Obviously, many of the people that are millionaires made the bulk of their fortunes by being entrepreneurs. But working for other people doesn’t mean that you have to buy lottery tickets to strike it rich. The trick is to maximize your income, make the most of your employee benefits and tax breaks, and use that extra money to start investing in income-producing assets.
At The Office
1. Find better ways to do your job. Streamline a process, shave costs, create a new profit method, become an expert on a topic, volunteer for a company committee — anything that will make you stand out as the prime candidate for a promotion or a pay boost. Fundamental rule – make your boss look good, and they will reciprocate.
2. Feel free to negotiate. In a study of master’s degree graduates from her university, Carnegie Mellon economics professor Linda Babcock found that those who negotiated their first salary boosted their pay by more than 7% compared with those who didn’t bargain. I know from personal experience that this is true!
3. Get it in writing and in a demonstrable fashion. Quantify what your efforts add to the company’s bottom line, and keep a record of your efforts. If that’s not feasible, spotlight your value with comparable salaries for workers with your experience and in your position from a site such as Salary.com, or from a professional association.
4. Know when it’s time to move on, but don’t job-hop. Create a professional-looking page on LinkedIn that tells prospective employers why you’re an exceptional candidate. And don’t neglect more conventional networking: Join a professional association or show up at school reunions toting business cards. However, don’t simply jump ship the instant something higher-paying comes along – studies show that people who spend a long time with one company do better than those that change every year or two.
Utilize Available Benefits and Tax Savings
5. Contribute as much as you can to your 401(k) and other tax-deferred retirement plans. You’ll not only build a bigger retirement nest egg, but you’ll also cut your tax bill pretty significantly. In the 25% federal tax bracket, every $1,000 you contribute to a 401k or IRA trims your taxes by $250. You’ll save on state income taxes and other government fees too!
6. Take tax savings where you can get them. Contribute pre-tax dollars to a flexible spending account to pay for dependent care or out-of-pocket medical expenses. The federal government also offers programs which some companies use to pay for parking pre-tax. If you set aside $1,500 per year and you’re in the 25% bracket, avoiding federal income and Social Security taxes means Uncle Sam will subsidize almost $500 of your expenses.
7. Review your tax withholding. If you’re expecting a refund this spring, you’re having too much tax withheld from your paycheck — and basically making a free loan Uncle Sam. That’s a terrible way to become a millionaire! Put more money in your pocket by filling out a new Form W-4 – just be sure to research the implications (you’ll have to make quarterly payments)
8. Stash savings in a Roth IRA if you’re eligible. Withdrawals in retirement, including your future years of compounded earnings, will be tax-free. This year, income-eligibility limits for a Roth Ira increase to $120,000 for individuals and $176,000 for married couples.
Be Sure To Invest
9. Get started! The quicker you get a jump on putting money aside, the easier it will be to stuff a seven-figure cushion. If you start at age 25, for example, investing $286 per month will get you $1 million by age 65, assuming you earn 8% annually (the historical rate of return on stocks).
10. Invest automatically, either through your employer’s retirement plan or by setting up a regular deposit to a mutual fund or broker. You’ll never miss the money, and you’ll avoid two big mistakes: buying too much when stock prices are high and not buying at all when prices fall. Slow and steady is the key.
11. Watch out for fund fees. The more you pay, the tougher it is to earn an above-average return. Many hedge funds, for example, take 20% of any gains, a huge hurdle to overcome. A better bet: no-load mutual funds with expense ratios of 1% or less. If you trade individual stocks, watch those commissions.
12. Keep it simple. Be wary of get-rich-quick schemes or sales pitches for complex investments, such as oil-and-gas partnerships, that trade on the millionaire cachet to lure investors into buying high-fee products they don’t understand. Most millionaire households accumulate their wealth over the long term by sticking to a regular investing plan in a balanced portfolio.
Tags: goals, Income, investing, IRA, long term, making money, Retirement
I think the ultimate way to become a millionaire is to EARN MORE and DESIRE LESS. Earning more increases your income i.e. (taking a second job, investing your money, buying assets that provide passive income, etc.) while desiring less lessens your spending (i.e. budgeting, frugality, etc.)
Make it a habit and definitely, you would become a millionaire someday.