There are approximately 35 million people who are millionaires in the world. As Robert J. Samuelson states so perfectly in The Washington Post, "That's about 5 percent of the U.S. adult population (241 million in 2014), or one in 20. Rarefied, yes; exclusive, no." Though the population numbers have gone up in the last year, they still prove a point. It's totally possible for you to become a millionaire.
I personally have been a millionaire several times in my life. I'm an entrepreneur and take chances. Sometimes they pay off and sometimes they don't. The following are a few of the tips that have helped me to become and stay a millionaire over the past couple years.
Click through for photos of billionaires under 35:
Billionaires who are under 35
8 frugal habits that will make you a millionaire
Billionaire Elizabeth Holmes, founder and chief executive officer of Theranos Inc., speaks to the media as she arrives at a state dinner hosted by U.S. President Barack Obama and U.S. First Lady Michelle Obama in honor of Japan's Prime Minister Shinzo Abe at the White House in Washington, D.C., U.S., on Tuesday, April 28, 2015. Prime Minister Shinzo Abe goes before the U.S. Congress on Wednesday to present Japan as a stalwart ally that's willing to play a bigger military role in Asia, a message likely to be embraced in Washington and greeted with suspicion in Seoul and Beijing. Photographer: Andrew Harrer/Bloomberg via Getty Images
Nathan Blecharczyk, co-founder and chief technology officer of Airbnb Inc., speaks during the 2015 Bloomberg Technology Conference in San Francisco, California, U.S., on Monday, June 15, 2015. The conference gathers global business leaders, tech influencers, top investors and entrepreneurs to shine a spotlight on how coders and coding are transforming business and fueling disruption across all industries. Photographer: David Paul Morris/Bloomberg via Getty Images
Brian Chesky, chief executive officer of Airbnb Inc., speaks during an interview at a media event in Johannesburg, South Africa, on Monday, July 27, 2015. Airbnb is hoping to spread its unique brand of hospitality throughout Africa. Photographer: Waldo Swiegers/Bloomberg via Getty Images
Airbnb online accommodation provider co-founder and Chief Product Officer, Joe Gebbia announces to the media their partnership with the Brazilian Olympic Committee for the Rio 2016 Olympic Games at the headquarters of the Brazilian Olympic Committee in Rio de Janeiro, Brazil, on March 27, 2015. AFP PHOTO / YASUYOSHI CHIBA (Photo credit should read YASUYOSHI CHIBA/AFP/Getty Images)
PARIS, FRANCE - JANUARY 26: Tatiana Casiraghi attends the Christian Dior show as part of Paris Fashion Week Haute Couture Spring/Summer 2015 on January 26, 2015 in Paris, France. (Photo by Pascal Le Segretain/Getty Images)
NEW YORK, NY - APRIL 22: Snapchat co-founder and CEO Evan Spiegel speaks during the iHeartMedia Soundfront at iHeartMedia Headquarters on April 22, 2015 in New York City. (Photo by Michael Loccisano/Getty Images for iHeartMedia)
Bobby Murphy, chief technology officer and co-founder of Snapchat Inc., speaks during a Google Inc. Cloud event in San Francisco, California, U.S., on Thursday, March 25, 2014. Google Inc. cut prices on some Internet-based services for businesses by 30 percent or more, stepping up a challenge to Amazon.com Inc. and Microsoft Corp. in cloud computing. Photographer: David Paul Morris/Bloomberg via Getty Images
Snapchat co-founders Evan Spiegel and Bobby Murphy attends the Time 100 Gala celebrating the Time 100 issue of the Most Influential People In The World at Jazz at Lincoln Center on April 29, 2014 in New York. AFP PHOTO / Timothy A. CLARY (Photo credit should read TIMOTHY A. CLARY/AFP/Getty Images)
Adrian Cheng, executive director of Chow Tai Fook Jewellery Group Ltd., attends the companys annual results news conference in Hong Kong, China, on Tuesday, June 18, 2013. Chow Tai Fook, the worlds largest listed jewelry chain, reported a 13 percent decline in profit on higher costs and weaker consumer spending. Photographer: Jerome Favre/Bloomberg via Getty Images
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While becoming a millionaire rarely occurs overnight, it's still an achievable dream if you work hard and follow these eight frugal habits.
1. Live Below Your Means
Do you really need to purchase a McMansion? Do you honestly have to have the latest luxury vehicle in your driveway? While status items like these can be enjoyable, even the extremely wealthy have realized that it's better to live below your means if you want to extend your wealth.
Take Warren Buffett for example. He still resides in the same Omaha home that he pitched in 1958 for under $32,000. Buffett is also known for purchasing modest vehicles, like his 2006 Cadillac, which was auctioned off for charity. Apart from having been owned, and signed, by Buffett, the car was described as "nothing special."
Around eight years ago, I started making real money. That doesn't mean that I changed anything in my lifestyle. Sure, I got a few nice things, but I didn't change the way I lived. This has saved me countless dollars.
2. Never Pay Full Price
Did you know that households that average an income of $100,000 or more use more coupons than households that earn under $35,000 annually? They also don't shop at luxury stores like Tiffany & Co. or Brooks Brothers. Instead, they prefer to shop at Walmart, Target, and Home Depot.
The wealthy never pay full price for the items they want or need. (My personal experience is that the ultra rich never pay full price for anything.) I personally like to shop on eBay and Craigslist. This helps me get super nice quality things for a much lower price. Note: I still don't buy crap, I purchase nice things. I just don't pay full price for them.
3. Cut Out Unnecessary Expenses
There are a number of small ways that you can cut out those unnecessary expenses that will add up over time. For example, how much money have you spent on ATM withdrawal fees or transaction fees when sending or receiving funds electronically? There are a number of alternatives that don't include these fees.
On a larger scale, you should also create a monthly budget, so that you can examine where your money is going each month. You may quickly realize that you actually don't need that cable package that includes every channel. Instead, you can downgrade, or cut the cord entirely and use alternatives such as Hulu, Amazon, or Netflix. If a budget sounds too restrictive to you, try not having the money to budget! However, merely keeping track of all of your expenses will go a long way to helping you see what you are spending your assets on.
4. Rent or Sell Your Current Possessions
Do you have a closet full of unused junk or clothes that you no longer wear? Do you have a spare guestroom or extra office space? You can make money simply by selling your unwanted items online through Craigslist, eBay, and Amazon, or offline by having a yard sale, visiting a consignment shop, or hosting a closet party. You could rent bedrooms on Airbnb. You can even rent out everything from your office, parking space, car, or even tools when you're not using them.
If you leave the house without your credit card and a large amount of cash, you won't be tempted to purchase items that you don't really need. In fact, according to U.S. News & World Report, it's been found that "86 percent of people who spend cash on luxuries like expensive cars, jewelry, and electronics are non-millionaires trying to act the part by purchasing luxury brands."
Instead, follow the example set by T. Boone Pickens. Make a shopping list and only carry the cash you'll need to make those specific purchases. This way, you aren't putting yourself into additional debt. Remember, if you don't have the cash to make a purchase or pay off your credit card, then you probably can't afford the purchase in the first place.
6. Don't Waste Money on "Get Rich Quick" Schemes
There is no such thing as getting rich quickly. This is something that the wealthy have realized. According to studies conducted by Thomas C. Corley, "16 percent of the wealthy gamble on sports at least once a week versus 52 percent of the poor." Additionally, "9 percent of the wealthy play the lottery every week versus 77 percent of the poor."
Don't waste your money on trying to accumulate a large amount of wealth in a short amount of time, because the probability of that happening is slim to none. Instead, invest the money you would have spent into new business opportunities.
7. Go Green
Going green is excellent for the environment. But going green can actually save you some green as well. For example, you could reduce your heating and cooling bills by turning your heat down during the winter and the air temperature up during the summer by just 2 degrees. You could also invest in a gadget like the Nest to help monitor and manage your heating and cooling expenses.
You could also recycle cans and cardboard for a couple of extra dollars, replace energy-guzzling gadgets with newer Energy Star models to cut back on your electric bill, and consider carpooling or taking public transport instead of driving yourself to and from work.
8. Get a Side Gig
There are two financial incentives for getting a side gig. The first, and most obvious, reason is that this will bring in additional income that can be used to pay down your debt or placed into savings or investments.
The other reason is, if you're busy with a side gig, then you'll have less time to spend the money you've earned. For example, if you do web design, tech support, or became a bartender on the weekends, you're less likely to go out to eat or shop all day. Here are a few tips to earn an extra $500 a month. Every little bit helps.
You can become a millionaire, now it's time to figure it out and go do it. I have faith and believe in you. If you're ever lost or need a little advice, I'm here to help!
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8 frugal habits that will make you a millionaire
Include taxes in your tally.
Withdrawing money from retirement accounts is, of course, not a free ride, so $1 million gross is not $1 million net. “If the $1 million were in a traditional 401(k) or IRA, all withdrawals would be taxable,” says Christine Pavel, vice president of wealth management at GCG Financial in Deerfield, Illinois. “You also have to consider how much the investor will withdrawal from the portfolio, and for how long.” Assuming 3 percent inflation, looking forward 30 years and accounting for retirement account taxes, “An investor would be lucky to be able to withdraw $20,000 or less from the account for 30 years,” she says.
If you're in your 20s and start investing now, you’re in luck, says Joe Jennings, wealth director for PNC Wealth Management in Baltimore. “Due to the power of compounding, the first dollar saved is the most important, as it has the most growth potential over time,” he says. As an example, Jennings compares $10,000 saved at age 25 versus age 60. “The 25-year-old has 40 years of growth potential at the average retirement age of 65, whereas $10,000 saved at age 60 only has five years of growth potential,” he says.
Consider annuities as a building block.
Annuities, which people purchase to get an expected payout once they reach maturity – usually at or after retirement age – also have a rough reputation, particularly indexed annuities. But last year’s Qualified Longevity Annuity Contract regulation by the IRS set guidelines for investors to create their own pensions. “You can invest and put money in a retirement account, and with annuity guarantees that you will never outlive your money,” says Stan “The Annuity Man” Haithcock, an annuities expert and author of the book, "The Annuity Stanifesto," based in Ponte Vedra Beach, Florida.
It may seem sexier to get in on the latest initial public offering or that new stock your Uncle Mortimer promises will take off. But that’s no way to build a nest egg through the years, says Jim Merklinghaus, founder and president of JBM Financial in Rutherford, New Jersey. “My philosophy has been a conservative approach to retirement, investing consistently over a 30-year period of time. If your principal is 100 percent safe, you have already accounted for 12 years of a normal 30-year retirement. The plan that avoids the loss of principal far exceeds the joy of temporary returns,” he says.
Diversify between companies large and small.
Risk tolerance and portfolio mix are major factors in getting to $1 million, and they’ll differ depending on the investor. But if there’s one universal that applies, ”The portfolio should be diversified among large- and small-company stocks, domestically as well as in established foreign countries and emerging markets,” says Kenneth Moraif, senior advisor at Money Matters in Plano, Texas. “The appropriate allocation in each of these asset classes will be determined by the investor’s time horizon, their current assets, age and tax bracket.”
Use that 401(k) all the way.
Since retirement is the major savings goal with most nest eggs, make sure you maximize your retirement savings, says Andy Saeger, vice president and senior financial consultant at Charles Schwab in Naperville, Illinois. “Max out your 401(k) or other employer retirement plan, especially if you receive matching contributions. If you're age 50 or older, make catch-up contributions. If you can afford to save more, you may be eligible to open and contribute to an IRA, where your money can grow tax-deferred or tax-free until retirement,” Saeger says.
Thou shalt pay thyself first.
What used to be simple, sound advice is more of a commandment when $1 million or more is the goal. “If you make the financial plan first and then build your life around it, the outcomes are typically very positive,” says Mike Chadwick, CEO of Chadwick Financial Advisors in Unionville, Connecticut. “Most people do the opposite: They set up their life and then try to save after the fact, when it’s painful to do so. When something is paid off, save the extra money and you won’t feel the pain. And when you get raises, save the money until you’re on target.”
Avoid the temptation to spend first.
Most investors, especially in their younger years, think they can easily make up for copious spending and shopping. “This is certainly possible, but will require a potentially difficult, if not impossible, return on the investment or a significant increase in savings,” says Bellaria Jimenez, managing partner with MetLife Premier Client Group, based in Cranford, New Jersey. ”Investors must ignore temptations to spend and instead save.”
Patience, patience, patience.
Just as it takes years to get to retirement age, you’ll want to stick it out, as some investments hit expected bumps. “Over a typical working career, an investor can expect to experience at least eight to 12 poor market years,” says Jakob Loescher, a financial advisor with Savant Capital Management and based in Rockford, Illinois. “During these years, it’s important that the individual remain patient and not make any large market-timing mistakes.”
And finally, answer the $2.3 million question.
That’s how much money you’d need in 2045 to have the same purchasing power as $1 million today, assuming a 3 percent annual inflation figure. So how do you get to $2.3 million? “Assuming a starting account value of $50,000 and an 8 percent return on assets, an investor would need to deposit $13,500 at the beginning of each year over the next 30 years to achieve that result,” says Andrew Gluck, managing director of wealth management at GCG Financial.