What does it take to become a millionaire these days? Maybe not as much as you think.
- Automate saving: A recent article by Sandra Block, senior associate editor at Kiplinger’s Personal Finance Magazine, includes a strategy that is simple. “Automate saving. You can’t spend money that isn’t in your take-home pay, so take advantage of your employer’s 401(k) or similar retirement plan to put your savings on autopilot,” she says. Contributions are pretax, and the account grows tax-deferred until you take withdrawals, which boosts your annual return. “Plus, if your employer matches a percentage of contributions — and most large companies do — you’ll have an even better shot at reaching $1 million,” Block says.
- Cut spending: “Take a look at your monthly expenses and see if there are areas where you can reduce spending. For example, replace expensive dinners out with more home-cooked meals,” or find ways to trim the cost of your cable or cell phone plan, says Joshua Zimmelman, president of Westwood Tax & Consulting in Rockville Centre.
- Build on three pillars: They say good things come in threes. Evan Tarver, an investment analyst for FitSmallBusiness.com in Manhattan, says the road to $1 million is a matter of taking some of your cash savings and investing it in public stocks, real estate, as well as private business ownership. “These are the pillars of wealth,” says Tarver.
- Don’t waste money on late fees and penalties: Over a lifetime, $30 overdraft, late fees and interest charges on your credit cards, loans and other bills can add up to a shocking amount of money. Says Zimmelman, “Always pay in full and on time.”