3 Financial Habits That Could Eventually Make You a Millionaire

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Hoping to become a millionaire in your lifetime? Read on to see how. 

A good 5.3 million Americans are millionaires, according to research from The Ascent. And while you might assume that the majority of those millionaires were born into wealth, that’s not necessarily true.

Many people reach millionaire status by embarking on successful careers or bringing innovative business ideas to life. And if your goal is to eventually become a millionaire, here are some important habits worth upholding.

1. Sticking to a budget

The idea of following a budget may not exactly thrill you. But if your goal is to build a lot of wealth over time, then it’s important to know exactly where your money is going month after month. And sticking to a budget could make that possible.

Just as importantly, by following a budget, you might lessen your chances of overspending. That, in turn, could free up cash you can put to work.

If you’ve never really budgeted before, you should know that it’s not rocket science. You can keep things simple by creating a spreadsheet on your laptop that accounts for your various expenses. All you then need to do is make sure you’re not spending your entire paycheck every month. There are also budgeting apps you can use to make the process easier.

2. Avoiding high-interest debt

You might assume that carrying the occasional credit card balance forward is no big deal. But actually, unless you happen to have a 0% interest rate credit card, carrying a balance for even a short period of time could result in losing a lot of money.

That’s money you can’t grow into more money via investments to become a millionaire. And so it’s really best to do what you can to avoid racking up credit card debt. (Hint: Budgeting can help with that.)

3. Investing money you don’t need for near-term needs or goals

If you have money earmarked for things like emergency expenses, that cash belongs in a savings account. The same holds true for funds you might need within a few years, like the cash you’ve been stashing away for a home purchase. But if you have money beyond that, investing it could be your ticket to becoming a millionaire.

The stock market has delivered an average annual 10% return over the past 50 years (before inflation), as measured by the S&P 500 index’s performance. So, let’s say you budget carefully, avoid debt, and manage to invest $200 a month over a 40-year period of time. If your portfolio generates an average annual 10% return during that time, you’ll end up with just over $1 million to your name. Make it $500 a month, and you’ll be looking at over $2.6 million.

And if you’re worried you won’t manage to find investments that lead to a $1 million portfolio, here’s a tip: Consider putting your money into a low-cost S&P 500 ETF. It’s a simple way to effectively invest in the broad market, which also means you get to maintain a nice, diversified portfolio without doing a ton of legwork.

You don’t need to grow up in a mansion or invent the next Tesla to become a millionaire. You just need to uphold a few solid habits that, over time, can allow you to meet your financial goals.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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