Five years is a reasonable period of time to work on becoming a millionaire. It's not too short, and it's not too long either.
What follows are a few ways that can help you reach this goal, according to some wealth and personal finance expert we have interviewed.
1. Automate your savings efforts
According to Andrew Priobrazhenskyi, CEO of Discount Reactor, if you want to become a billionaire in 5 years or less, you need to develop the habit of saving.
This is definitely the first step to start building wealth.
You can do this by consistently depositing a percentage of your income into your saving account or your personal emergency fund.
The best and easiest way to do it is by automating your savings.
This is a feature almost every bank offers, which allows you to automatically deduct a portion of your salary and deposit it into your savings account.
2. Start a business
You can't rely on your 9-5 to build wealth. No one became a millionaire or a billionaire just with their full-time job.
As Omer Reiner, Licensed Realtor & president of FL Cash Home Buyers, explains, the best strategy for creating long-term wealth is to start a business.
But, coming up with a successful business idea is much easier said than done.
Here's a simple strategy that you can use to generate dozens of business ideas: Identify a mega-trend that's taking place.
This could be pretty much anything but ideally, it'll be something that you're familiar with.
Here are a few examples of mega-trends:
- The popularity of Airbnb (both for renters/landlords);
- The popularity of remote work after COVID-19;
- The popularity of loungewear as opposed to formal attire;
- The popularity of grocery delivery services (Doordash, Uber Eats, Glovo);
- The popularity of boutique workout classes (Soulcycle, Barry's Bootcamp).
By this point, most of these trends are here to stay.
Next, design a business that works around one of these megatrends.
In other words, you don't want to compete with Airbnb. Instead, you want to create a product or service that will be valuable to people who use Airbnb.
For example, a service that helps Airbnb owners balance multiple listings. Or, a service that offers cleaning services specifically for Airbnb.
By doing so, you're essentially piggybacking off of Airbnb's success.
3. Save regularly and invest
As Brandon Wilkes from The Big Phone Store mentions, to become a millionaire in 5 years, it's not only essential to save regularly, but also to invest in a diversified mix of assets.
This could include stocks, bonds, real estate, and other assets.
Over time, these investments can compound and grow significantly in value.
And yes, investing in real estate is still worth it, according to financial experts.
"Investing your money is one of the smartest things you can do to become a millionaire. When you invest, you're essentially putting your money to work for you and allowing it to grow over time. Over the long term, investing can help you build significant wealth," says Wilkes.
4. Live below your means
Another important point according to Wilkes is this: if you want to become a millionaire in the long term, it's crucial to live below your means.
This frees up more money to save and invest, which can further accelerate the path to millionaire status.
Living below your means means spending less than you earn and carefully tracking your spending to ensure you're not overspending.
It also means avoiding unnecessary debt, which can drag you down financially and make it harder to reach your goals.
5. Become a football scout/agent
"I believe that a career as a football scout or agent is another opportunity for someone seeking to legally earn one million dollars in one to five years by establishing their own business," says Edward Mellet, Director at WikiJob.
Despite the fact that identifying and selling excellent footballers to European top-tier clubs such as Real Madrid, Barcelona, Arsenal, Paris Saint-Germain, Manchester United, and Chelsea may require some effort.
It still possible to have a successful career as football scout.
If you are able to recruit a few young football players, you may become a millionaire in five years or even less.
6. Avoid debt
"I would say that there is a prevalent notion in our culture that you must take significant risks to become affluent," explains Brady McAninch, Founder and CEO of HM-Attorneys.
People believe it is necessary to take out business loans and establish lines of credit in order to advance, and they explain this by referring to it as leverage, which is just a fancy term for borrowing money and incurring debt.
Debt is quicksand for financial aspirations.
Every time you purchase something on credit or take out a loan, you dig yourself a deeper hole.
This money (plus interest) that you are giving to lenders is money that you could be investing in your future.
People who later became millionaires realized this a long time ago. They did not want their most valuable weapon for developing wealth (their income) to be tied down to foolish monthly payments.
7. Outsource
"One of the best long-term strategies that can actually make you a millionaire is keeping your business at its highest operational efficiency," explains Pavel Stepanov, CEO of Virtudesk.
This can be done by keeping your operational costs low while, maintaining the quality of the service you provide. And, how can you do that?
One of the most effective ways to do it is through outsourcing.
Outsourcing saves you money from labor costs, infrastructure costs, and utilities. At the same time, you can delegate many tasks to many highly skilled people without sacrificing quality.
In other words, it gives you access to a global pool of talented people that you can hire on your team.
8. Buy a triplex or a fourplex
"I think that buying a small multifamily building with existing tenants in place and living in one of the vacant units is a great way to live affordably and build wealth over time," says Bill Samuel, Real Estate Expert and Owner of Blue Ladder Development.
If you purchase a small multifamily property (like a triplex or fourplex) then you'll be able to take advantage of the more favorable residential financing terms and you'll benefit from an accelerated depreciation schedule.
As mentioned in Realwealth, triplexes and fourplexes have lower property taxes than four separate single family rental properties, making them a profitable investment.
However, if you buy a multifamily property with existing tenants in place, you need to make sure you are doing the proper due diligence on the tenants before moving forward with the purchase.
Most importantly, you will want to know the current tenants payment history and if they had gone
through a professional screening process before the moved in (verifying their credit, criminal history, etc.).
You'll also want to verify if there is a lease in place and review the specific terms of the lease (such as pets allowed, late payment fees, security deposit submitted, etc.).
If there is a security deposit on file you will want to be sure to have this transferred to your escrow account on closing.
Or you can buy a triplex or fourplex and then rent out all the units except the one where you would live.
9. Generate passive income
"If you want to become a millionaire in 5 years, focus on generating passive income, in addition to your active income," says Christian Kjaer, CEO and Co-Founder of ElleVet Sciences.
Examples of passive income include investing in a real estate investment trust (REIT) and rental properties, renting out a parking space in a high-demand area, create one or more blogs and monetize them, building an online business, or turning your home into an Airbnb when you’re not there.
Real estate has one of the highest ROI when it comes to passive income.
An online business can help you generate a six or seven-figure passive income too, if you know what you're doing.
There are multiple avenues to choose from, depending on how involved you want to be.
The key to becoming a millionaire is to not rely on just one stream of income.
The wealthiest people tend to have multiple income streams.
10. Develop a millionaire mindset
As Leslie Radka, Founder of Great People Search mentions, it's essential to build a millionaire mindset in order to become a millionaire.
Because if you are starting your journey with a brilliant money mindset you can achieve your desired goals.
Maybe you will face some setbacks in the way but in the end you can definitely become a millionaire in 5 years.
Something that can help you develop a millionaire mindset is reading money and personal finance books.
11. Work smarter and harder than your competition
According to Adam Ng, CEO and Founder of Trusted Malaysia, something that can help you become a millionaire in 5 years is working harder and smarter than your competition.
Identify your competition. How hard are they working?
What are some points of difference you can bring to your industry?
Start by working smarter. There’s no use in working harder if your work isn’t effective at producing income.
There’s no sense in selling ice cream cones on your front lawn in the dead of winter. Instead, set up a booth at the park in the sizzling summertime – you get the idea.
Simple, commonsense tweaks can greatly improve your effectiveness.
Work harder and smarter than others. Do what others don't want to do.
12. Think backwards
Start thinking not only about how you can become a millionaire in 5 years, but also about what you actually need to get there.
Then, think about what you need to get what you need in order to get there. Sorry for the pun.
Let me give you an example.
Let's say that you want to make at least one million in five years.
You need to break down that goal into smaller goals.
And you know that to reach your main goal, you need to make $200K a year.
To do that, you could buy one property per year for less than 200K and then resell it at a higher price (200K or more each).
So you start working on a medium-term goal: making enough money every year to buy a property for less than $200K.
If you find a way to make enough money to buy a property each year and then resell it for approximately $200K-$220K, after five years you would have one million or more in your bank account.
Article originally published on Wealthendipity.
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