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How to become a millionaire in the UK

Have you ever dreamt of being able to tell people that you’re a millionaire? For many people, it’s little more than a pipe dream. But in fact, it’s not as hard as you may think and with a little bit of effort, nearly anyone can get there.

How to become a millionaire in the UK
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Did you know that in the United Kingdom, there are over 2,849,000 millionaires? Now that’s a lot of people. And people get there in lots of different ways, including working hard, being lucky or spending sensibly.

But you don’t need to be earning £1,000’s every week to reach your millionaire status (although it helps). But you do need to be financially savvy and have quite a bit of determination.

How to become a millionaire in the UK – getting started

The first thing you need to instil in yourself before you start your journey is discipline. Increasing your net worth is going to be a long-term process where you will need to save as much money as possible. If, when you receive your pay packet you’re likely to blow it all on alcohol and takeaways, the chances of reaching your goal become slimmer… if not impossible.

Remember, nobody said that becoming a millionaire was an easy process. But it’s all about taking small, manageable steps.

Follow these five rules and you will be well on your way to hitting seven figures.

1. Create a budget

Whether you’re an individual, a small business owner or the CEO of a major international corporation, you need to have a budget. It’s vital that you know how much money is coming and how much is going out of your accounts.

Keeping a budget comes with several advantages:

  • It helps to control your spending
  • Helps to reduce any nasty surprises
  • Stops you from becoming overwhelmed
  • Keeps you organized
  • Helps you stay out of debt

There are various ways that you can create a budget. Some prefer the old-fashioned pen-and-paper method. Just go through your bank and credit card statements, adding up all your direct debits and standing orders. You will also need to add your usual monthly costs such as food, transport and clubs. And to complicate matters further, you need to consider costs that you won’t see so regularly like insurance, MOTs and clothes.

If you don’t fancy cracking out a pen and paper to help you budget, then why not take a look at technology? There are several apps that can easily sort through your accounts and create a budget for you. It would be far less time-consuming than writing it yourself, and it can even be used to predict future bills. Plus, you can have it all to hand on your phone rather than stored in files at home. One of my favourites is Moneyhub, which is also free to use, but there are plenty of other alternatives. Why not take a look at the best budgeting and finance apps?

Once your budget is set, you should know how much money you have to spare each month. This is vital as this is the money that will help you to reach that millionaire goal.

2. Cut your bills

Now, you’re probably not going to like this because you’ve just spent time creating your budget, but your next step is to look at ways of reducing your costs. So, once you’ve finished, you’ll probably need to adjust your budget again.

But doing it this way means you have a list of all your bills right before you, so none will be overlooked. Take a look to see if you’re tied into any contracts or if you’re free to leave. If you are, you can either look for a better deal with a new provider or negotiate with your current one. Even if you only save £1 per month, this is still something you can put towards becoming a millionaire.

Although it may be daunting at first, switching providers can be done in a matter of a few minutes, and it can often save you £100’s.

You also need to consider changing your lifestyle habits. And I’m talking about small changes here, not major ones that mean you have to live off beans for the rest of your life… although that would help.

If you’ve never done any of these things before, here are a few things to help you get started:

Once you have worked your way through all of your bills, your new budget should look much healthier.

3. Increase your income

Well – duh. Of course, earning a lot more is the best way to become a millionaire. But that’s not possible for the vast majority of us. And if you made enough, I’m quite sure you wouldn’t be searching here for advice.

What I’m talking about are side hustles. You can do these in your free time, with little pressure. You can put in as much (or as little) effort as you like. But you know that the more time you spend doing it, the more you earn.

One of my personal favourites is paid surveys, which I can do when watching TV or during my lunch break at work. No, they won’t make me a million, but they do help me on my way.

Another simple and more lucrative way to earn extra is through matched betting. This involves taking advantage of free bet offers from bookies and can see returns of up to £1,000 per month in the early days.

Other methods you can look at include focus groups, mystery shopping, working as an extra or earning from your bank. Basically, there should be something for everyone.

Of course, if you enjoy your job and there’s plenty of overtime going on, go for it. Just ensure you don’t work so much that you start to resent going in.

No matter how small your extra earnings are, it’s certain to help you move closer to your goal.

Ways to become a millionaire

4. Save as much money as you can

This is the dullest part of the process, as nobody likes a saver. Well, apart from banks that pay very little interest.

By now, you should more or less know exactly how much money you have coming in and going out of your account each month. Although if you have decided to take on a side hustle or work overtime, it could vary slightly.

The trick now is to start squirrelling away as much money as possible. Whenever you have any extra money, no matter how small, move it to a separate account.

It will be hard to do because I’m sure you’ll have plenty of other things you want to spend your money on. But the fact is any amount you save, no matter how small it is, will be a big step in the right direction.

5. Making your money work hard

Now, this is the trick to becoming a millionaire. The majority of people will just place their money into a bank, earning themselves next to nothing in interest. But if you really want to reach your target, you must ensure your money is working hard.

Now, there are several ways to do this. One of the most popular is to invest in property and real estate, although you need some decent capital. But if you don’t have great wads of cash to do this, another great way is to invest.

But you need to know a lot about the stock market, right?

Not at all. There are fund managers out there that invest on behalf. And although it’s true that investments can go down as well as up, these managers invest in a range of stocks, so it minimises your potential losses.

How much can you expect to see in returns?

This isn’t easy to predict because it depends on the fund you choose. 5% can be a good (if not conservative return). According to this article by NerdWallet, the S&P 500 (the top American companies) has seen an average return of 10% over the last century.

Surely that won’t make me a millionaire?

Although putting small chunks of money away each month may not seem like much, there’s an important factor you need to consider. Compound interest. This is a potentially life-changing term that people often overlook. Put simply, you are paid interest on your interest – a passive income.

For example, if you put £100 away in year 1 for a 5% return, it will be worth £105 in year 2 (£5 worth of interest). The following year you will earn £5.25 of interest on your increased balance and this will keep on rising. After 10 years, your fund will be worth £162.89, an increase of over 60%.

How much do you need to save or invest in becoming a millionaire?

So, how much do you need to put away each month to make yourself a millionaire? Well, this depends on how early you start and how much interest you receive.

15 Years£4,450£4,131£3,832£3,550£3,287£3,0402,810£2,594
20 Years£3,085£2,782£2,504£2,250£2,017£1,806£1,615£1,441
25 Years£2,275£1,991£1,736£1,510£1,309£1,132£976£840
30 Years£1,745£1,479£1,248£1,048£877£731£607£503
35 Years£1,373£1,127£918£744£599£481£384£305
40 Years£1,102£874£687£536£415£320£245£187
45 Years£896£687£520£390£290£215£158£115
50 Years£737£544£397£286£204£145£102£72

Using the table above, you can see that if you were investing for 15 years and had returns of 3%, you would need to put away £4,450 each month before you hit a million.

But if you had 50 years to invest with returns of 10%, you would only need a monthly save of £72. The sooner you start investing, the more capital growth you’ll see.

Where to start investing or saving?

If you want to place your money into a bank, you will do well to see a 3% return with today’s interest rates, and it will take you far longer to reach your target. One day, we may see better returns, with rates being around 10% back in the 80s and 90s. But until then, investing will often see better returns.

And there are plenty of options out there to consider.

There are two platforms that I use when investing.

The first is Fidelity. This easy-to-use site allows you to choose the type of index fund you want to invest in. Over 5 years, this has given me a return of just under 9% each year. Take a look at my Fidelity review to find out more.

My second is Nutmeg. This is slightly different from Fidelity as it provides a Lifetime ISA (LISA). These can be opened by anyone under 40 and you can contribute up to £4,000 each year. And up until you reach 50, the government will give you a 25% bonus on anything you save. Take a look at my Nutmeg review to find out more.

Either of these is a great option for novice investors.

nutmeg lisa performance after 22 years
Expected gains from Nutmeg LISA

Alternatively, you could look at investment trusts, private equity or venture capital, hedge funds, commodities, or derivatives contracts. The list is pretty endless.

Wherever you choose to invest or save, ensure that the company is regulated by the Financial Conduct Authority (FCA). There are plenty of companies out there promising big returns that have only been set up to fleece you.

But don’t forget tax

Unfortunately, the government will not leave the money you make from savings and investments untouched. If your cash is in a savings account, you will need to pay tax on your income on anything above your personal savings allowance. Equally, you may need to pay tax on any dividends you receive from your investments if you exceed your allowance.

There are ways to lower your tax liability, such as through a stocks and shares ISA. It will be worth speaking to a financial adviser to get advice tailored to you.

Remember, it’s not just your savings and investments

As you can see from the table, unless you start putting money away when you’re very young, you’ll need to save quite a large amount of cash each month to hit your millionaire goal. But don’t forget your other assets.

If you’re in employment, there’s a good chance that you’ll have a workplace pension. Not only do you contribute monthly, but your employer will too. This can lead to quite a large pension pot for your retirement. It does tend to be ignored, but don’t forget it counts towards your overall wealth.

And then, there’s your home. If you own your own house, there’s a good chance that its value will outstrip the amount you owe on your mortgage, especially in today’s market.

With the equity in your home and the value of your pension, you’ll probably become a millionaire and reach financial independence far sooner than you think.

Important to remember

The value of investments can go down as well as up. Investing is a long-term process. It’s natural that in some years, your funds will perform poorly, and in others, it can grow exceptionally. This is not a way to grab a few easy pounds. Always seek financial advice.

And if you ever reach your £1 million goal, take a look at what kind of interest you can expect to receive.

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