Becoming a millionaire is totally possible for any average Australian with ASX shares.
I'm not going to say that it's easy. I'm not going to say it will be quick. But over time you can get there if you follow these four steps:
Earn money
There's no way around the fact that you need to earn money to have a chance of making $1 million. You have to "have money to make money" as the saying goes. Rich people become even richer so easily because they already have a lot of money invested in shares. But you have to start from scratch.
You need to find sources of income that will pay you more money than you need for a minimal lifestyle. If you're just beginning in the workforce then just getting onto the career ladder is a great starting point. Full-time work at minimum pay doesn't have to mean minimum for long, it's just about getting your foot in the door.
It's important to work hard. It's important to be kind to your clients/customers, your superiors and your colleagues. You'll be rewarded for being a good worker, or perhaps you'll be able to find a better paying job at a competitor after a while who will reward you properly.
You could boost your earnings if there are any applicable qualifications that you can do to improve your knowledge, ability and worth.
Or you may need to get a second job or a side hustle if there's no prospect of better income from your primary work.
Get on top of personal finances, plus pay off debt
Earning money is just one side of the equation. Avoiding lifestyle inflation is a key part of becoming wealthy.
If you're just starting earning and you make $45,000 today and spend it all on your life's expenses it's okay, Australia is an expensive country. If you can then grow your income to $60,000 fairly soon and only live as though you earn $45,000 (or maybe $50,000) then you have suddenly have thousands of dollars of surplus money. Savings!
Every budget is different with various wants & needs. Budgeting tools that your bank provides, or perhaps using Zip Co Ltd's (ASX: Z1P) free 'Pocketbook', will help you see where your money is going.
There are many strategies you can use to spend less than other Aussies – utilising Aldi, using public transport, eating home-cooked food and so on. However you do it, you need to spend less than you earn. If you earn $100,000 (or more) then you may find different money-saving choices than someone earning $45,000.
I think it's a good idea to save at least $1,000 as an emergency fund. Three months of living expenses is a good amount to have as cash in a high interest savings account.
Pay for things with cash or a debit card. Getting into debt for any type of discretionary purchase is probably a bad idea. If you already have debt then you should pay it off as quickly as you can (although mortgage debt and education debt don't have to be paid back faster than necessary). Debt means compound interest is working against you.
After your personal finances are sorted you can get into investing.
Invest in shares
You've already done most of the work to get to this point. Investing in shares can be the easiest part of the process if you take a simple approach.
Sure, there are shares out there that can help you grow your wealth quite rapidly. But you don't need to find the next Facebook or Afterpay Touch Group Ltd (ASX: APT) to become a millionaire.
The share market has returned an average of 10% per annum. Investing $525 a month for 30 years at 10% per year turns into just over $1 million. Most people are already making a big dent into that investing requirement through the mandatory 9.5% contributions to superannuation.
There are plenty of attractive, low-cost exchange-traded funds (ETFs) that would help you track the share market's pleasing returns like iShares S&P 500 ETF (ASX: IVV), BetaShares Australia 200 ETF (ASX: A200) and Vanguard MSCI Index International Shares ETF (ASX: VGS).
There are also some high-performing fund managers that are worth the fees in my opinion such as WAM Microcap Limited (ASX: WMI), Magellan Global Trust (ASX: MGG) and MFF Capital Investments Ltd (ASX: MFF), but it's best to buy these when they're trading at a price cheaper than their net assets per share (NTA).
Or you can try to identify the best growth shares and make returns better than the market to reach your $1 million goal quicker. I think some of the best growth shares today for the long-term are: Webjet Limited (ASX: WEB), Pushpay Holdings Ltd (ASX: PPH) and Altium Limited (ASX: ALU).
Be patient and benefit from compound interest
Time is one of the main things on your side. You just need to give your investment portfolio time to grow. Re-invest the dividends into more shares each time it hits your bank account.
Even if you had a portfolio worth $800,000 today, it would still take more than two years to reach $1 million growing at 10% per annum.
If you stay patient and keep investing, you'll eventually reach $1 million. There will be some bumps along the way, but those market declines are the best time to buy shares!
Foolish takeaway
You can become a millionaire if you put your mind and money to it. People who don't try at all will never get there, but if you work hard at it then you can create a good nest egg. Even if you only get to $750,000 that's a whole lot better than having $0!
