How to become a millionaire?
I believe almost everybody wants to be a millionaire, I guess you would agree. But what exactly a millionaire is? Actually, this is not a very simple question…
If you take a $1 000 000 loan are you a millionaire? You have a million, in this case, you have that amount available for spending, but you owe it to the lender, too. So probably no, you’re not a millionaire in this case. A similar situation is if, let’s say Sarah has a house worth a million but she lives there and doesn’t plan to sell it, how about that, is she a millionaire? She owns the house but at the same time, she might be struggling to pay her bills or even buy food because some liquid cash is needed for this. Is Sarah a kind of poor millionaire? There are three controversial definitions of a millionaire:
1. Net assets for more than a million – this means every person for whom:
total assets – total debt > $1 000 000
2. Net financial assets for more than a million – in this calculation your home, car, and furniture are excluded from the equation, too, as living assets:
total assets – total debt – living assets (first home, car, etc.) > $1 000 000.
3. Net investable assets (working capital) for more than a million – to be a millionaire according to this definition, a person should have 1 000 000 of a currency to invest. This rule is used for the creation of the so-called World Wealth Report every year, by Capgemini (www.capgemini.com), which offers insights into the size, composition, geographic distribution, and investing behavior of the world’s
population of high net-worth individuals (HNWIs)—those with US$1 million or more than 1 at their disposal for investing. You can see the report from 2018 below.
For example a person with:
– a house worth $200 000
– a car for $50 000
– credit card debt of $50 000
– other debt for $500 000
– vacation home for $300 000
– liquid investments for $500 000
– a bank deposit of $600 000
1. IS a millionaire according to the first definition:
200 000 + 50 000 + 300 000 + 500 000 – 50 000 – 500 000 + 600 000 = $1 100 000
2. IS NOT a millionaire according to point 2:
500 000 + 300 000 – 200 000 – 50 000 – 500 000 – 50 000 + 600 000 = $600 000
3. IS a millionaire according to 3, because the money available for investments are:
500 000 + 500 000 + 600 000 = $1 600 000
The most widely accepted definition of a millionaire would be a person, whose net worth is more than a million – 1.
So how to become a millionaire? Make your net assets exceed $1 000 000 and you’re done!
How many millionaires are there in the US and around the world?
Here is a nice page where you can understand more about world millionaire and their number in each country. I will just summarize here.
According to point 1, there were around 36 million millionaires on the planet in 2018
According to 3, there were around 12 million millionaires in 2018 in the world.
Below is an infographic by worldwealthreport.com on which you can how world millionaires actually became millionaires. The site is a very interesting one, too.
Becoming a millionaire
If you’re serious about becoming a millionaire, then you need to commit to the goal and plan how to make it happen. Here are seven steps that will help you get there:
1. Set a Goal: Before anything else, decide what your million-dollar goal is and when you want to reach it. Having a concrete goal in mind will keep you motivated and on track.
2. Create a Plan: A well-thought-out plan is essential for becoming a millionaire — this means researching investment options and coming up with an actionable strategy for reaching your goals.
3. Budget: Creating and adhering to a budget can help you keep tabs on your spending habits so that more of your money goes towards building wealth rather than being wasted on frivolous items or activities.
4. Invest Wisely: Research different investment opportunities, such as stocks, bonds, real estate, mutual funds, or cryptocurrency, and determine which ones fit best with your goals based on the amount of risk vs reward they offer. Make sure not to overextend yourself by investing more money than you can afford to lose — start small if necessary until more money is available for larger investments down the line.
5. Develop Multiple Streams of Income: It’s important that while investing in something lucrative, you must consider other sources from which income can be generated. So creating multiple streams of income should be an important part of any millionaire’s journey. You could do this by starting side businesses, freelance work, or even passive income like real estate investing or stock market investments.
6. Grow Your Network: Having the right connections can often give access to opportunities that may have otherwise been missed out upon. A strong network with people in similar industries or complementary fields can open doors for collaborations as well as access to new resources from which greater profits can be earned.
7. Live Below Your Means: Living below one’s means helps ensure that majority of one’s salary gets diverted into savings instead of expenses like luxury cars, expensive dinners, etc. In order to become wealthy, you must save more than what is spent, since wealth accumulation relies heavily upon sound financial principles like delayed gratification & minimizing expenses wherever possible without compromising upon quality standards & lifestyle comforts
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