5 Steps to Making a Million Dollars
There’s a reason some people are wealthy: they learn to manage their time, resources and passions. Leading financial adviser Diane Kimura of Merrill Lynch shows how you can get your life in order, financially and emotionally, so you can make a million.
1) Adopt the spending habits of self-made millionaires
- Buy few things, but when you do, invest in quality.
- Take care of what you have.
- Make accumulating wealth your priority.
- Find ways to minimize taxes, including using a financial adviser.
2) Reduce or eliminate debt
- Pay off credit cards immediately.
- Pay mortgage payments bi-monthly to reduce them faster, and every January try to make one additional mortgage payment.
3) Organize your finances
Calculate your net worth at the beginning of every year because that reduces financial stress and enables you to pursue what really matters in life. Reducing stress keeps you healthier, says Kimura, and that’s financially important because catastrophic illness is the No. 1 reason for home foreclosures. Here’s how to do it:
- Calculating your net worth is easier if you have organized your financial life in a chart that at a glance can show you everything you own, earn and owe, where all your papers are kept, and all your personal financial contacts.
- Kimura suggests dividing this information into these areas: Key contacts; personal information, such as Social Security card, birth certificate, passport; ownership documents; tax documents; banking documents; estate-planning documents, including insurance and personal and charitable-trust documents; investment documents; retirement documents; credit and lending documents; and small-business documents.
4) Save, save, save
Save 25 percent to 30 percent of your gross income every month. As your income grows, do not amp up your lifestyle. “It’s not what you earn, it’s what you spend” that’s important, Kimura says.
Plus, save all raises, dividends, bonuses and found money.
5) Proceed with intention
- Create a family mission statement and make deliberate changes to get there so you are doing what you really want in life.
- Make changes to renew the love in your marriage. “Divorce is very expensive,” says Kimura.
- Envision and write out what you want your retirement lifestyle to look like. Without a goal, you won’t accumulate the funds to pay for it.