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Key Takeaways
- Most millionaires in the U.S. are self-made.
- 79% of millionaires didn’t inherit their wealth.
- One-third never earned a six-figure salary in a year.
- Discipline and a savings mindset are key to building wealth.
- Starting young can provide a significant advantage.
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Your goal is to make $1 million—or more. While it can seem daunting, hitting the million-dollar mark may be more within your reach than you think. Most millionaires in the United States are self-made.
According to a Ramsey Solutions study of 10,000 millionaires, 79% didn’t receive an inheritance, and one-third never earned a six-figure salary in any one year of their career. But they did have discipline over their spending, a savings mindset, and a willingness to sacrifice, which can be a winning combination when it comes to accumulating wealth. And if you start young, time can be an ally.
Learn more about how becoming a millionaire is not as hard as you might think. We focus on seven steps, including taking time and modification of some spendthrift habits and putting your money in the right places.
1. Monitor Your Spending Closely
Many people spend their earnings on goods and services that they don’t need. And even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can add up and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month.
It’s usually not just one item or one habit that must be cut out if you want to accumulate sizable wealth. It’s important to adopt a disciplined lifestyle and budget to become wealthy. People who are looking to build their nest eggs must usually make sacrifices. This may mean eating out less frequently, using public transportation to get to work, and/or cutting back on extra, unnecessary expenses.
This doesn’t mean that you should avoid going out and having fun, but you should try to do things in moderation and set a budget if you hope to save money. Saving a sizable nest egg only requires a few minor and relatively painless adjustments to your spending habits, particularly if you start young.
Fast Fact
94% of millionaires in one study said they live on less than they make, and 93% use coupons all or some of the time when shopping.
2. Prioritize Retirement Plan Contributions
Your first responsibility is to pay current expenses such as rent or mortgage, food, and other necessities when you start earning money. The next step after these expenses have been covered should be to fund a retirement plan or some other tax-advantaged savings vehicle.
Retirement planning is unfortunately an afterthought for many young people, and it shouldn’t be. Funding a 401(k), an individual retirement account (IRA), or both early in life means you can contribute less money overall and end up with significantly more in the end than someone who puts in much more money but starts late.
Here’s an example that spells out the difference. If you’re 23 years old and deposit $3,000 per year (that’s only $250 each month) into a Roth IRA earning an 8% average annual return, you’ll have saved $985,749 by the time you’re 65, thanks to the power of compounding. A $1 million goal is well within reach if you make a few extra contributions. Keep in mind that most of your earnings on this type of account are interest. Your $3,000 in contributions alone only add up to $126,000.
But let’s say you wait until you’re 33—an additional 10 years—to start contributing. You have a better job than when you were younger, and you earn more, but you know you’ve lost some time. You decide to contribute $5,000 per year.
You get the same 8% return and have the same goal to retire at 65, but your compounded earnings won’t have as much time to grow because you started to save later. When you reach age 65, you’ll have saved $724,753 in this scenario. That’s still a sizable fund, but you had to contribute $160,000 just to get there, and it’s over $260,000 less than the $985,749 you could’ve had for paying much less if you started at age 23.
In the Ramsey Solutions study of millionaires, 80% of those surveyed invested in their company’s 401(k) plan and said this one move was the key to their success. In addition, 75% also invested outside of their company plan and reported that regular investing over the long haul also contributed to their wealth.
3. Improve Your Tax Awareness
It’s easy to think that preparing your own tax returns will save you money, and you might be right in some cases. But it may end up costing you money if you fail to take advantage of deductions and credits that are available to you.
Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your deductions on your tax return instead. Knowing which tax credits are available to you can also help you save money on your return.
It may pay to hire some help if you’re not willing or able to become educated about filing your income taxes, particularly if you are self-employed, own a business, or have other circumstances that can complicate your tax return.
4. Own Your Home
Many of us rent a home or an apartment because we can’t afford to purchase a home or aren’t sure where we want to live for the long term. That’s fine, but renting doesn’t offer the long-term investment that buying a home does, since homeownership is a good way to build equity.
It generally makes sense to consider putting a down payment on a home rather than renting, because you can build up equity and the foundation for a nest egg over time.
5. Avoid Luxury Wheels
There’s nothing wrong with purchasing a luxury vehicle, but individuals who spend an inordinate amount of their income on cars are doing themselves a disservice because this asset depreciates in value so rapidly.
Important
How rapidly a car depreciates depends on the make, model, year, and demand for the vehicle, but the general rule is that a new car loses 20% of its value in the first year, then another 15% per year over the next four years.
Consider buying something practical and dependable that has low monthly payments or that you can pay for in cash. You’ll have more money to put toward your savings in the long run. And your savings are an asset that will appreciate rather than depreciate over time.
6. Don’t Sell Yourself Short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their income take a jump. This can be a mistake, because increasing your income is an excellent way to boost your rate of saving.
Always keep your eye out for new opportunities and try not to sell yourself short. Work hard and find an employer that will compensate you for your work ethic, skills, and experience.
7. Don’t Rely on Luck
Becoming a millionaire won’t happen by winning the lottery or because of some other unforeseen circumstance. The only way to amass $1 million or more is by diligently working to do so.
Expecting luck to bring you a financial windfall will only delay the time you have to build your wealth. The money you spend on lotteries and other get-rich-quick schemes will be better utilized as savings and investments.
What’s the Difference Between a Roth IRA and a Traditional IRA?
You can claim a tax deduction for money you contribute to a traditional IRA in the year you make contributions, saving you tax dollars. But you’ll have to pay taxes on that money when you make withdrawals in retirement, as well as taxes on the money’s growth.
You’re taxed on contributions to a Roth IRA at the time you make them, but then withdrawals and growth on that money are often tax free, subject to some rules that aren’t particularly hard to meet.
When Should You Itemize Rather than Claim the Standard Tax Deduction?
You’ll probably want to claim the standard deduction if the total of all your eligible itemized deductions is less than the amount of the standard deduction for your filing status. You’ll otherwise pay tax on more income than you have to. Common itemized deductions include state and local taxes, property taxes you paid during the year, home mortgage interest, and gifts made to qualified charities.
The total of your itemized deductions should be more than the $15,750 standard deduction for the 2025 tax year if you’re an unmarried taxpayer. The deduction increases annually to keep pace with inflation, and it changes with marital status and other factors. For the 2026 tax year, the standard deduction increases to $16,100.
How Does Equity Build in a Home?
Equity is the difference between the current value of your home and the encumbrances against it, such as a first and second mortgage or other liens. You can build equity in your property by paying down these encumbrances, such as by making extra mortgage payments over the years.
You might also take steps to increase the value of your home—say, by remodeling—but this will cost you money out of pocket unless you’re a very capable do-it-yourselfer. You might also simply let market values increase over time. The decision to own or rent a home does carry financial consequences.
The Bottom Line
You don’t have to win the lottery to see seven figures in your bank account. The only way for most people to retire with a million dollars is by saving over time. You don’t have to live like a pauper to build an adequate nest egg and retire comfortably. Your million-dollar dreams are well within reach if you start early, spend wisely, and save diligently.
