How To Become a Millionaire Using 10 Simple Strategies

Many set a goal to become a millionaire but fail to make the necessary habit changes to achieve the goal. While many believe millionaires are simply lucky, more often a millionaire's money is made through grit, “sweat equity,” and financial discipline.

Strategies to become a millionaire can be easy to replicate but will also require some time and effort. Let's take a look at 10 simple strategies to help the goal of becoming a millionaire a reality.

1. Create a Financial Plan 

Benjamin Franklin said, “If you fail to plan, you plan to fail.”

Successful people understand something that most people don’t: the long game. While most people look for a way to get rich quick, and in the process assume large amounts of risk that often ends in loss, successful people look for ways to achieve an asymmetric risk-reward relationship.

The concept here is that you want to assume the least amount of risk with a lopsided potential reward. For example, you wouldn’t want to risk $1,000 with a 50 percent probability of making $1 if there was an equal probability of losing your initial investment. But you would want to risk $1 with a 50 percent probability to make $1,000. This is asymmetric risk-reward.

Setting a plan to paper with your tolerance for risk, target returns, and other process-driven approaches to earning, investing, and saving can have a massive impact on your finances. 

Working with a financial planner is recommended for this stage because they can give you personalized strategies based on your current wealth, age, risk appetite, and more.

2. Do The Research

If you study the habits of millionaires and billionaires, you will find that many are voracious readers who enjoy the process of researching their respective fields. Warren Buffett, for example, famously reads for hours each day, including entire annual reports of the companies he invests in or is considering investing in.

There are hundreds of books on personal finance and investing that come recommended by the millionaires and billionaires that you aspire to be like. Perhaps you don’t have the time to read annual reports cover to cover, but this doesn’t mean you can’t effectively research investment strategies, opportunities, business ideas, or otherwise.

Resourcefulness is a quality many millionaires share. They learn early on that it’s important to leverage time to have the highest possible output. If you have a sizable commute each day, look for ways to fill the time with research opportunities, whether it be listening to a podcast or an audiobook, or reading on the train or bus.

3. Establish Equity Ownership 

There aren’t many millionaires, and fewer billionaires, who do not own equity in a business, real estate, or other investment opportunities.

Entrepreneurs start out by establishing what has been coined, “sweat equity,” so named from the level of hard work they invested in building the business and the subsequent value created. Most people are not entrepreneurs, but this doesn’t mean you can’t build equity.

When hiring, it’s a common negotiation tactic to offer options or shares in the business—depending on the stage of the company. If you ever have the opportunity to receive equity or options, it can be advantageous to vest those shares as the company grows. This gives you skin in the game, which will likely make you more passionate about your work and the success of the business.

Seek to become an owner, partner, or investor in all of your financial endeavors. If you buy a share on the public markets, you technically own a piece of that business’ equity and therefore should act like an owner, although remaining dispassionate if and when it comes time to sell.

4. Invest 

Millionaires and billionaires invest.

The studies of economics and finance each come equipped with a ton of variables and complexity. The academic side of these fields takes a static approach to teach how variables interact, but the real-world lessons of the market come from its volatility and the reality that the economy is never actually static.  

This is why it’s almost impossible to time the market, and the efficient market hypothesis (if you believe it) suggests there are few opportunities for finding mistakes in valuations, either overvalued or undervalued. But given a long-term investment strategy, economic markets have historically expanded over time and the probability of a continued global economic expansion is high.

Investing in a diversified basket of stocks and bonds, including index funds with low expense ratios, has traditionally been a successful strategy for minting millionaires and billionaires over the years and decades. 

5. Re-Invest 

Some investments generate income on a monthly, quarterly, or annual basis, in the form of dividends. It can feel like an extra paycheck that you should immediately withdraw and increase your personal spending. But this isn’t the millionaire approach. 

Until you’re ready to retire and have built your wealth to a point where the principal amount in your accounts can cover all of your living expenses, it’s beneficial to continue reinvesting your dividends. Reinvesting contributes to what Albert Einstein said was the most powerful force in the universe: compound interest. 

By reinvesting dividends you add to your principal investment balance, also known as your cost basis. This means you own more shares than before and you in-turn generate more growth and dividend income.

If you start with $1,000 and assume an income of 10 percent in the form of dividends, reinvesting your 10 percent dividend will compound over 50 years to a total of $106,719. If you withdraw your $100 return at the end of each year, you will make only $4,700 after 50 years. In this example, we use a 10 percent dividend to simplify the math and visualization, in reality, you may not receive a dividend as high as 10 percent.

Try our compound interest calculator to see for yourself.

6. Diversify Investments and Income Streams 

If most financial advisors agree that diversification is a beneficial strategy for portfolio management, why wouldn’t the same strategy work for other businesses and investments? 

Whether you’ve built your earnings and net worth based on active or passive income strategies, or a combination of both, you should look to diversify and differentiate your sources of income. The average successful entrepreneur has multiple sources of income. 

This ensures that if one stream of income suddenly erodes, it should only impact a percentage of the entrepreneurs’ income and not their entire revenue stream. Differentiation doesn’t necessarily mean you need to start multiple businesses simultaneously, but you should look for other opportunities to invest. It could mean investing in real estate, building a side-hustle business, investing in public equities, and more. 

7. Become Tax-Efficient 

Paying taxes is something that everyone must do, but all taxpayers aren’t created equal under the tax code. 

Some states don’t tax income, for example, while others tax various sources of income differently. Understanding how debt, equity, income, investments, charity, children, and more impact taxation is important when considering your return on investment. The difference between a 10 percent and a 37 percent tax bracket can severely impact your actualized returns. 

8. Rebalance Portfolio

In the macro-economic environment, it’s important to understand how cycles work. The billionaire investor and Philanthropist, Ray Dalio, has used his understanding of the economic machine to side-step financial crises throughout his career. 

Although it’s impossible to time the market, understanding when to rebalance one’s portfolio is an important part of a long-term value investing strategy. This is especially important as your risk tolerance changes throughout your investing career. For example, as you approach the age of retirement, you may be more interested in a liquid store of wealth versus Wall Street’s most popular momentum stock. Rebalancing can help you preserve wealth in the later stages of your life. 

9. Have a Conservative-Contrarian Mindset

A conservative-contrarian may seem like a contradiction. Conservatives are rigid in their beliefs and contrarians are open-minded. 

It’s important to be conservative in your appetite for risk, especially as you move closer to retirement, but be a contrarian in your investment thesis. Founder of the robo-advisor startup Wealthfront, Andy Rachleff has famously explained why you must be non-consensus and right to be successful. 

If everyone believes what you believe (there is general consensus) and you’re wrong, you lose. If everyone believes your investment thesis or business idea (consensus) and you’re right, the opportunity will be heavily exploited, and you’ll likely lose any advantages your idea had. If nobody believes your thesis (non-consensus) and you’re wrong, you lose. Only when you’re right in your thesis and contrarian (few people agree) will you win.

10. Work Hard 

There’s a famous quote by Colin Powell: “There are no secrets to success. It is the result of preparation, hard work, and learning from failure.” This reveals the truth behind what everyone perceives to be the root of financial success and what it actually takes to achieve.

Even in today’s business environment of fast-paced technological innovation, overnight success stories rarely happen as fast as people imagine. A lot of hard work goes into the development of technology before the general public is aware “overnight.”

Luck is certainly a component, but not the driving force behind acquiring your fortune. You can’t control luck but you can control how hard you work. It’s entirely up to you how hard you work to become a millionaire. 

Becoming a Millionaire

People have overcome unthinkable obstacles to achieve the millionaire moniker, and you can too. Understand that if the opportunity to “get rich quick” seems too good to be true, it likely is, and building wealth over time boils down to planning and discipline. 

When you experience an economic downturn, which most of us eventually will in our lives, don’t panic. Instead, understand that there are troughs and peaks in any journey, including your path to becoming a millionaire. Take the first step in your journey by truly understanding how debt works both for you and against you and opening a brokerage account to invest your money.