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Ever wondered how to become a millionaire in the UK?
I know I have, many times. It used to seem like a rather impossible dream, but now I understand how it’s done. I now understand it’s not impossible, but achievable.
Learning how to make a million pounds?
It’s a funny thing isn’t it, the way that title just seems so, well…spammy. You read it and it brings some hope that maybe you CAN make a million, because the given train of thought is that you CAN’T make a million pounds.
I’m here to tell you it’s not impossible. Not only is it not impossible, it’s entirely POSSIBLE! It’s not even hard. Making a million pounds is not some sort of crazy idea that surely MUST require some secret magic!
I promise you, anyone can make a million pounds….and all it takes is a little know how, a lot of dedication and some serious staying power.
What IS hard (for most of us, anyway!) is making a million pounds in some get rich quick scheme (has anyone, ever, anywhere, got rich quick using one of those schemes!?). That’s not what this is about. This is about making choices that allow you to *save* a million pounds.
Read on, I’m going to lay it all out for you and then afterwards, you either make the choice to find financial freedom or not to. But at least you’ll know it’s possible, and within your reach.
I started to get interested in the whole ‘financial freedom’ thing about 3 years ago. At the time we were not in the healthiest place with our finances, although we appeared to have plenty coming in. It seems insane to me now, but at the time I just didn’t see things for what they actually were. And what they actually were, were terrible financial choices that meant we were always paying back money we’d borrowed, always chasing our tails, treading water trying to stay afloat.
It was exhausting, worrying and I couldn’t see a way out.
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Daily habits of millionaires
Before we go on, I wanted to share with you some statistics, a couple of which I found really surprising:
- Millionaires make a budget and stick to it – The Millionaire Next Door authors Thomas Stanley and William Danko found that even after becoming wealthy, millionaires still kept to a budget, and often refused to budge!
- They DIDN’t get rich quick – getting rich quick is not something the majority of millionaires did. American entrepreneur Gary Vaynerchuk makes the point that no one gets truly wealthy without some SERIOUS work
- They know when to take a holiday – what a shocker….I thought they must work ALL the time! Turns out they don’t, they know when to stop and take a breath…making them WAY more productive when they get back to it!
- Millionaires make goals – having a goal makes it 78% more likely that you’ll achieve it. That’s huge. Millionaires put timelines on their goals and then plan them out
- Bankruptcy – the average millionaire goes bankrupt 3.5 times before they eventually succeed (hopefully not something I’m looking at!)
- Millionaires don’t carry credit card debt – It’s probably not too much of a surprise that the rich don’t carry a credit card balance
I suppose what this tells us is that it’s all about the decisions we make, and it seems that financially successful people are making the same sort of choices.
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How to become a millionaire from nothing
It’s a commonly held belief that in order to become a millionaire, you have to have one of two things: a super high income, or come from a wealthy family who have helped you out. Neither of these are true. Over 80% of millionaires did not inherit ANY wealth previous to making their own money, and their super high income came AFTER they’d set the wealth wheels in motion, so to speak!
What does this mean for then rest of us? It means that whilst it’s not strictly true to say you can become a millionaire from nothing, you really don’t need anything more than a job…a regular income…and a plan!
So…if you don’t need a high income or family money behind you, then what IS the plan to make a million? Read on…
The way to make a million pounds is something that is quite simple. The first thing you need to make sure of is that you have an income. After that, it requires just two things:
- Spend less than you earn
- Earn more than you spend
You spotted it right? They’re the same thing….the point here is that you need to find some spare income each month to invest. For me, I used both these ways of looking at your income to increase our monthly take home money.
Firstly, I cut right back on most things we used to spend money on. You can read about that here. Secondly, I did anything and everything I could to bring in extra cash each month, which went straight to pay our debts. Some of the ways I did that, you can read about here.
The most important thing here is that you need to create some extra cash. So what are you going to do with all that extra cash? And how on earth is it going to turn into a million pounds?
How much you need to invest monthly to become a millionaire
How much you need to invest monthly to become a millionaire depends almost entirely on how many years there are until you want to be able to take an income from the invested money.
For example/ say I want to retire in 10 years, I’m going to have to invest way more than someone who’s 20 years younger and has 20 years longer than I do to let their money grow.
This is the nature of compounding. Compounding works well over a fairly short period of time, but it works REALLY well over a longer period.
Bare in mind that I choose to invest in an index….you need to get all the information in front of you, and make the best decision for you. There is a great guide here that explains index funds way better than I could, have a read if you need a better understanding of index fund investing.
I’ll tell you now that I have zero expertise on investing or the stock market or anything remotely related to it. That’s why I invest with an index fund.
To give you an idea of how much you need to be putting away each month, have a look at the table below.
It’s based on a monthly saving of £1000. Sounds like a lot huh? Keep reading!
Looking at this chart, you can see that by saving £1000 per month, you really need a longer period of time and a higher interest rate to be hitting that 1 Million Pound goal. Why? Because the brutal truth is that putting away £1000 a month, towards your dream of financial freedom is not actually that much.
This is where we need to ramp things up a little, and find out where this £1000 is going to come from in the first place and if you need to be saving more, where you can get that from too!
Finding £1000 a month
Remember earlier we said financial freedom is all about choices? Now it’s time to make those choices!
Here are a few ways you could find £1000 a month you don’t think you have:
- Pay off your debts – this is the fastest way to free up money each month to put towards your savings goals. A couple of loans and a credit card might be eating up £500 of your monthly income. That’s money that could be going towards financial freedom.
- Save on grocery shopping – think this can’t make that much of a difference? The average UK household spends £91 weekly on food (source). Saving just 20% of this cost, means an annual saving of £946.40. That’s almost one month of your saving goal taken care of!
- Get a side hustle – find a side hustle and stick with it. Need a couple of hundred pounds more to get to your savings goals? The world is at your feet if you’ve got an internet connection.
Have a read through these posts if you need some inspiration to get a side hustle started:
My plan for becoming a millionaire
Every millionaire has a plan right? I’m definitely not a millionaire right now, but do I plan on being one? You bet I do!
1) clear my debts
Problem number one for us was debt. We had a pretty huge amount of debt. It HAD to go. There is zero point in starting any wealth creation strategy until you’ve cleared your debts.
It’s quite a daunting issue, finally coming face to face with your debts. It’s scary, it’s pretty un-nerving and frankly, it’s way easier not to do it. But…if you want to get started on your way to a million, it’s something that needs to be addressed, ASAP.
Have a read through these posts if you’re in debt and have no idea how to get out. It needs 100% focus to get out of debt fast, but it can be done!
- We used Dave Ramseys Baby steps to get out of debt, read about them here
- Using cash envelopes to budget helped us HUGELY
- Creating a budget that worked specifically for our family was key
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2) create savings each month
Every single month, we go through our expenses to check that we’re not overpaying for something dull that we could get cheaper. Who wants to over pay a utility bill when that money could be going towards something you’re actually going to get some enjoyment out of.
Creating savings for us means:
- Meal planning – do you meal plan? If you don’t, it’s likely you’re spending more than you need to be in the supermarket. The food shopping, after our mortgage, used to be our biggest expense. Now, it’s still a substantial bill each month, but no where near where it used to be.
- Finding bargains – bargains are great, but make sure it’s something you actually need. It’s not a bargain if you weren’t going to buy it in the first place! Shop around, check online for prices before you commit to buying something. Make sure you’re paying the lowest possible price for the things you buy.
- Using vouchers – there are vouchers for so many things these days. I actually set up a separate email to subscribe to websites I didn’t want to use my personal email address for. Some of the sites I used included:
- Living social – great for discounted treats (we all need these occasionally!)
- Money Saving Expert – not a discount site of course, but the forums often have awesome deals I couldn’t find anywhere else.
- Money saving apps for the food shop – these do not save you huge amounts of money, but every penny counts right?
3) get smarter with my money
We’ve established that you don’t have to be a high earner to make a million pounds, right? It’s true…you don’t. However, that said, you also cannot keep spending like you might do if you weren’t saving up a million pounds.
You need to get smarter with your cash. Some of the things I was forced to get real about include:
- Our lease car – we had a £300 monthly car payment, for a car we would never own. Ouch. I did like it a lot, but I prefer the thought of being a millionaire
- Quick evening trips to the supermarket – these were a terrible habit and I’m glad I reigned them in. I hate to think about how much they added up to.
I guess we all have some habits we could stop. It’s all about choices.
4) investing the money I’m saving each month
We set up a direct debit to invest our saved money each month on the same day as payday. I do not even see the money in my account, and so I do not have to see my balance go down when it leaves.
You will have set up the amount you want to invest each month, based on when you want to retire or at least be financially free, so you know how much is coming out.
And really, that’s all there is to it:
- Clear your debts
- Spend less than you earn or earn more than you spend
- Get smart with your money
- Invest your savings
Writing this post makes the task of saving up one million pounds sound easy, but you know what? It’s not really that hard! I honestly believe we tell ourselves that it cannot be done because it’s easier than facing our spending habits and perhaps admitting to ourselves that we need to change.
I can tell you from the heart, I never thought I’d be able to get into the mindset where I believed this was at all possible. I couldn’t even imagine a time when we would be debt free. And I know from experience that when you’re right at the start of your journey, the road ahead looks long.
So I’ll leave you with this. Here are some other things that have happened in my life that I couldn’t ever have imagined happening:
- Meeting Mr.Right – it happened
- My kids growing up and not needing me like they used to – it happened
- Paying off our debts and becoming debt free – it happened
And if they happened…..then why can’t this?
Some other posts you might like from Debt Free Family