Money Management

You don’t need to earn a massive salary to become a millionaire. Discover a proven method that could get you there on an average income. [[{“value”:”

Being a millionaire has been synonymous with being rich for decades. It doesn’t quite mean what it used to, thanks to inflation. But it’s still an ambitious financial goal, and one that may seem out of reach if you don’t earn a higher salary.

But a net worth of $1 million is more realistic than many people realize. While it’s not easy, one study has found there’s a reliable path that average Americans can follow to become millionaires.

The most popular path to becoming a millionaire

Tom Corley interviewed 233 millionaires for his appropriately named Rich Habits study. He found that there were four common paths followed by self-made millionaires.

Three of those paths won’t be an option for everyone. There are virtuosos who become rich because of incredible talents — great if you’re LeBron James, not so great for anyone who doesn’t have near that level of talent. There are entrepreneurs who work long hours in hopes of building successful businesses. And there are company climbers who work their way up the corporate ladder.

Then, there’s the fourth path: Saver-investors. They aren’t born rich, and they don’t make big bucks. What they do is consistently save 20% or more of each paycheck.

Yes, that’s it. It’s simple, but highly effective. It’s also the most popular millionaire path that Corley found, with 49% of self-made millionaires building wealth this way.

Following the saver-investor path to $1 million

The saver-investor path may be simple, but that doesn’t make it easy. It’s one thing to save 20% of your income for a month or two. The saver-investors that Corley studied did it much longer. It took them an average of 32 years to accumulate their wealth, which came out to an average of $3.3 million.

If you can consistently save 20% of your income, you could get incredible results over time. Let’s say your household makes $75,000, around the median U.S. income. Some of that will go to taxes, although you can contribute to retirement accounts with pre-tax income. We’ll assume you save 20% of your take-home pay, and it amounts to $12,000 per year.

Here’s how that money would grow if you invested it and got an 8% annual return. That’s in line with the stock market’s average growth.

Consistent investing pays off. After 30 years of investing in the stock market with an average income, you’d have nearly $1.5 million.

Habits of successful saver-investors

When you have an average or below-average income, it’s more challenging to set aside 20%. Corley found quite a few things that saver-investors do to maintain their high savings rates.

They follow an important rule: “Same house, same spouse, same car,” as Corley defined it. New homes and new cars are expensive. So are divorces. The average cost of a divorce is $11,300 and the median is $7,000 — that’s a lot of money not being invested!

Here are a few of the key habits of saver-investors:

They live frugally. Saver-investors are careful about how much they spend, and they don’t fall into the trap of spending money to impress other people.They purchase high-quality products. Even though they’re frugal, they’re willing to spend on products that will last, such as reliable cars and well-made furniture.They stay out of credit card debt. While many saver-investors use credit cards, they pay the bill in full every month to avoid interest charges.They hang out with other saver-investors. Being around people with the same goals helps saver-investors stay on the right track.They’re not afraid to ask for help. Many of them have CPAs, tax preparers, and/or financial advisors they speak to regularly.

Only a small percentage of people start successful companies or earn a huge salary because of their special talents. Most follow a more accessible path to wealth. It takes time and hard work, but if you’re willing to put in that work, saving and investing could turn you into a millionaire.

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Becoming a freelancer is an adjustment, but it can provide certain perks. Here’s how one freelance writer has improved her finances. [[{“value”:”

I’ve been a full-time freelance writer for several years, and my life is very different from when I worked a traditional job. I have greater flexibility with my schedule and workload and can choose to take on projects that interest me. My finances also look different now. Here’s how freelancing has helped me financially — and how the effects spilled over to other aspects of my life.

1. I’m earning more than I ever did in a W-2 role

It’s been nearly 10 years since I worked a W-2 job. In the fall of 2014, after leaving an unfulfilling job, my husband and I moved abroad to teach English in South Korea.

We signed a one-year contract and enjoyed the experience so much that we stayed for a second year. After returning stateside, I immediately began freelancing full-time. At that point in my life, I wanted a better work-life balance and valued flexibility.

Before working abroad, despite having work experience and a college degree, I never made more than $30,000 annually. I had applied for other roles, but many people with a marketing background compete for the same roles — so I struggled to land anything decent that paid well.

The first couple of years of full-time freelancing were challenging, and I didn’t make much money. Establishing yourself and landing good clients takes time, but I’m thankful I stuck with it through the difficult moments. Today, my income is more than three times what I made as a W-2 worker. Most importantly, I feel more fulfilled and I’m happier.

2. I got better at money management

Being a freelancer has also forced me to improve my money management skills. I keep detailed records of my business finances. I know how much I earn and how much I spend on business expenses, so I can make more informed financial decisions. I’ve also gotten better at prioritizing my saving and investing goals.

One reason is that I’ve had to prioritize these personal finance goals since I don’t work for a company that provides employee benefits. Another reason is that I’m a financial writer and have continued improving my skills based on the knowledge I’ve gained.

3. I can afford to prioritize my interests

When you’re not making much money, it can be difficult to afford much beyond your bills and basic necessities. I spent money on fun purchases before becoming a freelancer, but that was a less frequent occurrence. The majority of my money was spent on essentials.

Now that my business has grown, I can afford to spend some of my earnings on personal interests, like travel. Every two weeks, money is automatically transferred from your checking account to my savings account, so I have the money I need when I’m ready to book a trip.

4. I feel more in control of my finances

After many years of freelancing, I also feel more in control of my financial situation. Here’s one example: As a freelancer, I can take on more work if an unexpected bill comes my way and I need to earn extra money. There’s no promise of work, but I can usually find extra assignments.

In my previous W-2 roles, overtime wasn’t available, so earning additional money would have been more challenging if I had a costly bill come my way. I know my situation can change at a moment’s notice, so I’ve been building my emergency fund in case anything happens. I’m thankful for my freelance career because it has allowed me to prioritize my savings goals.

Freelancing can be a financial win

There’s no one-size-fits-all approach to freelancing, and it’s not for everyone. However, for many self-employed workers, freelancing can allow them to improve their financial situations and change their lives for the better.

For me, freelancing has been a mostly positive experience, allowing me to live a more enjoyable life. If you’re considering freelancing, check out our small business resources for additional financial guidance that may help you on your journey.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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When you’re booking business-class airfare, mistakes can be expensive. Find out which ones could cost you the most. [[{“value”:”

Business class is known for being much more expensive than economy. That’s true, to an extent. Airlines generally charge far higher prices for business-class tickets. But another reason it ends up being more expensive is that not everybody knows how to get the best deals.

Some passengers pay more because of mistakes they make when booking business class. On the bright side, this also means that if you know what to avoid, you could save big.

1. Waiting until the last minute to book

While it’s sometimes possible to snag last-minute airfare deals, this could backfire on you. When you wait until the last minute, all you can do is book whatever’s available. You don’t have the luxury of waiting to see if prices drop.

It’s safer to start shopping for flights well in advance. Travel deals site Going says that the best time to book is one to three months before your travel dates for domestic flights and two to eight months for international flights. For business class, you may want to give yourself even more time.

You don’t need to book right away. When you start shopping early, you can see if there are any deals you like. If not, you can check back later. You can also set up deal alerts. Google Flights is one option that makes it easy to set up email alerts for the route you want.

2. Being inflexible about travel dates

Another way people limit their options when booking business class is by locking into specific travel dates. If you need to depart on July 20 and return on July 30, there’s not much you can do if prices are high on those dates.

I’ve often found that a little wiggle room on travel dates goes a long way. I personally book most of my business-class flights in miles I’ve earned using my credit cards. On some flights, I’ve saved 60,000 to 100,000 miles just by adjusting my travel dates a day or two. This also works when booking in cash.

Try not to commit to any travel dates until you’ve checked flight prices. Most airlines and flight booking portals have calendar tools you can use to compare prices on different dates.

3. Not using a travel rewards card

Travel credit cards are a game-changer for flying business class. It’s always more affordable to pay for flights with miles than with cash. Travel cards allow you to earn miles on all your credit card spending. I normally save at least $5,000 per year on business-class airfare thanks to my travel cards.

Even when you’re paying for a flight with cash, it’s still a good idea to make the booking with a travel credit card. Many of these cards earn bonus rewards on travel spending, such as airfare. If your card earns 4 miles per $1 on airfare, and you use it to pay for a $2,500 business-class ticket, you’ll be 10,000 miles closer to your next award ticket.

Also, most travel cards include complimentary travel protections, such as trip cancellation insurance and lost/delayed luggage reimbursement. Hopefully, you never have these sorts of issues. But if you do, it’s nice to be covered through your credit card.

4. Booking through a travel agency or portal without comparing prices first

There are lots of ways to book airfare online. You could do so directly through the airline. You could book through one of the many online travel agencies (OTAs): Expedia, Kayak, etc. Some credit card companies also have travel portals where cardholders can book flights.

Are the prices the same no matter where you book? Sometimes, but not always. Fares can vary depending on how you book them, and with business class, they can vary by a substantial amount — hundreds or even thousands of dollars.

When in doubt, booking with the airline tends to be the best option. You can contact the airline directly for any customer service issues, which you may not be able to do if you booked through a third party. Prices are often (but once again, not always) lowest through the airline. If you plan to book through an OTA or a travel portal with one of your credit cards, definitely compare prices first.

To recap, if you want to book cheaper business-class airfare, start shopping around early. Be as flexible as you can about your travel dates — even being open to a few dates can help. Look for a travel card to earn miles you can use for flight bookings. And before you confirm a reservation, do some comparison shopping to see if you’re getting the lowest price.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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This writer doesn’t skimp on emergency savings. Read on to see why. [[{“value”:”

SecureSave reports that 63% of Americans could not cover an unplanned $500 expense out of their savings account. And that’s problematic, as it means the majority of U.S. adults are vulnerable to taking on credit card debt in the event of a financial shake-up.

As a general rule, it’s a good idea to have enough money in emergency savings to cover three to six months of essential bills. This amount of savings could get you through a period of unemployment or cover larger out-of-the-ordinary bills, like home or vehicle repairs.

I, however, have a 12-month emergency fund. And a lot of people would probably say that’s overkill. But here’s why I insist on having enough cash in the bank to cover my bills for a full year.

1. I’m self-employed and not eligible for severance or unemployment

When you’re a salaried employee, you’re generally eligible for unemployment benefits should you lose your job through no fault of your own. You may even be entitled to severance pay on top of that.

As a self-employed writer, I have no such back-up plan. Even if I’m doing a great job and lose some gigs solely due to budget cuts on the part of my clients, I’m not entitled to any sort of severance or government benefit. So I need extra money in savings because of that.

2. My income is variable to begin with

People who work as salaried employees take home the same paycheck every payday. I don’t. My income can vary tremendously based on different factors, some of which I can’t control.

For example, if a client of mine decides they don’t need my services one month when they normally throw me $2,000 worth of work, that’s probably a month where I’ll make $2,000 less. Or, if I get the flu and need to spend five days in bed getting over it, that’s five days of work I’m missing. And I don’t get paid sick days. So my emergency fund needs more cash in case there’s a month when I end up working and earning a lot less than anticipated.

3. I need the peace of mind

Some people I know have parents or relatives who help them out financially when they run into a jam. Last year, for example, my friends had to put on a new roof and didn’t have the savings, so their parents bailed them out.

I have no such arrangement. Because of this and my aforementioned job-related circumstances, I need extra savings for peace of mind.

You’ll often hear that it’s a problem to overfund your emergency savings because you give up higher stock market returns. And it’s true — if I were to cut my emergency fund in half and put 50% of that money into stocks, I’d probably earn a lot more on that portion over time.

But sometimes, it’s okay to forgo earning higher returns on a modest amount of money if that helps you sleep better at night. So I consider my larger emergency fund an investment in my peace of mind.

Find the right number for you

In the course of building your emergency fund, you should aim to be able to cover three months of essential bills at a minimum, and six months’ worth for more robust protection. Whether you opt to save beyond that point is up to you.

But think about your financial circumstances when making that call. If you have variable income and are self-employed, it’s reasonable to pad your emergency fund — especially if doing so helps alleviate your financial anxiety and does good things for your mental health.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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