How to Become a Millionaire in Seven Easy (Hah!) Steps

The road to wealth is not paved with infomercials. Those
wee-hour TV staples would have you believe that you'll become "Fantasy
Island" rich by placing tiny ads in the classifieds, or by buying up --
for no money down -- distressed property and selling it for millions.

Unfortunately, the only thing you're likely to get from
watching those infomercials is dark circles under your eyes from lack
of sleep. If you actually go to the seminar or buy the tapes, you'll
probably just have more debt.

The truth is, unless you're lucky enough to receive a sizeable
inheritance, you'll need to navigate your own route to prosperity. But
while Bill Gates-style megawealth may be elusive, becoming a
millionaire is definitely within reach of those who start young and
develop the right habits. And anyone, at any age, can develop the traits
that increase wealth and decrease debt.

"You can have money or you can have stuff, but seldom do you
have both early in life," says Jason Flurry, certified financial
planner with Planmark Capital Management LLC, in Alpharetta, Ga.

"Part of our culture is, 'Fake it until you make it.' Debt
holds people back. They buy liabilities and they make those payments
forever. Spend less than you make, live a modest lifestyle and don't
live up to every raise. Some people have spent their prosperity for the
next 10 years and they've done it on credit."

It's a matter of choices

Flurry isn't suggesting you decorate your home in plastic lawn
furniture, forego cable TV and dine on macaroni and cheese every night.
But do you really need to buy a car that's so expensive that you must
stretch the payments out five or more years? Do you have to have that
50-inch widescreen HD-ready TV right now?

Many people who choose wealth over "stuff" wouldn't consider
spending money on the "latest and greatest" because they know their
money can be put to better use elsewhere. Buying a "liability" would
probably cause them stress because they'd rather buy an asset --
something that will appreciate over time and give them a return on
their investment.

Flurry says he has a hard time getting some of his older
clients to spend their money.

"They've been savers all their lives and the thought of
spending $5,000 or $10,000 on a vacation is ridiculous; it doesn't
matter that they're worth $3 million. They're really the last
Depression generation and it's burned in their memory that they need to
squirrel away money."

Seven steps to wealth

Paring it all down, we've come up with seven steps to becoming
wealthy. Remember, wealth is relative, it doesn't necessarily mean
"millionaire." The goal for many people is financial independence, says
Stewart Welch of The Welch Group in Birmingham, Ala.

"That's the point in time when your cash flow from investments
is equal to or greater than your income from work. Look at the
statistics: 95 percent of the population never achieves financial
independence. For 65 percent of retirees, Social Security is their
largest source of retirement income."

The No. 1 reason people don't achieve financial independence,
says Welch, is they don't have a written financial plan. So, that is
our No. 1 rule for becoming wealthy.

1. Develop a written financial plan
Saying you want to be wealthy isn't good enough. You need to come up
with a workable plan and put it on paper.

"The written plan forces you to do something," Welch says.
"Calculate what you need to earn and how to invest. The plan isn't just
the goal, it's the whole thing -- the dream, the goals, the options.
The options are scenario planning -- all the ways you can accomplish
that goal -- open a Roth IRA, contribute to a 401(k)."

2. Save, save, save
The end result of your financial plan should be systematic investment.
Get in the habit of saving money. Build an emergency fund in a money
market account so you don't have to raid the rest of your savings and
investments when there's an unexpected major expense. Make it a point
to save at least half of every pay raise.

3. Live below your means
Don't be a walking billboard for overpriced designer clothes, shoes,
sunglasses or jewelry. Don't allow your house or car payments to be
budget-busters.

4. Lay off the credit
Some people say that if you can eat it or wear it, don't put it on your
credit card. That's good advice, but take it further. Try not putting
anything on your cards that you can't pay off in two or three months.
You need only one or two credit cards. If you have a fistful, pay them
off and cancel them. Remember, debt holds you back.

"It reduces cash flow for other things, including investing,"
says Welch. "If no one gave you money to borrow, you'd be better off
and the economy would be smaller. If they only let you borrow 75
percent of the value of your home, you'd be a heck of a lot better off."

5. Make your money work for you
It takes money to make money, but that doesn't mean you need a lot to
invest. Open an account with a mutual fund company that has no-load
funds and low expense ratios. Build a diverse portfolio and you can
reasonably expect to earn 8 percent to 10 percent annually on your
investments over the long haul.

6. Start your own business
In the 1996 book The
Millionaire Next Door: The Surprising Secrets of America's Wealthy
(Simon & Schuster, 1998), the authors state that two-thirds of
the millionaires are self-employed, with 75 percent of them
entrepreneurs, and the remainder professionals such as doctors and
accountants.

"The idea that most people inherit wealth is outdated. A lot
is built through businesses. Business creation is the No. 1 driver of
wealth in this country," says Zultowski.

7. Get professional advice
A good financial planner can help you fill your portfolio with the
right investments and dump the wrong ones. You don't need to relinquish
control, but you do need to form a good working relationship with
someone who has expertise in this complicated area.

"About 76 percent of those surveyed are actively involved in
the day-to-day management of their financial affairs," notes Zultowski.
"They get involved; they learn about finances, but they're not day
traders. They work with advisers but ultimately make their own
decisions."

If you can't afford to have a financial planner manage your
money, many of them will review your portfolio and make recommendations
for a one-time fee.

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