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How to make a million dollars (advice from actual millionaires)

Real millionaires tell you how to make a million dollars (in 1 year!) using the most successful systems and advice that made them their first million

Ramit Sethi

‘How to make a million dollars’ has been plastered on book covers, typed millions of times in Google and is, generally speaking, one of the biggest goals for entrepreneurs, usually with a time frame like 1 year.

That’s why today I wanted to bring you insights from my experience making my first million, as well as the insights of not one but two other millionaire entrepreneurs.

Meet our millionaires: Ramit, Erik, and Shannon

Ramit

I’m Ramit Sethi, New York Times bestselling author and founder & CEO of I Will Teach You To Be Rich. I started this blog from my Stanford dorm room in 2004 and have built it into a multi-million dollar business with more than 10 products on how to start a business, earn more on the side, land a dream job, and live a Rich Life.

Erik

Before starting his own business, Erik was a freelance UX/UI designer. Now he runs an online school called Learn UI Design, where he teaches user interface design to students all over the world and still freelances on the side.

His email newsletter has more than 30,000 subscribers, and the business grew more than 60% last year.

Oh, and did I mention the business had made more than a million dollars?

Erik says:

“It’s incredibly gratifying to not be living my life by someone else’s clock. I enjoy being able to train Brazilian Jiu-Jitsu almost every day, never having to commute, and taking any spur-of-the-moment trips with my wife and kids that we’d like.  Right now, my toddler is “packing” for a mid-week trip to Disneyland to “meet some princesses.” I think that basically speaks for itself!”

Shannon

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With three kids to take care of, Shannon knew she had to really learn the art of the grind in order to quit her job and take her freelancing seriously.

That’s how she was able to grow her freelance CPA consulting hustle into a full-fledged business (Badger and Badger CPA) that she runs with her husband. It’s helped earn her her first million-dollar year in 2017.

“It was a huge mentality shift to how much can I ramp it up while still working full time in my other job,” she says. “There’s a quote by Dave Ramsey that goes: ‘Live like no one else, so you later can live like no one else.’ My husband and I were really disciplined when we got started, and it made the process less difficult.”

Erik, Shannon, and I are going to share our strategies on how we got to where we are — and how you can do it too.

NOTE: Making your first million usually takes some time, so if you need money FAST, I highly recommend checking out my free Ultimate Guide to Making Money. It’s loaded with tons of great advice on how you can start making some extra cash right now.

How to make a million dollars

Remember, all three of us were able to earn our money through a powerful combination of two things:

  1. Investing and saving
  2. Earning more money through side hustles

Though you can actually make a million dollars on investing and saving alone, you can watch your net worth explode if you combine them both — which I suggest you do.

Part I: Investing and saving

Step 0: Get out of debt

The number one barrier preventing people from living a Rich Life is debt.

That’s why this is Step 0. Before you even think about investing, saving, or earning more money, you need to take steps to get out of credit card debt.

Ramit says:

It might be painful to learn the truth but you have to bite the bullet. Then you’ll see that it’s not hard to end this bad habit. In fact, you can get the credit card companies to help you. Just look at the back of your credit cards for their number, call them, and ask them for the amount of debt you owe, the APR, and the monthly minimum payment on the card.

Getting out of debt was also a priority for Shannon when she and her husband/business partner first got married.

“When my husband and I were first married, we were really disciplined about getting out of debt and saving,” Shannon says. “We paid off all of our debt out of college. We paid off all of our car debt. And now we’re paying off our house.”

Paying off your credit card debt is one of the most important investments you can make into your Rich Life. I’ve written extensively about this before, both on the blog and in my New York Times bestselling book.

If you’re in debt and want to learn more about my system, I highly suggest you read my article on how to get out of debt fast.

Step 1: Save money for when you need it most

By saving money, you give yourself the freedom to earn more money.

Shannon says:

“My husband and I were really good about saving money,” Shannon says. “We created a six-month emergency fund that allowed us to take a small step back financially when I quit my job. But because we saved early, it gave us a lot of freedom to invest and earn.”

That’s why it’s important to set savings goals.

To find out how much you need in your emergency savings fund, you simply have to take into account three to six months worth of:

  • Utility bills (internet, water, electricity, etc)
  • Rent
  • Car/home payments
  • Food/groceries

Basically, any living expense that you have should be accounted for.

You should also start an account exclusively for your emergency savings fund. Most banks allow you to create a sub-savings account along with your normal savings account. (You can even name them too!) So create one for your emergency fund.

And you can start putting money into the account through my favorite system: Automating your personal finances.

The process only takes one to two hours at the most, but once you set it up, you don’t have to worry about it again.

AND it’ll save you thousands of dollars over your lifetime.

Here is a 12-minute video of me explaining the exact process I use below.

 

 

Step 2: Invest in your future

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Investing your money is the best way to guarantee you become a millionaire. In fact, I promise you, if you follow the systems below you will eventually become rich.

Shannon knows that too.

“My husband and I have been putting 10 – 15 percent of our earnings into our retirement accounts for a while now,” she says. “We also have a 529 plan for each of our kids.”

When it comes to accounts for retirement, you have two options:

  1. 401k
  2. Roth IRA

These are retirement accounts. That means you’ll be able to accrue gains with big tax advantages with one caveat: you promise to save and invest long term. That means you can buy and sell shares of almost anything as often as you want as long as you leave the money in your account until you get near retirement age.

Let’s take a look at each one.

401k: Free money from your employer

A 401k is a powerful retirement account offered to you by your employer. With each pay period, you put a portion of your pre-tax paycheck into the account. That means you’re able to invest more money into a 401k than you would a regular investment account.

But here’s the best part: Your company will match you 1:1 up to a certain percentage of your paycheck.

Say your company offers 3% matching. If your yearly salary is $150,000 and you invest 3% of your yearly salary (~$5,000) into your 401k, your company would match you that amount — doubling your investment.

Check out the graph below that illustrates this.

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This is free money!!! If your company offers a match, you should ABSOLUTELY take part in their 401k plan.

For more on 401k’s, be sure to check out my article on how the account is the best way to grow your money.

But 401k’s are only one part of the equation when you want to start saving for retirement. The other account you should get is a Roth IRA. And ideally, you have both.

Roth IRA: The best long-term investment

A Roth IRA is simply the best deal I’ve found for long-term investing.

Remember how your 401k uses pre-tax dollars and you pay income tax when you take the money out at retirement? Well, a Roth IRA uses after-tax dollars to give you an even better deal.

With a Roth, you put in already taxed income into stocks, bonds, or index funds and pay no taxes when you withdraw it.

For example, if Roth IRAs had been around in 1970 and you’d invested $10,000 in Southwest Airlines, you’d only have had to pay taxes on the initial $10,000 income. When you withdrew the money 30 years later, you wouldn’t have had to pay any taxes on it.

Oh, and by the way, your $10,000 would have turned into $10 million.

That’s an exceptional example, but when saving for retirement your greatest advantage is time. You have time to weather the bumps in the market. And over years, those tax-free gains are an amazing deal.

How to open a Roth IRA account

To open up a Roth IRA, find a brokerage account. There are many out there, so I highly suggest shopping around and taking a look at the options out there.

Certain factors you want to consider when looking at brokers can be:

  • Minimum investment fees
  • Customer service
  • Investment options
  • Transaction fees

A few brokers I suggest, though, are Charles Schwab, Vanguard, and E*TRADE.

These brokers offer fantastic customer service and are well-known in the investment community for their great stock options.

Special note: Most brokers typically have minimum amounts for opening a Roth IRA, usually $3,000. Sometimes they’ll waive the minimums if you set up an automatic payment plan depositing, say, $100/month.

Also, it’s worth noting that there’s currently a yearly maximum investment of $6,000 to a Roth. (This amount changes often so be sure to check out the IRS contribution limits page to keep updated.)

Once your account is set up, your money will just be sitting there. You need to do things then:

  1. First, set up an automatic payment plan so you’re automatically depositing money into your Roth.
  2. Second, decide where to invest your Roth money; technically you can be in stocks, index funds, mutual funds, whatever. But I suggest investing your money in a low-cost, diversified portfolio that includes index funds such as the S&P 500. The S&P 500 averages a return of 10% and is managed with barely any fees.

For more, read my introductory articles on stocks and bonds to gain a better understanding of your options. I also created a video that’ll show you exactly how to choose a Roth IRA.

NOTE: After you invest in your retirement accounts, you can actually stop right there. After many years, your money will compound and earn you well into the millions if you continue investing.

Say you’re 25 years old and you decide to invest $500/month in a low-cost, diversified index fund. If you do that until you’re 60, how much money do you think you’d have?

Take a look:

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$1,116,612.89.

However, if you want to be able to hit a million dollars sooner than that, there’s only one really good option: Earning more money.

Part II: Earning more money

The reason earning money is one of my favorite ways to get to a Rich Life is simple:

There’s a limit to how much you can save, but no limit to how much you can earn.

If you’re willing to put in the work and develop a hustle that’ll scale and grow, you can earn as much money as you want. And while there are a lot of ways you can make more money, my favorite way is by starting a freelance hustle.

That’s what Shannon and Erik did, and they’re going to show you how.

Step 3: Find a million-dollar business idea (it’s easier than you think)

One very common misconception about starting your own freelance hustle is that you need to come up with the “perfect” idea to do it — when that couldn’t be further from the case.

I know it’s difficult to imagine that you might have profitable skills already — but you do. In fact, Shannon has a perfect solution to find out those skills: Look at what your friends ask you to help them out with. That’s how she got her start as a freelance CPA consultant.

From Shannon:

“I had a colleague who needed help sorting through her finances. She asked me to help her out, and she became my first client. Then I had another friend who started a law office and needed help, so I helped them out with all of their accounting. I’d meet with them to make sure that they were still compliant and help with their tax returns.

It just started with helping people as a hobby, but then my husband pointed out that I was getting clients without even trying. Eventually, I was able to start a freelancing business from it.”

Sometimes it’s just a matter of trial and error like it was for Erik. He says:

“Before freelancing, I was at a large tech company, and regularly tried my hand at little entrepreneurial side-projects. Come to think of it, I’ve attempted to sell made-to-measure men’s suits, novelty wall clocks, coaching, and both product and digital design services. But nothing really stuck until Learn UI Design.”

That’s not the only way you can find a profitable freelancing idea either. There are actually 4 questions you can ask yourself right now to find an idea you can leverage for your hustle.

  1. What do you already pay for? We already pay people to do a lot of different things. Can you turn one of those things into your own online business? Examples: Clean your home, walk your pet, cook you meals, etc.
  2. What skills do you have? Now, what do you know — and know well? These are the skills you have that you’re great at — and people want to pay you to teach them. Examples: Fluency in a foreign language, programming knowledge, cooking skills, etc.
  3. What do your friends say you’re great at? I love this question. Not only can it be a nice little ego boost — but it can also be incredibly revealing. Examples: Workout routines, relationship advice, great fashion sense, etc.
  4. What do you do on a Saturday morning? What do you do on a Saturday morning before everyone else is awake? This can be incredibly revealing to what you’re passionate about and what you like to spend your time on. Examples: Browsing fashion websites, working on your car, reading fitness subreddits, etc.

Find an answer to those questions and I promise you you’ll find a great freelancing idea.

Spend about 10 – 20 minutes now writing down five answers for each of the four questions above. Once you’re done, congratulations — you now have 20 potential business ideas that you can grow into a flourishing side hustle.

For now, just choose one business idea. It’s okay, you can always change it later. For now, we’re going to just try one out and try to find a client with it.

For more on how to make more money, you can download 30 Successful Online Business Ideas guide for FREE.

Step 4: Find your first client

In order to start earning money, you need to find the people who will give you money for your ideas.

But the question is…how? Where do you find these people?

One way to find potential clients is to start an email list. That’s what Erik did after writing his piece on designing user interface, “7 Rules for Creating Gorgeous UI (Part 1).”

“Before Learn UI Design, I had kept a blog for a few years, and if that experience taught me anything, it was the internet does not magically show up on your doorstep. Marketing is hard,” Erik said. “I didn’t actually have a newsletter, but over the next couple years, it collected almost 8,000 emails. By the time I finally built and launched my course, I had a whole bunch of folks ready to learn design! (Although, hilariously, I got a couple replies back “This looks amazing, but who are you again??”)”

Another way to find potential clients is to go online and find out where they live. Ask yourself:

  • Who is my client?
  • Where do they go when they want to look for a solution to their problems?
  • Where are they ALREADY looking for solutions to their problems?
  • How can you connect them to your service?

At this point, you’re also going to want to niche down your market in order to really tailor your services and draw in customers.

“Stay in your niche,” Shannon suggests. “We had a few instances where we veered from the niche and we paid for it dearly. It might feel cheesy to sit down and figure out what your target market is or what your goals are for the company, but you have to do that. All that legwork needs to be done upfront. It’s just practical.”

So think about who’s an example of a client who might want to buy your product.

A few questions to jumpstart your research:

  • How old are they?
  • Where do they live?
  • What are their interests?
  • How much do they make?
  • What books do they read?

Using this information, find out what your clients need by going to the places they go.

For example:

  • Want to pitch to moms that blog about children? Go to The Mom Blogs and start with the ones under “Popular Blogs.”
  • Looking for physical or massage therapists within 50 miles of your house? Yelp should get you started easily.
  • If you want to do large dog grooming and sitting, well there’s probably a local pet store or dog park near you where owners are all congregating just waiting for you to offer them a solution.

Here are a few suggestions of some other great sites freelancers can use to find business online:

Once you find a potential client, you’re going to want to reach out to them and pitch your services.

CLIENT’S NAME,

I saw your post on X and visited your website. I noticed that you’ve recently started using videos too.

I’ve been doing video editing for three years and I’d like to offer to help you edit your videos and get them optimized for the web.

That would make them look more professional and load faster, which is important for your readers. And you’d free up time that you could use to create new content.

We can discuss the details, of course, but first I wanted to see if this is something you might be interested in.

If so, would it be okay if I sent you a few ideas on how to help?

Best,

Ramit Sethi

A few takeaways:

  • There is zero fat in the pitch. Every word counts and is needed to help really sell the benefits of working with you.
  • Don’t mention payment. There’s nothing that will kill a potential client’s interest in you more than pushing prices on them before they’re ready.
  • Stress the benefits. This email shows the client why it would be in their best interest to buy from you in the third paragraph.

Once you get a client using this email, congrats! You just secured your first client — but it doesn’t end there. You need to actually do the work for them, and that means continually adding value.

Step 5: Invest again — but this time, in yourself

Investing takes many shapes. It’s not all stocks, bonds, and retirement accounts. Investing can also be in yourself — and it’s something you need to do if you want to earn a million dollars. Be continually curious.

From Erik:

“I read pretty voraciously. Reading takes time, but if you learn the right lessons now, they pay dividends later. Many of the best books I’ve found I read months or years before I actually used the lessons they taught.

And while it’s not related to Learn UI Design directly, another great book-as-investment that’s helped me in freelancing and life is Chris Voss’s negotiation book “Never Split the Difference”, which cost me $18 and saved me $1797 within two months. That’s a 100x ROI on a book!”

I love this. It hits on an idea that all IWT readers should embrace: Be continually curious.

Ask questions when you don’t understand something and don’t be afraid to seek out more information through books, courses, or schooling. It’s only then that you can hope to truly live your Rich Life.

That’s why my team and I have worked hard to create a guide to help you invest in yourself today: The Ultimate Guide to Making Money.

In it, I’ve included my best strategies to:

  • Create multiple income streams so you always have a consistent source of revenue.
  • Start your own business and escape the 9-to-5 for good.
  • Increase your income by thousands of dollars a year through side hustles like freelancing.

Download a FREE copy of the Ultimate Guide today by entering your name and email below — and start blowing up your net worth today.

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