Personal Finance 101: How to Think & Invest Like a Millionaire

As the popular American game show coined, “Who wants to be a millionaire?” Easy answer — everyone!

Unfortunately, becoming a millionaire is not as simple as snapping your fingers or answering trivia questions. It requires hard work and dedication, and above all, a healthy mindset. You may think becoming a millionaire is not in the cards for you because of where you came from or your family’s financial situation, but this is not the case — becoming a millionaire is attainable and depends solely on you.

If you’re determined, hard-working, and have a healthy money mindset, you’re off to a great start. In this article, you’ll find a few easy steps you can take to start on the road to gaining a millionaire mindset. From investing in small businesses to investing in the stock market and real estate, here’s what you need to know to become a millionaire.

Getting Started with Your Millionaire Mindset

There are many ways you can start your journey to becoming a millionaire, but here are two essential steps to do before anything else.

Avoid Debt

Sometimes debt is unavoidable, and that’s okay. Things pop up in life that may require a loan if you do not have enough savings — this isn’t the end of the world! The key takeaway here is to pay back that debt as soon as possible. Avoid borrowing so much money that you struggle to reach your financial goals and borrow only what you need. 

An excellent example to use here is a car payment. According to recent data, the average car payment is around $575, with a term of just over five years. Imagine you took $500 and invested it for five years instead. You could have $40,000 in your bank account by the end of that period. If you took this $40,000 and invested it for 20 more years, you could have just shy of $300,000! That’s a quarter of the way to becoming a millionaire just by substituting that shiny new car for a used one.

Prioritize Your Savings

What if you want to start investing, but you have no spare income to begin? After all, the bigger the initial investment, the bigger the eventual return. Therefore, it’s best to start investing when you have some spare money to use.

A great way to start saving your income is by cutting out unnecessary spending. This will be much easier if you already have a budget, but you can start by gauging which expenses are essential and which are not. For example, many people waste money every month by keeping subscriptions active that they never use. Music streaming services, expensive gym memberships, subscription boxes — are these genuinely essential to your wellbeing? Or, could you invest that money into more essential items or work on paying off any debt?

Dining at restaurants is also a big reason many people struggle to put money into their savings. Many financial advisors recommend going an entire month without eating at a restaurant or stopping for that coffee on your commute to work. If you are successful, you will likely be surprised at how much money you saved by not going out to eat!

Dining at restaurants is also a big reason many people struggle to put money into their savings.

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In some instances, these small changes may not be enough to really make an impact on your savings account. If that’s the case, there may be some more extreme options for you to consider, if applicable to your situation. Downsizing to a smaller house with cheaper utilities could be a viable option, or even relocating to a different city with a lower cost of living. You would be shocked to find out how varied the cost of living can be between some cities!

Again, saving more money always starts with small, simple changes. As you let go of unneeded expenses, don’t do it from a place of scarcity — instead, think about all the new abundance you are welcoming into your life through this change! 

How to Start Investing in CDs and Stocks

Investment will look different for everyone depending on their situation. A person close to retirement with a healthy amount of savings will have different investment options than someone just starting their career without any savings. For this reason, most financial advisors recommend you have at least six months of living expenses stored in your savings account before investing in anything riskier than a high-yield savings account.

What Are Certificates of Deposit (CDs)?

Certificates of deposit are a type of savings account that offer a fixed interest rate over a concrete time window. The risk of a CD comes with the penalties for withdrawing your money early, so it is essential that you do not need this money at any point before the scheduled time to withdraw. The purpose of a CD is to safely grow your money for a period of three to five years. CDs are generally used in preparation for big purchases such as a down payment on a house, so if you’re saving up for a purchase (or perhaps a bigger investment) and you already have a healthy savings account, this could be a viable option for you.

How Do I Start Investing in Stocks?

On the other end of the investment spectrum are stocks. Stocks represent a share of ownership in a company and generally have the biggest return on investment. A good return on investment is usually anywhere at or above 10% per year. 

Unfortunately, stocks also expose your money to the greatest amount of risk at the same time. To minimize the risk, advisors usually recommend you spread out your investments across multiple stocks — this is called diversifying your portfolio. A good start to begin diversifying your portfolio is to invest in mutual funds. These allow you to familiarize yourself with the stock market and how it works before making any riskier investments.

How to Start Investing in Real Estate

When you think of investing in real estate, you may think of buying a property and selling it later for profit or renting it for fixed income. Though this is certainly the more traditional approach to real estate investment, it isn’t the only one. There are ways for you to invest in real estate without owning any physical property — that’s far less intimidating than purchasing an apartment building!

What Is House Hacking?

House hacking refers to renting out a property that you currently live in. This can be the three other rooms in your four-bedroom house, or it can be renting out the other apartments in a building you own. 

House hacking can be an easy way to step into real estate for people who have never rented out a property before. Keep an eye out for cheap properties available to buy in your area with combined expenses lower than what you can charge in rent. If possible, it could be a wise move to purchase that property and start house hacking.

What Are Real Estate Investment Trusts (REITs)? 

Real estate investment trusts (REITs) are a way to invest in real estate without physical property. REITs offer high dividends, so they are particularly popular with retirees who depend on this fixed income. If you don’t need the income, you can always reinvest the dividends to further grow your investment. REITs can be complex and are not easily sold for cash, so it is best to invest with money that you will not need to use any time soon. Even if you are an experienced investor, it may be in your best interest to consult with an advisor before making any real estate investments.

How to Stay in the Millionaire Mindset

Of course, before investing in stocks, mutual funds, or real estate, you need to get in the right mental space. Reaching your goal of becoming a millionaire will be nearly impossible if you aren’t affirming your goals and striving for progress every day. There are many factors at play in achieving a millionaire mindset, all of which rely on you maintaining a positive outlook.

Focus on Your Goals and Practice Gratitude

Did you know that according to a recent poll, 49% of millennials said they were influenced by social media when it comes to how to spend their money? Are you letting social media (or other outside sources) dictate how you spend your money? Since it’s integrated into almost everyone’s lives these days, social media isn’t always possible to avoid. 

If you find yourself comparing yourself to someone else who has “more” than you. A great way to steer yourself away from jealousy (and spending money on unnecessary things as a result) is to make a mental list of all the things you already have in your life. This may come off as a cliche, but taking inventory of what you’re thankful for can really put into perspective what you need to spend your money on and help you stay hyper-focused on goals that matter! 

Repeat Your Plan

This is an important step and will get more complicated with time. Year after year, you must check in with yourself and figure out what is working and what isn’t. Are you working towards erasing your debt? Have you put enough into your savings account to cover six months’ worth of living expenses? Are you still spending too much money on expenses that aren’t necessary? Go over your plan with yourself from the beginning, and consider what needs to be changed and what is getting positive results. 

Hustle Hustle Hustle!

It isn’t that most people aren’t millionaires because they don’t know how to become one — it’s because they are unwilling to make the hard decisions necessary to reach that goal. Most millionaires became who they are by putting in the hard work and making the sacrifices necessary to reach their goals. 

Do you have enough spare time to take a second job? Are there more job opportunities in another city? Should you be waking up an hour earlier each day to get a more productive start?  You must be willing to make sacrifices to put your millionaire mindset into action. 

Becoming a Millionaire Isn’t Easy, But It Is Possible for You!

Don’t feel overwhelmed — developing a millionaire mindset isn’t an easy task to accomplish. You may have a long road ahead of you, but your ambition and hard work are what’s going to take you all the way to becoming a millionaire! Stay focused, and greatness will follow!