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6 Steps to Becoming a Millionaire
You don’t need a high-paying job or family money

By BARCLAY PALMER Updated September 23, 2023
Reviewed by MARGARET JAMES
Fact checked by YARILET PEREZ
You don't need a six-figure salary or a family trust fund to become a millionaire. Instead, you need to start saving early, stay out of debt, and be mindful of every dollar you spend.

Below are six steps to becoming a millionaire.

KEY TAKEAWAYS
Accumulating wealth requires starting early so you can take advantage of the power of compounding interest.
Keep your spending in check so that you'll have more money to save and invest and can reach your goal faster.
Max out your retirement fund contribution every year.

1. Start Saving Early
   The best way to build your savings is to start early. Doing so allows you take advantage of the power of compounding over the years.

Say you're 20 years old. If you contribute $6,000 to an individual retirement account (IRA) every year ($500 a month) for 40 years, your total investment would be $240,000.

But because of the power of compounding, your nest egg would be worth much more. Assuming a 7% return, it would total more than $1.37 million.

You'd be a millionaire by age 57, just by saving $500 a month. Granted, you'd rather be a millionaire by age 30. There's more to do.

1. Avoid Unnecessary Spending and Debt
   Stop buying things you don't need, especially if you're putting the purchases on a high-interest credit card. Before you buy, ask yourself the following:

"Is this something I really need?"
"Do I have something similar already?"
"Do I want this more than I want to become a millionaire?"
Every dollar you spend on something you don't need is one less dollar you can invest.

Here's a reality check: If you invest an extra $25 a week for 40 years, you will end up with an additional $277,693. Can you cut $25 of unnecessary spending out of your weekly budget?

Maybe, maybe not. But if you can, it will go a long way toward helping you reach your goal.

1. Save 15% of Your Income—or More
   The personal savings rate is the percentage of income left over after people spend money and pay taxes. That rate for Americans on average was 3.5% in July 2023, according to the Bureau of Economic Analysis (BEA).
   1

According to experts, that's not enough to save for a comfortable retirement, let alone for anyone aiming to become a millionaire.

Exactly how much should you save? Although there's no correct answer here, most financial planners say that, depending on your age, you should save at least 15% of your annual gross income just for retirement.

That figure is ambitious but not necessarily unattainable. If your employer matches contributions of up to 6% of your salary in your 401(k) plan, you need to save only 9%.

1. Make More Money
   Granted, this is easier said than done. If you don't make enough to stash 15% of your income, it will be difficult to become a millionaire.

You do have a few options available to you, including:

Asking for a pay increase (if you think you're due for one)
Working extra hours
Getting a second job
Getting training to increase your earnings potential
Additional training pays off the most in the long run.

Let's say you're a licensed practical nurse (LPN). The median income for LPNs was $54,620 per year in 2022.
2
Registered nurses (RNs), on the other hand, earn about $81,220 a year.

It takes one to three years more education to qualify to be an RN.
3
But that extra money every year can really help you reach your financial goals—especially if one of them is to become a millionaire.

1. Don't Give in to Lifestyle Inflation
   Lifestyle inflation is a common consequence of career advancement. You spend more money just because you have more to spend.

You may decide that your apartment is too small, and you need a house in the suburbs. You realize that you can come up with a down payment for a much fancier car. Your vacation plans get more ambitious and expensive.

If you want to become a millionaire, resist the urge to give in to lifestyle inflation. Instead of spending more—just because you can—save and invest more. You'll reach your financial goals a lot faster.

22%
The percentage of people who say they're "very confident" that t hey're doing a good job of preparing for retirement, according to the 2023 Retirement Confidence Survey.
4

1. Get Help If You Need It
   Planning for retirement can be stressful, partly because of all the investment options available, not to mention the unknowns that await you. Only 18% of Americans in one survey said they're very confident that they will be able to retire in comfort.
   5

Unless you're a financial rock star, it's worth the money to work with a qualified financial advisor to come up with a personalized and workable retirement plan. An advisor can help you choose investments, set up a budget, and make plans to reach your goals. And once you're ready to start spending some of that money, they can help you make it last.

Maximizing Your Retirement Savings
Here's a quick look at how retirement savings accounts can help you reach your goals:

401(k), 403(b), and Other Employer-Sponsored Retirement Plans
If you have a regular job with benefits, you probably can have an employer-sponsored retirement plan such as a 401(k) or a 403(b). About 69% of private company employees, and 92% of government workers, now have access to one of these plans.
6

The combination of tax advantages and easy payroll deductibility make these the best retirement savings vehicles available to workers. Better yet, many employers match a portion of the employee's contribution, jump-starting your account's earnings potential.

You can deduct your contributions, up to an annual limit, and the earnings in the account grow tax-deferred if it is a traditional 401(k) account rather than a Roth account.

For the 2023 tax year, the maximum contribution is $22,500, increasing to $30,000 if you're age 50 or older.
7

Traditional and Roth IRAs
People who are self-employed or are freelancers can open retirement accounts on their own. They are available at almost any bank or brokerage.

The big choice is between a traditional or Roth IRA. The major difference between the two IRAs is when the taxes are due on the income deposited.

If it's a traditional IRA, you deduct your contributions the year you make them, up to a maximum per year. You pay taxes when you withdraw the money in retirement.
8
If it's a Roth IRA, you pay the income taxes owed in the same year during which you deposit the money in the account. But qualified withdrawals in retirement are tax-free.
8
No matter which type of IRA you have, the contribution limit is the same. For 2023, you can contribute up to a total of $6,500 (or $7,500 if you're 50 or older).
9

Beyond that, the choice is yours. Any bank or brokerage firm will give you access to a wide range of retirement funds that you can use to build your nest egg.
Simplified Employee Pension (SEP) and SIMPLE IRAs
The SIMPLE IRA is a tax-favored retirement plan that certain small employers, including the self-employed, can set up for the benefit of themselves and their employees.
10

SEP IRAs can be established by the self-employed and by those who have a few employees in a small business. The SEP lets you make contributions to an IRA on behalf of yourself and your employees.

Both SEP and SIMPLE IRAs are popular with small business people because they're easy to set up, require little paperwork, and allow investment earnings to grow tax-deferred.
10
11

For 2023, you can put away as much as $66,000 in a SEP IRA or $15,500 in a SIMPLE IRA.
12
13

Taxable brokerage accounts provide a way to invest additional funds after you max out your retirement accounts. Be aware that you need to pay taxes on the income generated in these accounts in the year you receive it.
14

Example of Retirement Account Growth
If you start early and save regularly, you can make a million dollars or more by contributing to your retirement savings accounts. To take full advantage, try to contribute the maximum limit.

For example, let's consider Joe, who wants to reach the $1 million mark by the time he retires at age 67. Let's assume Joe:

Is single and age 33
Makes $50,000 per year
Has a 401(k) plan with a 5% employer match
Saves $4,000 a year in a Roth IRA
We'll assume his investments have a 7% return.

Joe takes full advantage of the employer match and defers 5%, or $2,500, of his salary each year. His employer contributes $2,500 each year as the match. Of course, in real life, he'd probably get raises over the years, but for the purposes of this example we'll assume his salary remains the same for decades.

Here's the breakdown of his savings over the 34 years.

401(k)  Roth IRA

Annual Contribution $5,000 $4,000
Rate of Return 7% for 34 years 7% for 34 years
Balance at Retirement $686,184 $548,948
That's a grand total of $1,235,132. Welcome to the Millionaire Club, Joe!

If he had started his plan at a younger or older age, here's what his results would look like:

Starting Age Annual Investment Annual Return Value at age 67
25 $9,000 7% $2,220,988
30 $9,000 7% $1,544,049
35 $9,000 7% $1,061,401
40 $9,000 7% $717,279
45 $9,000 7% $471,925
50 $9,000 7% $296,991
55 $9,000 7% $172,266
What Is the Easiest Way to Become a Millionaire?
The easiest way to become a millionaire is to take advantage of compounding by starting to save money as early in your working life as possible. The earlier you save, the more interest you accumulate. And you'll earn more money on the interest you earn. That's the power of compounding interest.

You should aim for at least 15% of your income.

You can also reach your million-dollar goal by cutting down on unnecessary spending and getting financial advice from a professional.

If you're able to, consider upgrading your work skills or getting a second job.

How Much Do I Need to Invest to Become a Millionaire?
The amount you'll need to invest to become a millionaire depends on where you are in your life. When you're young, you may make less money but you have more time to accumulate wealth and you can tolerate more risk in your investing choices. If you put off saving until you're older, you'll have to put away more money every month to get the same results.

How Can I Get Rich With No Money?
Unless you come from a very wealthy family or win the lottery, there's little chance of becoming rich by doing nothing. You'll need discipline, a plan, and, if necessary, good advice from a registered professional who can help push you in the right direction to reach your goal of becoming a millionaire.

The Bottom Line
How much wealth you accumulate depends on how well your investments do. At younger ages, you have the time to be a little riskier with your investments and seek out choices that have the potential to get you a higher return.

That means not putting much of your money in low-earning certificates of deposit (CDs) and money-market investments. Instead, you should consider choices like equities to achieve returns that exceed the rate of inflation and grow your savings.

The key is to start while you're young, stay disciplined, and make and keep a long-term financial plan. You'll be pleased with the long-term results. Making your first million won't be easy—but it's not impossible.

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ARTICLE SOURCES
PART OF
Retirement Planning Guide
5 Retirement Planning Steps to Take1 of 34
How Much Do I Need to Save to Retire?2 of 34
Will Your Retirement Income Be Enough?3 of 34
How to Retire Early4 of 34
6 Steps to Becoming a Millionaire5 of 34
Retirement Planner6 of 34
Financial Independence, Retire Early (FIRE) Explained: How It Works7 of 34
Best Places to Retire on Earth8 of 34
The Best Retirement Plans to Build Your Nest Egg9 of 34
401(k) Tax Benefits and Advantages10 of 34
How to Get the Most Out of Your 401(k) Plan11 of 34
Traditional vs. Roth vs. SEP IRA: Differences?12 of 34
Understanding a Traditional IRA vs. Other Retirement Accounts13 of 34
Best IRA Accounts14 of 34
Best Roth IRA Accounts15 of 34
9 Things You May Not Know About Your IRA16 of 34
How Does a Simplified Employee Pension (SEP) IRA Work?17 of 34
Thrift Savings Plan (TSP): How It Works and Investments18 of 34
Tips for Successful Retirement Investing19 of 34
How to Build an Investment Portfolio for Retirement20 of 34
How to Save for Retirement Without a 401(K)21 of 34
Laddering: Meaning, Overview, Examples, FAQ22 of 34
Annuities vs. Bonds: What's the Difference?23 of 34
How to Invest at Every Age24 of 34
Retirement Savings Tips for 25- to 34-Year-Olds25 of 34
Retirement Savings Tips for 35-to-44-Year-Olds26 of 34
Retirement Savings Tips for Individuals 45–54 Years Old27 of 34
Top Retirement Savings Tips for 55-to-64-Year-Olds28 of 34
Tax-Deferred vs. Tax-Exempt Retirement Accounts29 of 34
Tax Strategies for Your Retirement Income30 of 34
10 Ways to Reduce Your 401(k) Taxes This Year31 of 34
Special Government Help for Your Retirement32 of 34
When a 401(k) Hardship Withdrawal Makes Sense33 of 34
Required Minimum Distribution (RMD): Definition and Calculation34 of 34
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Related Terms
What Is Retirement Planning? Steps, Stages, and What to Consider
Retirement planning helps determine retirement income goals, risk tolerance, and the actions and decisions necessary to achieve those goals. more
Individual Retirement Account (IRA): What It Is, 4 Types
An individual retirement account (IRA) is a long-term savings plan with tax advantages that taxpayers can use to plan for retirement. more
What Is a Roth 401(k)?
A Roth 401(k) is an employer-sponsored retirement savings account that is funded with post-tax money. Withdrawals in retirement are tax-free. more
Understanding a Traditional IRA vs. Other Retirement Accounts
A traditional IRA allows individuals to direct pre-tax income toward investments that can grow tax-deferred. more
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