest while you’re young can turn into outrageous amounts in 20 or 30 years. Personally, if you’re just starting out (or not an advanced investor), I’d start investing in low-fee index funds and ETFs. They’re a great type of passive investment, which makes you a lot of money over the long haul. It’s also fairly simple and straightforward, especially with modern brokerages like M1 Finance.
Don’t Forget About Real estate
Another great investment opportunity is real estate. I’ve gone over all sorts of different investment opportunities within real estate before – of which there are many – but overall there are a couple of things they mostly have in common. First off, yes, real estate can make you very wealthy if you know what you’re doing. For those who don’t know what they’re doing, they can lose everything they put into it easily.
Real estate is a great investment, but I caution it for beginners. When you want to get into it, dip your toes in and do some initial research. If possible, find a mentor who can show you the ropes. Real estate investing is definitely worthwhile, you just need to be a little more cautious and do the legwork first!
Handle Debt Properly
If you never learn how to handle your debt, you’ll get trapped under it. Fortunately, there are several very easy to understand (yet highly effective) methods for eliminating debt. The debt avalanche is the method I used for mine, but the more common one is the debt snowball. Despite my fondness for the debt avalanche, I think the debt snowball is the best method for the average person. It gets results and helps people stay consistent.
Ultimately, choose whatever you think will work best for you. The funny thing about personal finance, and especially debt, is that a lot of it is just about the mentality and psychology behind it. Whatever helps you stay consistent is the best method for you!
Good Vs Bad Debt And What It Means
A lot of people like to debate the difference between good and bad debt. I think that debate is a little ridiculous, since it can vary so wildly. You need to determine if debt is bad or good for you, given your situation. A college degree in a prestigious program can be worthwhile, even with the student loans. However, a degree in something like basket weaving may just saddle you with debt that you can’t handle. Likewise, a car can be an unnecessary burden, but buying a home can actually save you money when compared to renting.
It varies, so I can’t always say what is bad or good debt without knowing the full situation. When in doubt, debt is generally something you should try to avoid though.
Use Credit To Your Advantage
Ah, credit! The thing most people fear because they don’t understand it. If you want a complete, simple breakdown of credit scores – check out my article. The gist of it is simple though. Good financial habits will build up your credit score and bad ones will tear it down. As long as you can make ends meet and you’re responsible, your credit score shouldn’t really suffer.
Bad credit can shut a lot of doors, whereas good credit can open them. For example, with good credit you can get lower interest rates on loans. This can make things like buying a home or even real estate investing much more attainable. So, do yourself a favor and take care of your credit score.
Start A Side Hustle
I’ve said it before, I’m saying it now, and I’ll say it again – start a side hustle. There are many lucrative side hustles you can start, all it takes is bravery to start one and the discipline to keep it going. If you’ve never started a side hustle before, but want to, just dive in with my 30 day challenge. It will get you started, but do your best to keep it up as long as possible – at least 6 months – so that you can actually see the results.
Build A Business
Once you’ve built up a side hustle, you can always turn it into a business. Starting a business doesn’t need to be complicated, and in fact it can be straightforward. The most important thing is having discipline and the ability to be honest with yourself. Of course, being a business owner isn’t for everyone. You may decide you’re better served with a 9-5 and a side hustle. Either way, 9-5s, side hustles, and your own businesses can help you reach one million dollars if you know what you’re doing.
Conclusion
There you have it – everything you need to reach your first million. Stay focused, save money, invest money, and increase your earning potential as much as you can. If you’re diligent with your finances, you’ll be able to make it. If you have any tips of your own, let us know what they are in the comments!
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