By Alan L. Olsen, CPA, MBA (tax)
Managing Partner
Greenstein Rogoff Olsen & Co. LLP
In 2010, the number of households in the United States worth over $1 million rose to 8.4 million[1]. Although the thought of acquiring a million dollars may be a whimsical fantasy for some, it is not out of reach. With careful saving and investing, becoming a millionaire is possible if you apply a 5 step plan involving the following areas:
1. Health
2. Spending
3. Savings
4. Investing
5. Career
Health
Take care of yourself. If your health is poor, you won’t enjoy the rewards of a solid financial plan. Eat right, exercise daily, and discipline yourself. The most successful investors are those who have the discipline to stay with the program.
Spending
It’s true; a person always lives up to the amount of income they earn. If you make the money, you are apt to find a place to spend it. The key to successfully saving is to spend less than you make and to also spend more money in areas that will actually preserve wealth.
Savings
A disciplined approach to saving reaps rewards in the future. While saving early in your career, allocate a larger percentage of your savings to investments. A 30 year old
with $15,000 invested and saving $600 a month will become a millionaire by age 56 if the money invested returns 10% per annum. If the investment rate of return falls to 8% per annum, the millionaire age is moved to 60 years old.
Investing
Focus on an investment portfolio that minimizes your fees and maximizes your returns. If you are unsure about the types of investments, consider low cost index funds such as the S&P 500 or Russell 5000.
Career
No matter how much you position yourself, your career will dictate how quickly you reach the millionaire plateau. You have to move above and beyond your job description, excel in your performance and make yourself invaluable to the organization. Align your goals and focus on efforts that make you a valuable employee. You want those merit raises; they will add up.
Check out the GROCO Millionaire Calculator to determine how much you need to put away to enter the millionaire class.
[1]U.S. MILLIONAIRE POPULATION GROWS BY 600,000 IN 2010 TO 8.4 MILLION. Spectrem Group. March 15, 2011. Web. September 29, 2011. http://www.spectrem.com/
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Alan L. Olsen is Managing Partner at Greenstein, Rogoff, Olsen & Co., LLP, a leading CPA firm in the San Francisco Bay Area. With more than 25 years of experience in public accounting, Alan works with some of the most successful venture capitalists in the world, developing innovative financial strategies for individuals and businesses. Olsen is also host of KDOW’s American Dreams: Keys to Life’s Success Radio Show.