Many people foolishly believe that the only way they’ll become a millionaire is if they hit the lottery. However, you need to put your dollar and a dream to better use. Instead of gambling your money away, use some tried and true methods to grow your wealth.
Choose a high-paying major while in college
Some degrees have more earning potential than others. Therefore, it’s important to choose a major that’s known to pay well right out of college. This will at least get you moving in the right direction. According to PayScale, if you’re pursuing a bachelor’s degree, three of the best majors are Petroleum Engineering, Operations Research & Industrial Engineering and Actuarial Mathematics. Here’s a comparison of what you’ll make early in your career (0-5 years’ experience) versus mid-career (10+ years’ experience).
- Petroleum Engineering – $82,700 (early career), $183,600 (mid-career)
- Operations Research & Industrial Engineering – $79,600 (early career), $166,300 (mid-career)
- Actuarial Mathematics – $54,700 (early career), $158,100 (mid-career)
Get free money from your employer
Not everyone is able to save a million dollars on their own. Fortunately, you probably don’t have to. If your job offers a 401k or a similar employer-sponsored plan, enroll and start contributing immediately. This needs to be high on your priority list because most employers offer to match a percentage of your contributions. It’s free money and you’d be crazy to turn it down. Your 401k contributions will grow tax-free until you’re ready to withdraw the cash at age 59 1/2.
Monitor your credit
At some point, you’re going to want to apply for a loan or credit card and when you do, you’ll want to get the best interest rates. This will require you to have good credit. You can easily put yourself in a good position by always paying your bills on time and keeping your balance low. Try not to open too many lines of credit at a rapid pace either. Keep track of your progress by checking your credit report annually. You’re entitled to a free copy from Experian, TransUnion and Equifax every 12 months. Many credit card companies also supply your FICO score for free along with your monthly statement.
Begin investing early
As soon as you start earning a paycheck, you need to start investing for your future. Aim to save at least 10-15 percent of your income for retirement, more if you can afford it. Retirement may be decades away, but you need to use the time wisely. By starting early, your money will be able to reap the benefits of compound interest.
Earn the salary you deserve
Sometimes we’re just so happy to have a stable job that we don’t think to question if we’re being paid what we deserve. Do a little digging to find out the going rate for similar positions in your area. Pay attention to the job descriptions to ensure these are things you actually do on a daily basis. If you find that you’re being underpaid, come up with a list of reasons why you think you deserve a raise then talk to your boss. If you’re unsuccessful and it’s a big pay difference, consider changing jobs.
Find ways to earn additional income
Chances are your regular 9-5 won’t make you enough money to get where you’re trying to go. Therefore, you’re going to need a side gig to earn additional income. You can drive for Lyft, deliver packages for Amazon Flex, become an Instacart shopper or do freelance work. Just be sure to pick something that doesn’t feel like torture, so you won’t quit.
Know how much money you make and where it’s going
On your journey to a seven-figure bank account, a budget is going to be your best friend. You need to know how much money you have coming in and where every penny goes. By staying on top of your spending, you can pinpoint budget leaks and seal them before it gets out of control. If you need help getting started, check out our post “Which budgeting method is right for you?”.
Spend a lot less than you can afford
The smart thing to do when you get extra money is to increase your savings. However, many people are guilty of increasing their spending instead. You get a raise and start thinking you need a more expensive car, bigger apartment and fancier clothes, but you don’t. Make it a point to live on less than you can afford for as long as possible. Keep your eye on the prize and save every penny you can.
Minimize your tax bill
You know the drill, if you earn money Uncle Sam wants his cut. An easy way to minimize your taxes is to contribute to tax-deferred accounts. Aim to max out your 401K. For 2019, the contribution limit is $19,000. For those 50 or older, the catch-up contribution limit is $6,000. Another option is to take advantage of an Individual Retirement Account (IRA). For 2019, you can contribute up to $6,000. The catch-up contribution limit for those 50 or older is $1,000. Finally, you can contribute to a Health Savings Account (HSA). In 2019, the contribution limit is $3,500 for single coverage and $7,000 for family coverage. If you’re 55 or older, you can contribute an extra $1,000. When you’re ready to do your taxes, use ezTaxReturn and get the biggest possible refund, guaranteed. Then put that money toward your millionaire dream.