4 Money Rules to Follow if You Want to Be a Millionaire

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Becoming a millionaire doesn’t have to be difficult. Following these guidelines can help set you on the path to a seven-figure net worth. 

If you want to become a millionaire, you need to make smart money choices. After all, amassing a seven-figure nest egg in your bank accounts and brokerage accounts is going to take some financial savvy.

The good news is, if you follow four simple money rules, you’ll be well on your way to achieving millionaire status.

1. Keep your fixed costs low

One of the first key rules to follow if you want to become a millionaire is not to overcommit yourself. If you sign up to have huge monthly payments consistently coming out of your checking account, you aren’t going to have the money you need to grow your net worth.

Fixed costs include things like housing, car payments, and other ongoing expenses you must pay month after month. Once you commit to spending this money, you have restricted your future self from making the kinds of smart choices needed to build wealth.

2. Don’t buy things to impress others

If you want to become a millionaire, it’s important not to spend money on things you don’t personally value. Especially as some of these things, like luxury goods or fancy cars, tend to be overpriced and don’t increase your wealth.

To be clear, if there is something you personally love and it’s within your budget to buy it without jeopardizing your other financial goals, then there’s nothing wrong with doing that. But chasing status isn’t going to make you actually rich — it is just going to make you look rich while you ultimately fall behind in your efforts to become wealthy.

3. Invest early and regularly

If you truly want to become a millionaire, investing is one of the most important things you have to do. This is what you should be doing with the money you haven’t over-committed to fixed expenses or used to buy things that impress others.

When you invest, compound growth helps you build wealth. This happens when returns you earn are reinvested so you become richer without any effort on your part. In fact, investing just $189 a month every month over 40 years is enough to make you a millionaire even if you do nothing else (assuming you earn 10% average annual returns). If you want to become a millionaire sooner than that, you simply have to increase the amount you’re investing.

4. Avoid bad debt

Finally, the last key thing to do to become a millionaire is to avoid going into debt for depreciating assets — especially if you’re borrowing at high rates.

There’s nothing wrong with using debt as a tool. For example, taking out a business loan to start a company of your own is a great way to build wealth if you have a solid business plan. But, going into high-interest credit card debt to finance vacations or dining out is going to set you back on your efforts to achieve millionaire status, since you’ll be making purchases more expensive and tying up future income you can’t invest.

If you follow these four rules, becoming a millionaire is almost definitely something you can do. Just cut out bad spending and debt, invest what you save, and you’ll be on your way.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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