What do millionaires have in common? It isn’t six-figure salaries, trust funds, or their bank balances—it’s the rules they follow to meet their goals. The truth about how to make your first million is surprisingly simple: save early, invest wisely, avoid debt, and keep track of every dollar you spend.
No matter where you’re starting, a disciplined strategy significantly increases your chances of reaching the million-dollar mark. In this article, an experienced corporate attorney offers practical steps to help you on the journey toward making your first million dollars.
Make Your First Million: 10 Money-Growing Tips That Actually Work
Set Clear Financial Goals
Start by defining your financial objectives. This means taking a full accounting of money coming in, money going out, and money kept in savings. You’ll likely already see some areas where economies might be made.
Next, set realistic goals. Clearly outline your short-term and long-term targets, focusing on factors like your current income, expenses, and desired timeline. Having a specific goal will give you a sense of direction and motivation.
Finally, create a detailed budget that tracks your income and expenses. Identify areas where you can curb unnecessary spending and divert more funds towards savings and investments.
Your financial plan and disciplined budget are essential wealth-building tools. They help keep you on track, hit milestones, and allow you to measure your success along the way to your first $1 million.
Build Savings with Compound Interest
The easiest way to make your first million is through compounding interest. The earlier you start saving money, the more interest you earn—and each interest payment increases your balance for future interest calculations.
So how much should you save to become a millionaire? There’s no hard and fast rule, but generally, between 15% and 50% of your income should go into a high-interest savings account.
When it comes to compound interest, nothing is more valuable than time. If you’re still young, deposit as much as possible into savings (while still paying rent and keeping the lights on). If you start saving in your 40s or older, you’ll have to put considerably more in savings every month.
Max Out Your Retirement Contributions
Retirement accounts are a valuable asset that can help make your first $1 million. The money in these accounts grows (and compounds) tax-free. Retirement contributions are also excluded from your taxable income, further reducing your outgoings.
If you have an employer-sponsored 401(k) or a 403(b) account, you should invest the maximum amount possible each year. In 2024, the maximum contribution is $23,000 or $30,500 for taxpayers over 50. Some employers offer retirement contributions by payroll deduction and even match a portion of your funds, making it easier to seed your retirement account.
If you’re self-employed, you can open your own traditional retirement account or Roth IRA. However, the contribution limit on these accounts is significantly lower. In 2024, the maximum contribution is $7,000 or $8,000 if you’re over 50.
Hone Your Income Streams
You’re making good use of the money you save, so now you can focus on finding ways to bring more in. The average 9-to-5 job alone usually isn’t enough to provide $1 million dollars by retirement age, so you may need to find other sources of income to accelerate your wealth-building. The more diverse your income streams, the more resilient your financial portfolio becomes.
Common side hustles include gig work (Uber driving, making deliveries, etc) or freelancing (selling your skills to the highest bidder). If you have something valuable, such as a boat, camper, spare room, or power tools, consider renting them out to earn passive income. Finding income opportunities takes a little creativity, but once you get started, you’ll start to see earning potential everywhere.
Make Smart Investments
Investing is a crucial skill for financial success. A diversified portfolio of stocks, bonds, real estate, and other assets can help spread out risk, while a long-term perspective allows your investments to grow consistently over time.
Avoid emotional decision-making and buying and selling frequently. Relying on data and analysis is how to make your first million. Research thoroughly before investing, staying informed about market trends and economic indicators.
Investing isn’t a “set it and forget it” activity; you’ll need to review and adjust your portfolio as needed. An experienced financial advisor can help you create a tailored investment strategy that aligns with your risk tolerance and financial goals.
Stay Out of Debt
While there’s no guaranteed path to financial success, spending is almost always contrary to your goals. This doesn’t mean all of your income must go to essentials; the occasional dinner out or family vacation can be just as important as saving for the future.
Just steer clear of buying things you don’t need—especially if you’re using third-party financing or a high-interest credit card to do it. Credit companies know how to make a million dollars leave your account and pile into theirs.
Live Wisely
The myth that millionaires need to spend to maintain an image or keep up with their neighbors keeps many high-earners from accumulating wealth. Plenty of people with high salaries don’t have a high net worth, and the most common reason is lifestyle inflation.
Lifestyle inflation, or lifestyle creep, is the tendency to spend more money as you earn more income. However, just because you have more money doesn’t mean you need a sports car or an expensive home in a gated neighborhood.
The budget you made is your greatest defense against lifestyle inflation. As you increase your income, consider putting the excess into savings, college funds, or investments rather than spending. For example, if you pay off your vehicle, continue to put the monthly payment amount into savings each month instead of buying a new car right away.
Never Stop Learning
Financial landscapes are always changing, and you’ll need to take an active interest to stay ahead of the curve. Attend workshops, read books, and leverage online resources to enhance your financial literacy. Networking with other professionals helps you stay informed about investment opportunities, market trends, and personal finance strategies.
Be Flexible
It might seem strange to add flexibility to a list of rules, but your ability to adapt is vital to financial success. You’re going to try a lot of new things on your wealth-building journey, and some will fail. That’s fine, as long as you’re constantly learning and making adjustments along the way.
Now that you know the rules, you need to know when to bend or even break them. If you’ve saved a few hundred thousand and want a new kitchen that costs $45,000, the personal satisfaction and increased property value it brings might be worth the hit to your savings.
Be Patient
Remember: building wealth takes time and discipline. Stay focused on your goals, resist the temptation of quick fixes, and be patient through market fluctuations. Consistency and perseverance are crucial elements of long-term financial success.
Get the Guidance You Need to Make Your First Million
Regardless of how you make your first million, second million, or more, it’s important to realize that riches won’t necessarily make you happy. You should focus on the reasons for growing your wealth—and where it will ultimately go—just as much as the number on your bank account.
With a business lawyer on your money team, you have the freedom to enjoy what really matters and make hard decisions with confidence. Email us at hello@yolofskylaw.com today or schedule a 15-minute call to learn how we can help.