Right now, I’m reading a fun novel called The Penny Pincher’s Club by Sarah Strohmeyer. It’s about a woman who realizes that not only is she in debt, but she needs a ton of money to become financially secure. What if someone wanted to make quite a bit more? Today, I’ll cover a few strategies and tools that can help us reach financial freedom, and perhaps even make a million dollars in the process. Is it possible? It sure is, when you think of the amount of money that may actually be passing through our fingertips each year. If you make $50,000 a year, it will take you 2 decades before you can claim that you’ve earned an aggregate of $1 million.
But that doesn’t account for a few things, such as whether:
- You have a double income household and have a spouse who can assist you with the family’s total household income.
- You have investments that are generating income on their own.
- You receive windfalls from unexpected sources.
- You use a significant part of your income to live. And if you’re like most people, of course you do!
So let’s look at a few things that may help us in our quest to gain financial freedom. That would mean making enough money so that you can work less, sometime in the future. Can you really have enough in assets that can generate sufficient income for you to live on?
7 Concrete Steps To Help Us Gain Financial Freedom
1. Calculate the numbers to set up a savings schedule.
CNN Money has a calculator to help you figure out when you’ll be a millionaire. First, you input data about your taxable accounts, such as how much you have, how much you’ll save, whether that’s per year or monthly, and your tax rates. For tax-deferred accounts, you’ll enter similar information, minus the tax rates. Then you’ll be asked to pick a rate for your projected rate of return.
A typical savings calculator will let you input your age, your target age for becoming a millionaire, and other information. Let’s say you enter 30 as your age, with 65 being the target age. If you’ve got a total savings amount of $65,000, with savings per month as $541, an expected rate of return of 8%, and an inflation rate of 3%, it shows that a 30-year-old could be a millionaire at the age of 56.
Play around to see different results that show how increasing your savings each month can impact you long-term — the results may surprise you!
2. Visualize your goals.
Another effective trick to get you motivated is to visualize the future. I have a friend who put up a poster of a Porsche on his cubicle wall (at our place of work, some time ago). It was his way of inspiring himself to work hard to get to that point of becoming a luxury car owner. After we left the company, it was some time before we saw each other again in a company reunion. When I saw him again, there he was with a gleaming black Porsche. While his goal isn’t to become a millionaire quite yet, this exercise proves that you can get somewhere if you set your mind to it. Other people will put their favorite goal up as their desktop or laptop wallpapers. Whatever works!
3. Make the power of compounding work for you, not against you.
Sure, I can go to the gas station and buy a lottery ticket for $1 and maybe even luck into millions. However, if I took that same $1 to an investment account, I’d be growing that dollar. A dollar is not much by itself, but if you nurture that account and keep adding to it religiously, you should see it grow over time. The earlier we start saving, the better. Here’s more on how the power of compounding works to your advantage.
By educating ourselves about different savings and investment options, we get closer to our million dollar goal. More on concrete money saving advice here.
On the flipside, consider expediting your credit card payments if they’ve been growing over time. Anyone with a Visa or MasterCard at more than 10% interest can tell you that compound interest can actually work against you. One popular method for driving down debt is Dave Ramsey’s Debt Snowball Plan.
4. Develop income channels.
One way to grow your savings and reach that million faster is to increase your income. Even in a tough economy, it’s possible for some people to locate better-paying jobs or start their own online businesses.
If you’re thinking about finding a new job, take advantage of sites like LinkedIn, Facebook, or Twitter to selectively put out the word that you’re looking for new job opportunities, or that you’re promoting your business. Also, try to get feedback from family, friends and colleagues on ways to help your career or business.
5. Get lean. Live with less to live with maximum efficiency.
Try to sell goods & assets you no longer want. If there’s an item in your home that you no longer want, you just might find a buyer for it locally or online. Think about selling bigger ticket items you no longer need — maybe you’re holding on to something for sentimental reasons or thinking you may use this later on. Chances are good that you won’t! A house that was perfect for your growing family decades ago might be too much to manage for one or two people. If you decide to downsize, you’ll be operating your household more efficiently, and you’ll be exchanging a lot of that extra clutter for cash! That SUV that seemed perfect two years ago might be more to insure than a sedan.
6. Shop wisely and be discriminating.
If my house had been located two miles in another direction, I’m pretty certain it would’ve cost me $25,000 more. When you seek out your next home, vehicle, or any other type of major purchase, take some time to see if something similar is available at a lower price. Comparison shopping takes a bit of time and patience, but you may learn that you can be happy with less expensive purchases. If you have a college education to consider in your household, then ask the student to compare in-state schools to out-of-state schools. Planning a wedding? Agree on a reasonable budget instead of going all-out.
When I’m looking for anything from computers, electronics, clothing, and more, I like to check out sites such as Dealnews or Slickdeals first to see if coupons or discounts are available. I also like to read sources like Consumer Reports to see what items are worth the price.
7. Prepare for inflation & uncertain times.
Generally, the prices of goods and services go up every year. That implies that my hypothetical $1 million today might be worth thousands less in thirty years. When you set up your financial plan to become a millionaire, you should factor in at least 3% for inflation. Here are some tactics to fight inflation.
I’d love to hear about your ideas for getting to a million or for achieving financial freedom!
Created May 6, 2007. Updated June 29, 2011. Copyright © 2011 The Digerati Life. All Rights Reserved.
{ 10 comments… read them below or add one }
Can you ever become a millionaire on a minimum wage income?
Minimum Wage,
That’s a tough one but not entirely impossible, especially if there’s a chance of improving one’s earnings as time goes on. I’ll try to address this question in depth sometime.
Is $50 a month in a TSA on top of State Teacher’s Retirement System’s standard contribution on a 60K/yr salary gonna be enough?
I already know your answer . . . so thanks for the list so I can try and make a million some other way 🙂
Some people say you can be a millionaire in 20 or 30 years just by saving $5 every week. Heard this from somewhere I don’t remember. But do you think it is true? Just to let you know that software from parcusgroup.com does financial planning and a lot more for those who are interested. Think about saving.
@ Minimum Wage
there are people that became Millionaries after making a low wage. They went on to college and graduated, starting making an above average salary and began to invest their money and acquire businesses, car washes etc. And they became millionaires.
It is possible. It takes patience, disciple and hard work.
Moneymonk,
I’ve already gone to college and graduated into a locally depressed economy with a degree that was useless when I couldn’t afford to go on to law school.
Not only did I not get the above average salary, I got student loan debt that hangs around my neck like an albatross.
@Minimum Wage:
Sounds like it’s time for you to get creative. How about hopping a bus to a new place and getting a fresh start?
Can’t do it? Well sit down and figure out a different way to make your situation better.
Did that. Now I have no marketable skills, no career-related experience, and I think my age combined with the above have rendered me unemployable.
Somebody is playing with us here. I think that what we need to keep in mind is that there’s always hope out there even in our darkest hour. If you’re in a financial slump — visualize things for the better. You’ll be surprised by the motivating effects of your imagination. To tell you the truth, I know a lot of people who have been down and out, but they don’t really stay down for long. Give them a few years and they’re doing well again!
In terms of getting to a million or some specific, ambitious level of wealth, I think it comes down to:
– Living on what you need, not what you want or “can afford”. Big Difference.
– Maximize your earning power.
– Grow the gap between your earnings and expenses
– Invest wisely, with appropriate asset allocation for your own situation
– Plan for the “unexpected”. This means problems, and those can and do affect us, even if we have no way of foreseeing what they might be. Just be able to handle things.
– Have goals, visualize success, and work toward it.
– Have self-discipline.
This is what I have set in motion – or at least most of it, as I’m still working on a couple things. Anyway, I hope it pays off down the road!