How to make a million pounds
Wondering how to make a million pounds?
While the ultimate secret to happiness does not lie within your bank balance, there are certainly a lot of positives to being wealthy, not least peace of mind.
There are 56 million millionaires in the world, with 2.5million of them living in the UK as of 2020, according to analysis by Credit Suisse.
New ONS data also shows that the gap between the richest 1% in the UK and the poorest households has never been so vast. The richest 1% are now worth at least £3.6m each!
But is wealth just for those who are already wealthy?
It’s true that it’s far easier to accrue greater wealth if you already have stacks of money in the banks. Having said that even with a modest income you can grow your wealth if you are prepared to go the distance and commit to regular monthly savings.
Becoming a millionaire does not have to be a pipe dream, but if you want to do it then you’ll need to:
- Start right away – the earlier in life you start the better
- Commit to making some changes to your spending and saving habits
- Look for ways to boost you income so you can save more money each month
Making a million pounds from nothing
Three possible ways to making your million pounds are:
- Win it – Not something you can count on, obviously! And can ultimately cost you a fair amount of money when it comes to things like gambling, with no guarantee of any return.
- Earn it – Whether through working for someone else or through your own money-making entrepreneurship. This one takes imagination and hard work.
- Grow your wealth – The earlier you start saving the better. Use regular investing or purchase investment property to grow your money over time. This option requires careful planning and forward thinking, but is achievable if you set your goals right now from an early age.
How to get rich overnight
Sorry to be the bearer of bad news but let’s be realistic here, if there was a simple secret to overnight success then we would have even more UK millionaires than we do.
The second I stumble upon a get-rich-quick scheme that is actually legit, you guys will be the first I tell!
Most people will only get rich overnight through luck or chance, such as a competition or lottery win or a sizeable inheritance.
If you don’t have any wealthy relatives waiting in the wings then it’s best not to count on your riches coming to you by chance, and instead focus on a realistic way to reach your goal.
Realistic path to a million pounds
Any journey starts with a single step and the path to wealth is no different.
Many of us may feel intimidated by our own finances, preferring to live month to month rather than thinking about the bigger, long-term picture. I know I have been guilty of this!
One of the biggest habits of successful millionaires that we could all learn from is they watch every pound and penny like a hawk, and invest it wisely to see the greatest return.
Even if you only have a small savings pot this is a sensible place to start if you want that money to really grow!
Start by understanding your finances
Any money makeover should start with a thorough review of where you are right now.
Write down everything, including all income and all outgoings, as well as debt.
This can be a good opportunity to cut back on subscriptions you rarely use, or to haggle for a better deal.
The other week I ditched my Now TV subscription. When I went to cancel Now offered me a discount, cutting my monthly price from £9.99 to £3.99. I did ultimately cancel, but it’s worth noting that you could potentially save money on your subscriptions by telling firms you are prepared to cancel.
There are lots of tips for haggling down the cost of Sky TV here.
Figure out how much you can realistically afford to save each month. That’s after all of your key spending, such as mortgage/rent, bills, food, and your typical spending on stuff like nights out and beauty treatments.
If the amount you can afford to save each month is small, look for ways to cut back on monthly spending. You could try:
- Switching supermarkets to a budget brand like Lidl or Aldi
- Walking instead of using the car
- Looking for free family fun
And if you have already cut your spending right back to the maximum amount, why not try a side hustle to boost your income.
Clear debts
If you have debt then start with a solid plan to clear it.
Make a list of all your debts, and make a note of the interest rate on each and the minimum monthly repayment.
Next take a look at your budget – your income and other outgoings – and figure out if you can afford to stretch beyond the monthly repayment. If you can’t then ensure you can meet the monthly repayments.
Figure out how long it will take you to be free from debt by using the monthly repayment you are committing to and the interest rate on the debt.
You can use this debt repayment calculator to figure it out.
This way you can set a debt-free date and that is your first goal to work towards.
Investing your way to a million pounds
When it comes to making a million pounds through investing you can figure out a rough idea of how much you need to save each month to hit your goal.
Investing in stocks and shares may seem risky, as the market goes up and down (right now my general investment account is way down), however if you look at it over the long term the value increases.
You could use an investment ISA or go through a general investment account. Or you could try picking your own stocks and shares to invest in through platforms such as etoro.
Most of the big investment firms have an investment calculator on their website that gives you an idea of how much you need to save to hit your goals. When investing your interest rate is not guaranteed, but you can get a rough idea of what you could earn over time.
Say you’re in a hurry and want £1,00,000 in just 10 years, the calculator says you would need to be saving £6,452 into an investment account, based on a 5% interest rate, just as a guide.
So as you can see, that’s not really achievable for most people. Whatever amount you save, it should always be affordable.
If you want to have £1,000,000 in 30 years you would need to save roughly £1,222 per month, which is a little more realistic.
This video here sets out the path to £1million by investing wisely.
There are tips for how you can make £1,000 extra per month over here, in case you need to boost your budget.
Remember your returns with investing are never guaranteed, but if you are in it for the long haul you will make much better gains over time with a balanced portfolio of investments than leaving your money to sit in a regular bank account.
My knowledge of investing is limited, so I use a general investment account and get the experts to pick my portfolio for me.
Some years you may do badly and others you’ll see great gains. The key is that over time the money appreciates in value and as you continue to invest you see greater returns.
Working your way to a million pounds
If you’re in a hurry to get your million pounds then starting your own money-making venture could be your ticket to riches.
This is where you need to use your own imagination and ambition to come up with a great money-making idea, then be prepared to put in the work.
I thoroughly recommend blogging as a great way to make money, and I know people making seven figures from their blogs. You can find tips for starting a blog here.
You need to consider how you can scale it up to hit the level of income you need to cover your monthly costs, provide you with spending money and leave you with a decent amount to save every month.
People who get wealthy and stay that way save, save, save.
Anyone who works their way to a million pounds still make sure their money works hard for them. So a long-term investment ISA or an investment account would still be a smart place to put your earnings so that they appreciate in value faster.
Habits of millionaires
When considering your own journey to becoming a millionaire it can help to understand and learn from the habits of millionaires.
These secrets to success can help to motivate and inspire you on your journey:
Avoid debt
This is a wise strategy whatever your financial situation.
If you use a credit card then ensure you are paying it off every single month.
Debt is only going to drag you backwards and hamper your efforts towards financial freedom and making your £1m.
Have an emergency fund
When saving towards your million pound goal it’s important not to neglect your emergency fund.
This is your pot of “just in case” money that, in my own experience, you end up needing to dip into at least once a year.
On your journey to accruing your million pounds there will be setbacks along the way that eat into your funds.
The boiler may break, you may need a new carpet, or the car could suddenly need all four tyres replacing. In life, the unexpected happens!
So it’s important to be prepared for that with an emergency fund that is separate to your main savings pot.
My emergency fund, as a general rule, should always have enough money to help me pay the bills for three months.
Have clear goals
Successful people get what they want because they made a conscious decision to go after it.
I decided I wanted to be a full-time blogger. It felt a little ridiculous at the time when I decided on this goal, as my blog hardly made me a few quid a month.
Now here we are three years later and my blog makes me more than my old full-time employed job. My next step is growth and I have goals for where I want my income to be in five years time, plus a plan for what I would need to do to achieve that.
Diversify your income
Successful people are always on the lookout for ways to increase their wealth.
This may involve investing in property to produce a passive income from rent, or starting a side hustle.
When it comes to increasing your income it’s also smart to focus on what brings in the most amount of money for your time. For example survey sites are OK for a little boost to your income each month, but they won’t go very far towards significantly upping how much you bring in each month.
Plan ahead
Think down the road to costs that will come up and make sure you are prepared for them.
This may include buying your child their first car – if they’re only a toddler now that leaves you plenty of time to save – or helping your child pay for university.
When trying to maximise your savings its also important not to neglect your pension. If you work for yourself you can set up a pension that you pay into each month. I use Nest which is super easy to get on with.
Make your money work for you
The wealthy look to protect their assets by putting their money in the smartest place possible.
That means investing the money in the best possible savings accounts, stocks and shares that will yield a great return over time. It’s important not to sucked in by so-called “sure things” when it comes to investing.
You don’t have to pick all of your individual investments if that isn’t your cup of tea, you can start an investment ISA or general investment account and rely on the company to assess your risk appetite and create a portfolio for you.
Learn more about getting started with investing here.
Final thoughts on becoming a millionaire
As we’ve explored in this article, becoming a millionaire does not happen overnight apart from for the very lucky few.
However there are routes to growing your wealth and your chances are greatly increased if you start early and create a budget that allows you to grow your savings every month.
If you want ideas for work that can be done from home I’ve got some cool stay at home mum jobs here.
