A Step By Step Process To Becoming a Self-Made Millionaire
By: Dustin Owen, CMB
The first step to being healthy, regardless of it being physical, mental or financial, is to recognize where you have been and acknowledging how you got there. This requires a long, hard look in the mirror and allowing yourself to be honest as well as vulnerable. For many of us, we think we know but we still need clarity. Therefore, we must embark on an exercise to monitor and track all of our spending for 60 days. (If we were discussing physical health, you would track what you ate and what you did for exercise.) Tracking your spending will allow you to put together a realistic budget. This is where you must start if becoming a millionaire is in your future.
The first step in creating a budget is to start by writing down how much your household brings in each month. (This would be your pay after taxes and cost of health benefits are subtracted.) Then, from studying your 60 days of spending, notate how much of what was spent is a non-negotiable (i.e. housing, car payment, basic food, utilities) and how much was discretionary spend (concert tickets, drinks at a bar, subscription services, new clothes etc.). The removal of discretionary spending will be key to your success. You now have the data you need to create and follow a realistic budget. By following a budget, you can formulate a plan to live a financially fit lifestyle that includes spending less than you take home and saving for retirement. Here is your step-by-step plan:
- Step 1: Spend less than you bring home. (If this is not possible, put yourself in a position to earn more money which could include a second job.)
- You should be able to achieve this in 60 days.
- Step 2: Establish a Reserve Account. By tracking your spending and focusing on bringing home more than you spend, you will have money left over each month. With this money, you will establish a reserve account that holds six months’ worth of your monthly budget. This is your rainy-day fund. You should never again need to use a credit card to bail you out of a financial jam. This reserve account should never hold less than 6-months of reserves for long. Meaning, if you dip into it because life threw you a curveball, your priority is to pay yourself back ASAP.
- This could take 3-9 months to achieve.
- Step 3: Pay off all credit card debt. Once your reserve account is full, focus of paying off all credit card debt.
- This could take 6 months, or it could take 24 months.
- Step 4: Begin to generate wealth via homeownership and retirement savings. Once you have achieved the above, start focusing on wealth generation and retirement savings.
- If you do not already own the home you live in, formulate a plan to purchase a home. This will be your #1 way to generate wealth.
- Enroll in your company’s 401k. Most companies offer a match to your savings. Think of this match as FREE money.
- Open a Roth IRA. This is another way to save for retirement.
- Step 5: Be a forever learner. Don’t be afraid to consult with a financial advisor. Read books. Attend workshops. This is a lifestyle to live and embrace. Things like picking stocks, trading crypto, flipping real estate etc. should only be considered once Steps 1 through 4 have been mastered.
Finally, trust the process. No one gets rich overnight by systematically contributing a few hundred dollars each month to a 401k or IRA. Same applies to owning your own home. Your home is not a get rich quick scheme. Those schemes don’t exist. However, over time, the compounding effects of living this financially fit lifestyle gives you the greatest chance of becoming a self-made millionaire. I know this because history tells me so. Research indicates this basic strategy is how the bulk of today’s millionaires generated their wealth. And now you can too. Just remember, it is a process. Think marathon and not a sprint.
