Debt Free Millionaire

How To Become A Millionaire In 5 Steps (Debt Free)

What You Need To Know

  • Millionaire status is about net worth, not income.
  • You can be a millionaire without the stress of debt.
  • You may reach millionaire status before owning a home.

Many people long to become millionaires. The thought of being a millionaire brings smiles to many faces. Some consider it an impossible feat.

Today, we will share tips we and many others use to have a net worth of a million plus without debt. Some of us are not homeowners. Here are the steps we took that you can do, too.


Step 1: Cash Flow

The focus here is getting a source of income. The amount doesn't matter as long as you aim to be above the poverty rate. The actual ranges depend on your location.

Focus on your four walls whenever you face setbacks like income loss. These are food, shelter, clothing, and transportation. Pause the other steps as needed to adjust to life's realities.

Get additional sources of income to shorten your journey to the millionaire status. More income streams can also mean less instability if you lose a particular cash source. Adjust your budget as soon as possible in case of significant changes to your cash flow.


Related Blog - How To Survive Job Loss


Step 2: Budget Check

At Debt Free Living 254, we encourage the use of zero-based budgeting. The tool allows you to gain control over your finances, a critical skill for building wealth. Use estimates for your original spending plan if it's your first time budgeting.

Be honest with yourself. Embracing your reality is a foundational step in building up your net worth. Think through all your expenses.

Give yourself time to adjust to the zero-based budgeting kind of spending plan. Remember, budgets do not have to be the same every payment cycle. Adjust for life's realities, for example, holidays.


Related Blog - How To Know Where All Your Money Is Going (Zero-Based Budgeting)


Step 3: Mirror

The mirror stage is difficult for many people but a worthwhile endeavor. Get the help of a third party if you have to. Think through how you make your financial decisions and what triggers you to do so.

Replace any negative mindsets with positive ones. Let facts take the place of unsubstantiated beliefs. An example of a saying without proof is that all millionaires have debt.

You can Google Ramsey Solutions to see millions building wealth debt-free. The pinned section of our Facebook group, Dave Ramsey Africa, has a video interview of a dollar billionaire who doesn't have debt. List all you own and owe since net worth calculation is the difference between the two amounts.


Step 4: The Path

Set up a mini-emergency fund whose upper limit is an equivalent of 1,000 US Dollars. In Kenya, this currently equals around Kshs 153,900. The only exception is if your three to six months expenses are less than the higher limit.

Then, pay off all your non-mortgage debt. Remember, your net worth increases as your liabilities decrease. Once complete, fill up your mini-emergency fund to a fully funded one that covers three to six months of your expenses.

Some people at this point reach millionaire status just based on having a fully funded emergency fund. Remember to consider vehicles when calculating your net worth as much as cars are depreciating assets, which means their value generally decreases with time. At this point, you can aim to save up for a down payment for a house or move on to the next stage of investing at least fifteen percent of your gross income for retirement.


 Related Blog - How To Know How Much Rent To Pay


Step 5: The Future

Many people achieve a net worth of a million by the time they complete raising the down payment (aim for at least twenty percent of the home value). Those with children can start putting aside money for fees as they invest for retirement. Remember, at this point, you do not have any debt, and you have a fully funded emergency fund.

Depending on your finances, you can invest for retirement, put money aside for fees, and start paying off your mortgage or building in that order simultaneously. Otherwise, handle the steps that work for your finances. Some stages may take longer than others.

Overall, with focus, many people take way shorter than they thought they would to achieve millionaire status. Being a millionaire may not feel as rich as you expect. The journey will help you decipher authentic millionaires.


Ready To Become A Millionaire?


Additional Tips

Aim for a fifteen-year mortgage at a payment whose upper limit is a quarter of your income after tax. Pay more towards the principal to shorten the period of paying off the mortgage whenever possible. A higher down payment means lower monthly repayments.

Use the debt snowball method to get rid of debt. The strategy accounts for the role of emotions in improving your financial status. Clearing debts from the smallest to the largest encourages you along the debt-free journey.

Join groups of like-minded individuals to keep away the noise of discouraging voices. Focus on following the steps one at a time to avoid overstretching your finances. You can do this!

Love The Blog?

Back to blog