Do you want to become a millionaire? If you do, and you have some time until the date when you’ll reach your desired goal, then having a seven-figure nest egg is entirely within your reach.
In fact, if you just make four very simple moves, you stand a very high chance of becoming a millionaire by 2054. Just start doing these four things today, and you’ll be on the path to successfully hitting your goal.
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1. Open a retirement account
Investing is a key part of becoming a millionaire, unless you really make a lot of money (or win the lottery). You’d simply have to save too much money to become a millionaire if you don’t invest.
If you’re saving for retirement, you’ll likely want to open a tax-advantaged retirement account, such as a 401(k) or IRA, to put your money into. The ability to deduct your contributions from your taxable income can make it easier to save enough, since Uncle Sam helps out with a tax break.
You can use a 401(k) if your employer provides one, or open an IRA at any brokerage firm and contribute to it as long as you meet income limits.
2. Start investing $507 per month
The next step, if you want to become a millionaire by 2054, is to start investing around $507 a month. This is the amount you would need to hit millionaire status by this deadline, assuming you earn a 10% average annual return (which it’s reasonable to assume you can do).
If you happen to earn a higher return, you won’t need to have invested quite so much. But you don’t want to count on doing so, as a 10% average annual return is pretty consistently what the S&P 500 has produced for those invested over the long term. If you get lucky and earn more, you’ll just be even richer than planned.
Because of the S&P 500’s consistent performance over the long term, it’s also not very likely you’ll earn a much lower return than 10% if you invest over 30 years, although of course it is possible. If you do end up earning less than 10%, you may fall a little short of your millionaire goal, but you should still have a good nest egg.
3. Automate your contributions to your account
To make sure you get your contributions in, automate the process. If your employer withdraws 401(k) contributions right from your paycheck or you have money transferred directly from your bank account to your IRA as soon as your paycheck hits the account, you won’t have a chance to accidentally spend the money earmarked for achieving your millionaire goal.
4. Start dollar-cost averaging into an S&P 500 fund
Once your money is in your account, you’ll need to invest it. One of your best options is to choose a low-cost exchange-traded fund (ETF) that tracks the performance of the S&P 500. S&P funds usually have very low fees. and you’re likely to get those consistent returns.
Dollar-cost averaging in means you buy a set dollar amount worth of shares of your S&P 500 ETF at the same time each month. So, for example, you’d buy $507 worth of shares on the 2nd of every month.
If you do this, you don’t have to try to time the market to get your investments completed at the perfect moment. Sometimes you’ll buy at a higher price and sometimes a lower one, but you’ll end up buying more shares at the lower price simply because your $507 will stretch further during downtimes when shares are effectively on sale.
Of course, you can invest in other things — like shares of individual stocks — that might earn you a return higher than 10%. Doing this can be riskier, and require more attention and knowledge, though. If you just want a simple, straightforward path to millionaire status without a lot of investing skill, an S&P 500 fund is likely your best bet.
If you follow these four steps, becoming a millionaire by 2054 is the most likely outcome. So get started today.
