For instance, in life, we all think to become a millionaire but most of us are not able to get the right path to achieve financial success.
Therefore we prepare an exact step-by-step guide on how to become a millionaire in 5 years. Following these simple steps will help you achieve financial independence in your life.
Millionaires are made, not born – it’s up to you how quickly you want to achieve this status! You have to avoid things that ordinary people do and adopt the mindset of wealthy people.
The following are the seven-step guide on how to become a self-made millionaire in five years:
Create a Financial plan
The first step is the most essential is to do your financial planning. You need to write down what are your expenditures, how much you earn, and how much you can save.
This may seem like a difficult task, but if you break it down into smaller goals, it will be more manageable. You need to create bold goals and divided them into smaller parts that will seem achievable to you.
You need to have enough retirement savings to get a comfortable retirement. You can invest in National Pension Scheme in small portions and get back in chunks when you retire.
NPS (National Pension Scheme) has delivered 8% to 10% over the past decade. While it does not result in lots of money but can be a good option for people who have a low-risk appetite.
Furthermore, you can also claim a tax deduction under Section 80CCD(1) up to INR 1.5 Lakh under NPS.
You can also concern your financial advisor to have better guidance on your financial plan like whether you need to require additional funds to achieve your goals as you want.
Once your financial plan is done it’s time to take action! It will be your roadmap to achieve millionaire status as soon as possible.
Now you should divide your financial plan into long-term goals and short-term goals ( Like 90-day short-term goals) to make it easier to achieve.
Create a budget and stick to it
The second step is to create a budget. This may be difficult for some people, but it is essential to achieve millionaire status.
You need to know how much money you are spending and where it is going. Track all of your monthly expenses whether it is living expenses or housing expenses.
Once you’re aware of how much money you spend, it will be easier to cut down on unnecessary items and create a budget that works best based on your needs.
You can follow a simple rule of budgeting known as the 50-30-20 rule which means that –
- 50% of your income goes towards necessities,
- 30% for discretionary items (Wants), and
- 20% is saved.
But here is a twist as sooner you want to become a millionaire the harder you have to go. You cannot spend money on your wants and that is how millionaires live. You need to differentiate yourself from average people from a financial perspective.
According to a survey by Acorns, 94% of millionaires spend less than $6,000 on their vacations and even 46% spend less than $3,000 yearly on vacations.
While creating a budget you need to consider having an emergency fund to tackle future uncertainties.
Increase how much you earn
The third step on How to become a millionaire in five years is to increase how much you earn. This can involve taking on extra hours at work or starting a side hustle where possible.
If you can find ways to generate extra income, you will be on the right track to get rid of your financial chaos.
You cannot become a millionaire by saving $10 on your daily expenses or $100 on other things. You need to learn high-income skills that can pay off your expense and left with enough to invest.
You can try out different things to make extra money streams that will result in generating cash flow and reinvest them to generate more.
Starting with consistent savings to get your hand into other things like freelancing can be a good idea.
Even I also started freelancing on Fiverr and make a few gigs about Content Writing and also received good responses and earned almost $300 in the last 90 days.
You may think it is not how much you expected and yes it was not so much but a good start for me in freelancing. You may also try out similar options to earn more.
Let me know in the comment section what are methods you looked at to generate income streams.
Develop a Daily routine – NO Cheat day!
The fourth step is to be a millionaire is to develop a daily routine. This includes waking up early, working out, and eating healthy.
It may be difficult to stick to this routine at first, but it will become easier over time. millionaires are made, not born – it’s up to you how quickly you want to achieve this status!
According to a study, 50% of millionaires wake up at least three hours before their workday starts and they spend time planning the day.
You should do the same: plan how you want your day to go and how you can complete all necessary tasks you need to take for a comfortable retirement.
According to a survey by Acorns, 81% of the millionaires prefer to have a plan, and they try to keep a to-do list with them.
There is a good reason why rich people start their day early: according to the Journal of Applied Psychology, those who wake up and go to sleep earlier than others tend to be happier.
About 76% of millionaires exercise at least 30 minutes per day and at least four days a week. This is important to maintain good health and have the energy to work hard.
It will be hard to get started out. You can start by making small changes to your schedule. First, add waking up early for a few weeks and when your body is comfortable with it start exercising as well.
Like this, you can add other good habits like reading books on a daily basis, social media detox. Things might not change in one day, it will take time to get to your efficient schedule.
Follow a Mentor and focus on Learning
The fifth step to becoming a millionaire is to follow a mentor. This individual will help guide you on the right path and provide advice when needed.
I am not talking about those fake Gurus who claim to make you rich in a matter of days. The most common traits among fake gurus are –
- Only talk about mindset (no practical advice)
- Show their fake luxuries to prove they are rich
- Try to form a bad image of 9 to 5 jobs
- Promote Get rich quick scheme
- Sell you the dreams, not value
There are other common things that you will find but are not worth mentioning separately.
You can listen to the podcast, watch free material on youtube, and premium books available in PDF formats.
If you are a complete beginner I would recommend you to start “Rich Dad and Poor Dad” or The Psychology of Money”. To learn investing you can go for “The Warren Buffett Way”.
To find the best book for you, you are just one search away to find out on google. You can seek guidance from successful people who have achieved their financial goals.
Additionally, 88% of millionaires read daily to increase their knowledge while 85% read a minimum of two books a month.
If you have INR 10K in your hand, I would recommend you to invest it into yourself for buying books, courses, learning new skills rather than buying stocks or other assets.
Invest how much you can afford!
The sixth step is to invest as much as possible. It not only includes popular investment options like stocks, bonds, real estate, index, and mutual funds but also includes self-investing.
According to The Millionaire Next Door study by Thomas J. Stanley, 46% of millionaires reinvested their dividends back into their company stock while 37% bought more shares in their business.
It’s also important to remember that you don’t have to be wealthy to start investing. You can start with an initial investment of INR 500 with low-cost index funds and increase your investment amount over time.
The most important part of your investing journey is to be patient and stay focused and reinvest your investment earnings (dividends) back into your portfolio.
Sometimes new investors try to find multi-beggar stocks which can be 10 times or even 100 times their money in a few years and end up investing in bad stocks.
You can start with investing in large-cap companies or go for index funds at the begging of your journey.
After reaching a certain you also diversify your investment portfolio into real estate to reduce the risk associated.
The most important step to becoming a millionaire is to be consistent.
According to the book “The Millionaire Fastlane” by MJ DeMarco, it takes an average of seven years for self-made millionaires to reach their goal.
This may seem like a long time, but if you put in the hard work and stay focused, you will become a millionaire in five years!
It’s easy to get sidetracked, but if you want to become a millionaire in five years you need to work every day.
Most people think motivation helps you achieve your goals but it’s not like that. Being disciplined is the most important thing to help you be consistent.
You can divide your goal into smaller milestones which help you stay focused at a time and get track of your performance as well.
Make connections with other people. It is about sharing, not taking. Get fresh ideas and how to be a millionaire in five years’ advice from them as well as strengthen your knowledge.
Connections are one of the 8 assets that millionaires try to focus on building wealth. You can also read our blog “8 assets that millionaires are invested but you are not”.
Make relations with other people who are at the same level as you or even higher than you so that they can help you grow.
It will lead to getting access to job opportunities, career advice or career support are some of the things you can get from these people as well as helping them with their business if they need it.
You will feel more comfortable as time goes by, and eventually, people will start coming to you for advice too! All these things are part of the networking process that we all go through.
It’s important to have a positive outlook and to be genuinely interested in other people. It will help you form valuable relationships that can help you reach your goals!
The best way to make relations with other people is by finding common interests, attending various events, or even joining online communities where like-minded individuals gather.
I am not referring to MLM as most people correlate Network Marketing with making connections.
FAQ (Frequently Asked Questions)
If you are a college student, you can become a millionaire within 5 years. It all depends on how you invest your time and money.
Here are some ways that will help you achieve your goal of becoming a millionaire:
- Get part-time jobs during college semester breaks or summers;
- Create passive income sources;
- Invest in stocks, bonds, or mutual funds;
- Make investments into real estate property;
- Start an online business
It will be a little difficult to become a millionaire in 5 years with investing. If you invest 1 Lakh per month in the stock market and select the best selection possible in that scenario as well you will have to achieve at least 19% of returns per year on your investment to become a millionaire in 5 years.
I would suggest you go with other streams of income like opening a business or you may work on side hustles as investing is a long-term game and it takes time to deliver returns.
You can also go with small-cap mutual funds as some of them have delivered 60% returns in the year 2021.
If you have a nest egg of 1 Lakh rupees and you want to become a millionaire, it means you have to make your investment 700 times or even more.
You need to understand your success will be the product of habits and you have to adopt a healthy lifestyle to achieve the milestone in a limited time.
My first step will be learning a high-paying skill like web development, copywriting or there are many others as well. After that, I will give 2 to 3 months to gain expertise in it and even work for free for people to learn more.
After that, I will start selling my services on freelance platforms like Fiverr, Upwork as well as some direct client building sites like Linkedin and other social media platforms.
It will take time to get established in freelancing in that scenario I will start my work from a small portion of money out of the lumpsum.
Once I start getting clients and start making money I will try to go for diversification by hiring other freelancers and taking the margin out of the work.
Short-term goals here will play a great role to achieve that mark. It may take a year or even some months to double your money. But when you start getting the basics you will start getting ideas to make money.
If you think a little more about doubling your money you are just 10 steps away from becoming a millionaire but this process will be of challenging goals which you will have to conquer.
The easiest way to become a millionaire is to start investing early not in stock markets or any other asset classes but yourself first.
Here are the top 5 industries where most millionaires come from -
- Financial services
- Real Estate investors
- Renewable Energy
To achieve financial success, you need to be consistent and stay focused on your goal. You can surround yourself with people who have the same goals and dreams to help you stay motivated along the way.
Make connections with other people and form valuable relationships that can help you reach your goals! The sky is the limit when it comes to networking, so be creative and put yourself out there!
One way of being committed is by setting milestones. This will help you stay focused and motivated along the way. When it comes to reaching your goal, think big!
There is a great quote by Jim Rohn “Become a millionaire not for the million dollars, but for what it will make of you to achieve it.”