It’s much easier to become a millionaire if you make over $100,000 but what about someone making an average household income (less than $50,000)?
I think the majority of people believe that it’s not possible to become rich on such a small income, but it is and here’s how:
Minimizing Housing Costs
Instead of renting an apartment or house, offer to share an apartment or house with a friend for 1/2 the rent it would cost to rent a place by yourself.
So you would normally spend $1,000 a month on rent, but instead you’re splitting the cost of rent with a friend. This act enabled you to put $500 a month into safe mutual fund or ETF for a total investment of $6,000 a year! After 10 years, the money you save in such investments will be as follows:
Using the Realistic Growth Model above, we can see that after 10 years of using this technique, we would have saved almost $80,000.
At this point, I would take half of that money and buy a multi-unit rental unit. I would then live in one of the units and rent out the other units.
At this point, I’m now a landlord, and I still have almost $40,000 for other types of investments. After one year, I can determine if being a landlord is for me or not. If I don’t like it, I’ll sell it all and put the money in financial investment like stocks, bond, mutual funds, etc.
Saving: $6000 (this varies greatly depending on how many people are in your household).
Minimizing Food Cost
Instead of buying expensive or highly processed foods, why not make eggs, beans and vegetables as a main stable of your food consumption? Eggs and beans are excellent sources of protein, and very healthy for you to boot. I also have a can of peanuts that I munch on for snacks.
You can save a lot of money by growing your own vegetables (and canning them for the winter months). You know exactly where the vegetable came from, and since you grew them, you get exactly what you wanted. No worries about insecticides or some bacteria tainting them! Both cheaper and safer is a winning combination!
Listen to an mp3 player or an audiobook while you work. That way you can enjoy your time tending the garden while you weed, plant, etc (a win-win)!
As a supplement, why not try some extreme couponing too!
Saving: $3000 (this also varies greatly depending on how many people are in your household).
Buying Used or Bargain Needs
Instead of buying everything new, look on Freecycle.org first, then Craigslist!
You want to watch movies or listen to CD’s? Borrow them from the library (if one is close by). If you have internet access, go google what you want to listen to, or play the type of music that you want to listen to on www.Pandora.com. You can watch movies online via hulu.com! Obviously there are also other options… Google them using keywords phrases like “free online movies” etc…
Skip unnecessary monthly costs that add little value! There is really no need for cable TV, or even a land-line if you have an internet router (go with MagicJack, or even Skype).
Savings: $1,000 (this varies too much to predict, so I pick a low number).
If your employer has a 401(k) take advantage of it! The amount deposited is tax-deductible! Try to at least save 10% ( or at least $5,000)
If you employer doesn’t have a 401(k), put that $5,000 into a Roth IRA!
Without even cutting into vacation spending, We are able to save $10,000 and with retirement contributions another $5,000 for a total of $15,000 savings.
So with what I mention above that’s $15,000 a year that we could be saving on our way to becoming rich. If you continue to keep focused, it would be fairly easy to become a millionaire in a bit over 30 years.
Best of luck to you,