This one tip could make you a millionaire faster

More than a quarter of Americans — the highest percentage in the survey — said that you need to earn at least $1 million to be “rich” in the U.S., according to a recent GOBankingRates survey. However, it harder to become “rich” in America these days, as it seems each and every year the cost of living continues to rise while income growth is either lackluster or stagnate

Earning at least $1 million a year is one definition of being a millionaire; however, it’s not the traditional definition. The traditional definition of a millionaire is someone who has assets, or a net worth, equal to at least $1 million.

GOBankingRates conducted a study to find how long it takes to reach $1 million in assets or worth. The study takes into account annual incomes, annual consumption expenditures and savings per year. The findings aren’t reassuring if you want to realistically become a millionaire in your lifetime without making some serious moves.

How Long Does It Take to Become a Millionaire in the US?

When you account for the cost of living, it takes close to 65 years to become a millionaire. But with basic investing, it’ll take about 61 years — which might not seem much quicker, but that’s because it’s an extremely conservative calculation.

How Long It Takes to Become a Millionaire in America
 How Long It Takes to Earn $1M (not incl. cost of living or investments)How Long It Takes to Earn $1M (incl. cost of living)How Long It Takes to Earn $1M (incl. cost of living and investments)
U.S. Average17 years, 9 months and 2 days64 years, 8 months and 23 days61 years, 4 months and 9 days

To find out how long it takes to become a millionaire, the study assumes that a person is making the median household income in the country/their state. From this income, the study subtracted the average per capita personal expenditures (i.e., cost of living) in a year. The difference between the two — this surplus — was then assumed to be put into an investment portfolio with a 5.5 percent annual return, which is the approximate average return for an investment portfolio. From there, the study calculated how long this surplus per year would generate $1 million.

These calculations were necessary because you can’t simply multiply your income by a number of years to reach $1 million. If you could, it would take approximately 18 years to become a millionaire. But this would assume you earn money and then never have to spend any on the necessities of life, let alone discretionary expenditures. That’s why determining the nation’s and each state’s per capita expenditures is essential to calculating how long it’ll take to reach $1 million.

RELATED: 13 pieces of money advice you can't afford to ignore: 

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13 pieces of money advice you can't afford to ignore

1. Pay yourself first

"People still don't grasp the fact that they need to save a dime out of every dollar," author and self-made millionaire David Bach told Business Insider in a Facebook Live interview. He said the average American who's saving money is saving just 15 minutes a day of their income, when they should be saving an hour.

Bach noted troubling research from the Federal Reserve that revealed nearly half of Americans wouldn't have enough money on hand to cover a $400 emergency. Yet, he continued, millions of those people will buy a coffee at Starbucks today and expect to buy the new $800 iPhone next year. Americans have money, he says, but we aren't saving it.

So get on the "pay-yourself-first plan," as Bach calls it, and automatically save an hour a day of your income. "When that money is moved before you can touch it, that's how real wealth is built," he said.

2. Beware of lifestyle creep

There's a lot of pressure in your 20s and 30s to keep up with your friends. Maybe they're buying a nicer car or a house, but if you're not in the financial position to keep up, don't try.

"I always refer to it as 'lifestyle creep' because one of the big things that people can do — that's an advantage to them — is keep their fixed expenses somewhat stable and reasonable for what they make," Katie Brewer, a Dallas-based certified financial planner who founded Your Richest Life, told Business Insider.

Planning for your recurring costs — like mortgage, rent, a car payment, and insurance — ensures that expenses won't creep up on you and derail your financial future. Of course, Brewer said, if you're making good money you should have the freedom to spend it how you wish, as long as your lifestyle doesn't overtake your income.

In short: Live below your means.

3. Take advantage of an employer-sponsored 401(k)

Putting money into a retirement plan as early as you can, no matter the amount, is a smart and easy way to pay yourself first.

If your company offers a 401(k) plan, take advantage of it. In some cases, employers will offer a contribution match. "That means the company contributes a set amount — say, 50 cents for a dollar — for every dollar you contribute up to a specified percentage of your salary," Beth Kobliner writes in her book "Get a Financial Life: Personal Finance In Your Twenties and Thirties."

"That's free money, equivalent to a 50% or 100% return. There's nowhere you can beat this!" she writes.

Plus, 401(k)s allow you to contribute your pre-tax money, meaning the more you contribute now, the greater the growth (thanks, compound interest) and the more money you'll have down the road, though you will be taxed when you withdraw the money for retirement. For 2017, the maximum contribution to a 401(k) is $18,000.

4. Invest in the stock market, just don't try to time it

"No one can time the market, so know that if there is a decline, it's going to bounce back. Over time, being in the market pays off more so than staying out of it," Michael Solari, a certified financial planner with Solari Financial Planning, told Business Insider.

A smart play, according to Solari, is to put your money in a low-cost target date retirement fund.

Sometimes known as "set it and forget it" investments, these diversified funds automatically adjust their asset allocation and risk exposure based on your age and retirement horizon. Early on, when the need for that money is still a couple decades away, the fund will adopt a more growth-focused strategy. As you ripen toward retirement, it dials back the risk.

You may not get the average annual return of 11% in your target date fund — given you'll be invested in a blend of stocks, bonds, and alternative assets — but if you get even 6% per year, an original $10,000 investment will be worth more than $32,000 in 20 years without you having to do a single thing. Compare that with $12,200 in your high-yield savings account or $10,020.20 in your traditional savings account.

kid put coin to piggy bank on the vintage wood background, a saving money for future education concept and copy space for input text.

5. Build an emergency fund

Let's face it: It's really not a matter of if you'll need to fork over cash for a car or home repair, child expense, or medical emergency, but a matter of when.

"No matter how well you plan or how positively you think, there are always things out of your control that can go wrong," Bach writes in his bestseller "The Automatic Millionaire."

"People lose their jobs, their health, their spouses. The economy can go sour, the stock market can drop, businesses can go bankrupt. Circumstances change. If there's anything you can count on, it's that life is filled with unexpected changes," he wrote.

Most financial planners suggest stockpiling anywhere from three to nine months worth of expenses in an emergency fund that you can turn to when in need. If you don't have savings at the ready, you run the risk of having to rely on family or friends for help, or worse, falling into debt.

6. Pay off your credit card balance in full every month

Sometimes a credit card can feel like free money, until you're slapped with the bill. Even then, most credit cards only require you to pay 1% to 3% of your balance each month, which can be an alluring prospect if your budget is tight. But consistently paying the minimum could cost you a fortune in the long run, damage your credit score, and affect your ability to qualify for a mortgage.

Farnoosh Torabi, a financial expert, author, and host of the "So Money" podcast learned this lesson the hard way.

Not only did she swipe her credit card with no reservations and adopt the bad habit of paying just the minimum amount — Torabi said she once forgot to pay the bill all together.

She remembered incurring a late fee that showed up on her credit report and gave her a true "wake-up call." The incident happened before she "realized the power of automating" her bills, a practice that can save you money on late fees and relinquish you from remembering due dates and the embarrassment of missing a payment.

7. Don't sit on too much savings

Saving money is important — and could be easier than it sounds — but if you're saving too much, you may be keeping yourself from building wealth.

Though you're "never going to kill your financial future" by accumulating money, Brewer says, "you're losing out on opportunity costs by having money sitting around ... especially if it's sitting in an account making barely anything in interest."

If you're risk-averse, one way to manage savings overflow is to move your money into a high-yield savings account, where you could be earning 1% interest on your money, rather than the 0.01% earned in a traditional savings account. Or, as previously mentioned, stick it in a low-cost target date fund and see your returns balloon over time, with little to no work required.

8. Have more than one credit card

It may seem financially reckless to have a wallet full of credit cards, but it's actually smart. According to John Ulzheimer, credit expert at CreditSesame.com, having a single credit card can damage your credit score, thanks to something called your credit utilization ratio — that is, how much of your available credit you're actually using.

"That percentage is very, very influential in your credit score," explains Ulzheimer. "People say that you're in good shape if you keep your utilization within 50% of your available credit, or 30%, but really, it should be below 10%."

Available credit counts all the cards you have: If you have one card with an $8,000 limit and one with a $6,000 limit, your total available credit is $14,000, even if you only spend $1,000 a month. With a single card, you have no unused credit cushioning the impact of your spending. The closer you get to your limit, the harder the hit on your credit score.

9. Pay off high-interest debt first

Sallie Krawcheck, a former Wall Street executive and the founder and CEO of Ellevest, says paying down high-interest debt should always be prioritized, even above building an emergency fund.

She explained the math in an article on Ellevest:

"Say you have $5,000 of credit card debt at an 18% interest rate. Say you happen upon $5,000 of money. If you take some of the advice out there, and split the use of that $5,000 (half to establish an emergency fund, half to pay down credit card debt), you still have $2,500 of credit card debt and $2,500 of money sitting in cash.

"The $2,500 of credit card debt at an 18% interest rate costs you $450 a year. The emergency fund earns almost nothing in interest. So you're out $450."

Bottom line: You'll save more paying off the debt than you'd earn if you invested it, whether in a high-yield savings account or the stock market.

10. Always be insured

Every American citizen is required to have health insurance, or be fined hundreds of dollars by the IRS each year. Kobliner advises signing up for insurance should be "your No. 1 financial priority" because it'll protect you from unforeseen accidents or illness, and prevent yourself or your family from going bankrupt in the case of an emergency.

If your employer offers health insurance, take it, Kobliner says. It's almost always cheaper than buying a policy on your own (but keep in mind that you can be covered by your parent's insurance until age 26). Before signing up, though, make sure you understand the cost and extent of the plan, including your deductible, or how much you'll be paying out-of-pocket before insurance takes over.

If you do end up needing to purchase a policy on your own, head over to healthcare.gov to compare plans and pricing.

11. Track your spending

Business Insider's Libby Kane has written, edited, and read hundreds, maybe thousands, of stories about money during her career, and says she's learned that "the best, most critical first step you can take to improve your finances is to track your spending."

Keeping tabs on where your money is going, whether fixed expenses like rent or mortgage payments and transportation costs or discretionary spending like dining out and travel, is a crucial part of mastering your money.

Setting up a spreadsheet or using a service like LearnVest or Mint can help you make cuts where necessary and even set you on a path to early retirement, if that's what you're after.

12. Pay your taxes — and be smart about it

"Whether you owe money to the tax man at the end of the year or not, it's always a smart move to file your taxes," Kobliner advises. 

And be aware that you can save money on taxes by taking advantage of deductions, or the specific expenses you're allowed to take out of your income before calculating your owed taxes. The standard deduction — $6,300 for singles and $12,600 for couples — is a good place to start, Kobliner says.

You can also itemize deductions to maximize your savings by listing specific deductions, including expenses for housing costs like mortgage interest or property taxes, and charitable donations, or making use of tax credits.

And if you don't file your taxes? You could pay a penalty fee of at least $135, plus interest on the money you owe, and lose ground on your credit report, among a host of other financial consequences.

13. Be patient

When bestselling author and motivational speaker Tony Robbins asked billionaire Warren Buffett a few years ago, "What made you the wealthiest man in the world?" Buffett replied, "Three things: Living in America for the great opportunities, having good genes so I lived a long time, and compound interest."

"The biggest thing about making money is time," the investor, who's now worth more than $76 billion, said in a recent HBO documentary about his life. "You don't have to be particularly smart, you just have to be patient."

In his latest letter to Berkshire Hathaway shareholders, Buffett announced that he was on his way to winning a $1 million bet he made in 2007 that his investment in an S&P 500 index fund would outperform five hedge funds over a decade.

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The Secret to Becoming a Millionaire Faster: Investing

At the same time, just calculating income minus cost of living alone won’t give you much of a surplus to build on. People trying to reach $1 million in their lifetime must invest, rather than hoard it or put it into a basic savings account with a return that’s much lower compared to a diversified portfolio.

So, the key to becoming a millionaire — to becoming truly wealthy in the long term — is to invest. When you take out investing, it adds many more years.

“If you want to get on the path to riches, find ways to make more money — whether it’s negotiating raises, making the change to a higher-paying career, getting a second job, investing in rental property or all of the above,” said Cameron Huddleston, personal finance expert and GOBankingRates’ Life + Money columnist. “Then, invest those earnings in the stock market so your money can grow even more.”

Investing can lead to further investing as well as more complex vehicles and strategies, which really accelerate your savings over time but would be completely absent if you never invest. You can’t predict future returns, but if you never open the door, you can’t even get in on the wealth-building action.

How Long It Takes to Become a Millionaire in Every US State

The cost of living and median income vary from state to state. That’s because different states have different jobs and workers — and thus different incomes.

Cost of living varies due to factors such as the amount of money residents can even spend, the purchasing power of their dollar, as well as supply and demand. For example, housing is more expensive in states where supply is low and demand is high, such as Washington, D.C., Massachusetts and Hawaii.

Check out the table and visualization below to see how long it takes to become a millionaire in each state:

StateTime It Takes to Become Millionaire (Without Investing) Time It Takes to Become Millionaire (With Investing)
Alabama72 years, 6 months and 30 days68 years, 9 months and 17 days
Alaska35 years, 2 months and 7 days33 years, 4 months and 6 days
Arizona52 years, 6 months and 25 days49 years, 9 months and 28 days
Arkansas87 years, 2 months and 16 days82 years, 7 months and 29 days
California42 years, 9 months and 2 days40 years, 6 months and 10 days
Colorado42 years, 7 months and 14 days40 years, 4 months and 25 days
Connecticut43 years, 11 months and 30 days41 years, 8 months and 13 days
Delaware51 years, 5 months and 29 days48 years, 9 months and 22 days
District of Columbia68 years, 5 months and 24 days64 years, 10 months and 28 days
Florida88 years, 1 month and 28 days83 years, 6 months and 25 days
Georgia53 years, 11 months and 3 days51 years, 1 month and 10 days
Hawaii35 years, 1 month and 19 days33 years, 3 months and 20 days
Idaho60 years, 8 months and 5 days57 years, 6 months and 7 days
Illinois55 years, 4 months and 31 days52 years, 6 months and 10 days
Indiana62 years, 5 months and 2 days59 years, 2 months and 2 days
Iowa53 years, 8 months and 26 days50 years, 11 months and 8 days
Kansas53 years, 7 months and 21 days50 years, 10 months and 3 days
Kentucky77 years, 7 months and 14 days73 years, 6 months and 28 days
Louisiana94 years, 2 months and 18 days89 years, 3 months and 19 days
Maine102 years, 10 months and 10 days97 years, 6 months and 1 day
Maryland29 years, 5 months and 19 days27 years, 11 months and 6 days
Massachusetts45 years, 4 months and 11 days42 years, 11 months and 29 days
Michigan75 years, 4 months and 22 days71 years, 5 months and 17 days
Minnesota49 years, 4 months and 11 days46 years, 9 months and 14 days
Mississippi85 years, 2 months and 18 days80 years, 9 months and 8 days
Missouri76 years, 1 month and 15 days72 years, 1 month and 26 days
Montana110 years, 1 month and 24 days104 years, 4 months and 29 days
Nebraska59 years, 7 months and 6 days56 years, 5 months and 28 days
Nevada64 years, 11 months and 30 days61 years, 7 months and 10 days
New Hampshire48 years, 4 months and 4 days45 years, 9 months and 27 days
New Jersey38 years, 1 month and 12 days36 years, 1 month and 17 days
New Mexico82 years, 10 months and 30 days78 years, 7 months and 4 days
New York73 years, 4 months and 18 days69 years, 6 months and 21 days
North Carolina60 years, 9 months and 23 days57 years, 7 months and 22 days
North Dakota71 years, 8 months and 2 days67 years, 11 months and 7 days
Ohio77 years, 3 months and 11 days73 years, 3 months and 1 day
Oklahoma61 years, 11 months and 27 days58 years, 9 months and 4 days
Oregon59 years, 8 months and 28 days56 years, 7 months and 16 days
Pennsylvania70 years, 11 months and 6 days67 years, 2 months and 26 days
Rhode Island57 years, 5 months and 2 days54 years, 5 months and 4 days
South Carolina63 years, 2 months and 18 days59 years, 10 months and 30 days
South Dakota83 years, 10 months and 29 days79 years, 6 months and 15 days
Tennessee73 years, 3 months and 1 day69 years, 5 months and 6 days
Texas52 years, 4 months and 16 days49 years, 7 months and 23 days
Utah33 years, 1 month and 4 days31 years, 4 months and 16 days
Vermont101 years, 7 months and 20 days96 years, 4 months and 3 days
Virginia40 years, 8 months and 5 days38 years, 6 months and 24 days
Washington43 years, 11 months and 18 days41 years, 8 months and 2 days
West Virginia115 years, 10 months and 1 day109 years, 9 months and 17 days
Wisconsin61 years, 10 months and 14 days58 years, 7 months and 24 days
Wyoming53 years, 0 months and 8 days50 years, 3 months and 4 days
United States64 years, 8 months and 23 days61 years, 4 months and 9 days

Tips to Start Investing and Grow Your Wealth

Investing is so important to wealth, and thus becoming a millionaire, for many reasons. But perhaps the key reason can be observed in discussing the difference between saving money and investing.

Take, for example, the popular phrase “a penny saved is a penny earned.” That phrase refers to saving money because when you save money, you’re storing it away for use at a later time and purpose, such as saving for your kids’ college education or a car. Your saved money will not be building your wealth.

Investing that money, on the other hand, allows your money to grow to a larger sum. Here are some easy options you can invest your money in:

  • Stocks, mutual funds and exchange-traded funds (ETFs)
  • Treasury or municipal bonds
  • Certificates of deposit
  • Real estate property investments

These are just some of the more common investments available. Once you jump into the investing waters, you can go even deeper, finding different investment vehicles, returns, levels of risk, etc. — all of which can help build your wealth in a manner that hoarding or saving with little to no interest cannot do.

More from GO Banking Rates:  
How Much You Need to Earn to Be “Rich” in Every State 
Places in America Where You’re “Rich” Earning Less Than $100,000 
12 Realistic Ways to Make Your First $1 Million

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Methodology: GOBankingRates calculated how long it takes to be a millionaire by using median household income data from the U.S. Census Bureau and annual consumption data from the Bureau of Economic Analysis. We found the difference between what a median household in every state earns and per capita consumption in every state, and then divided that number by 1,000,000 in order to determine how many years, days and months it would take to reach $1 million in every state and in the U.S. We used median household income because per capita income does not cover the per capita consumption in every state and is much smaller than annual spending. 

In addition, to account for investing leftover income, we took the difference between annual income and consumption expenditures, and assumed it was invested in a portfolio with the average investor’s long-term average of around 5.5 percent, according to Zacks Investment Research.

This article originally appeared on GOBankingRates.com: Study Finds Exactly How Long It Takes to Become a Millionaire

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