Unless you were born in a rich family, wealth building can be difficult. Only around 8% of the entire US population has achieved the millionaire status based on a study in 2021.
Many people see reaching the millionaire status as the ultimate financial goal, and wonder just how do people amass such fortune? What does it all take? Predominantly, there are 6 ways to become a millionaire.
Saver investors
Saver investors are those who earn normal salaries, and accumulate wealth through frugality, low-risk investments and compound growth over time. The key for the saver investors to become millionaires is steady income, regular savings, consistent investment return, and allowing time for the investment to compound. This is probably the easiest and surest way to become a millionaire.
To demonstrate how achievable this is, let’s assume Tom is a 24 years old with a starting yearly salary of $45k USD and zero savings. If Tom maintains the same job throughout his career getting an average yearly salary increase of 3%, manages to save 10% of the salary each year and invest in an index fund (e.g. SPY) with an average 7% annual return, receives 4.5% 401(k) employer co-contribution, he will have just over $1M in assets (index fund plus 401(k)) by the age of 52. If he managed to invest 20% of his salary each year, he would become a millionaire at 48.
As you can see, achieving millionaire status can be done relatively early in life even with such a conservative calculation (Tom would’ve spent 80 to 90% of his after tax salary). Start early or as soon as you are able, it’s never too late to start building wealth. Stay consistent, keep invested. The journey to become a millionaire as saver investors is a marathon not a sprint, but if you stick to it and stay patient, you will get there over time.
High income earners
High income earners are individuals who are in the highest tax brackets, usually earning more than $200k a year pre-tax. Much like earner investors, high income earners rely on salary and low-risk investing (e.g. index fund, realestate) to build wealth. The key difference is that the much higher income accelerates the rate of wealth accumulation, trimming years or even decades off their journey to become millionaires.
Here are some of the high earning job types:
- Corporate high achievers. Starting their career from the ground up in a mid to large size corporation, these high achievers rapidly climb their way up the ladder, mastering the corporate game to become highly compensated executives.
- Highly paid professionals. Some professions pay more than others. Certifications of these high paying professions usually require much longer education and professional training. Doctors, lawyers and engineers are on top of the high paying professions list.
- Financial market traders. There are many institutions (e.g. banks, hedge funds, prop firms) and individuals who trade the financial market (e.g. stocks, bonds, derivatives, currencies). Although trading is risky, it can be one of the most financially rewarding professions for those who conquer the volatility of the market.
Business owners
Assets of business owners would come from the business net profit, the business asset itself and its investments.
There is a lot of risk being a business owner, regardless of running a physical shop or an online business. Depending on the nature of the business and upfront investment cost, it may take a business years to break even. Only 40% of small businesses in the US are profitable.
The upside of being a business owner is that you are in complete charge of the business direction and decision making. And when the business goes in the right direction, it can be a very rewarding experience both financially and professionally.
YOLO investors
In contrast to the low-risk investors who typically invest in relatively lower-risk assets, YOLO investors are those who put money in high-risk speculative assets hoping for significant capital growth.
Picking the right asset is very difficult, and it may not pay off right away if it ever pays off at all. It requires the ability to identify early trends, commitment based on deep understanding and belief of the underlying asset, and patience to ride out the ups and downs without capitulation.
High-growth tech stocks and crypto currencies are places where many potential millionaire-making risky investment opportunities are found.
Marry rich
This is quite straightforward. There’s a whole debate on whether it’s ethical to get married for money (which we will not get into in this article), but marrying someone who has made it can be a fast track to wealth.
Lottery or sports bet winners
It might be a bit controversial to even consider lottery and sports betting as proper methods to reach millionaire status, but there are plenty of examples of overnight millionaires who have pulled it off.
While the probability of winning big in the lotteries is very low, as there are simply too many random variables, winning more consistently in sports betting is somewhat more achievable in comparison. Although there’s no guarantee, betting on Lebron James to score 30 points with 7 assists certainly has a much higher winning chance compared to picking a series of totally random numbers in the right sequence.
Betting is extremely risky, but sports betting can be lucrative for those who truly understand the sports they bet on, equipped with high probability betting strategy, and of course, a lot of luck.