FINANCIAL freedom is a dream for most of us but a reality for very few.
Becoming a millionaire before the age of 30 requires a lot of hard work and discipline – but it is possible and many have done it.
Pulling together £1million takes hard work and lots of planning[/caption]
Increasing your income is one of the first things you can do to work towards your goal[/caption]
No single formula is completely fool-proof, but you can use a combination of the following ideas to amass a large sum of wealth or choose to focus solely on one.
Here Sun Savers editor Lana Clements speaks to experts and takes a look through your options to reveal how you could join the millionaires club.
Become an ISA millionaire
The number of ISA millionaires in the UK is steadily increasing, according to investment firms.
Savers can invest up to £20,000 a year into a Stocks and Shares ISA, which is a tax-free savings account.
Money squirrelled into investments tends to increase faster over time than cash savings.
However, to get to £1million before you turned 30, you’d typically need to have had parents who started investing for you from a very young age through a Junior ISA.
Even then, you’d need to be investing large sums over a long period of time.
You’d hit a goal of £1million after 21 years of investing the full £20,000 allowance at the start of each tax year and achieving an annual 7% total return, according to figures by savings platform AJ Bell.
This would mean investing a hefty £1,666 a month.
Interactive Investor has launched a tool that allows investors to estimate how long it would take to reach ISA millionaire status based on their current monthly contributions.
Among the ISA millionaires on AJ Bell’s platform, the account holders average 87% in shares, including investment trusts, with most of the rest in funds. By comparison, the figure is 33% across other ISA holders.
Those with sizeable ISA portfolios at a young age often tend to pursue a high-conviction strategy focused on specific stocks, according to AJ Bell – which is a much more risky strategy but can pay off.
Dan Coates from AJ Bell said: “Certain investors have utmost faith in a small group of stocks, believing that’s all they need to own to generate big returns.
“They might know every minute detail about these companies, believing this information gives them an edge.
“If they get it right, they could be quids in. If they back the wrong stocks, the lack of diversification in their portfolio could backfire and leave them nursing big losses.”
Before investing you should make sure you have an easily accessible pot of cash savings that you can access in an emergency, for example, if you were to lose your main source of income.
As a general rule of thumb, you should have a rainy day fund that is worth between three to six months’ worth of income.
Top tips for becoming an ISA millionaire
SAVING into a stocks and shares ISA can help you build wealth faster over the long term than cash savings. Dan Coatsworth, investment analyst at savings platform AJ Bell, gives his advice…
- Start as early as you can
Time in the market is important, not just so you can ride the market ups and downs but also to let your wealth build up.
Not everyone can afford to invest the full £20,000 ISA allowance each year, particularly younger people who might be on a lower salary.
The trick is to start as early as possible with what you can afford to invest. Increase your contributions as you get older, such as when you get a pay rise.
- Maximise your contributions
Try to invest as much as you can each month once you’re sure all the essentials are covered.
Create a budget so you can pay bills in full and clear any expensive debt, such as personal loans or credit cards.
The remaining money can be used to fund your lifestyle and to top up your ISA.
- Be consistent with contributions
Feeding your account on a regular basis means you get into the habit of squirrelling money away for your future.
After a while you get accustomed to that money going into your ISA that you may not even think about alternative uses for it, such as going shopping or down the pub with your friends.
- Keep an eye on costs and charges
Costs can add up over time and eat into your returns. Try not to fiddle too much with your portfolio as trading in and out of investments incurs transaction charges.
It is important to be patient with investing, especially for someone hoping to be an ISA millionaire as the journey to build up this wealth could last for decades.
- Spread your risks
Having a diversified portfolio is good practice for any investor and essentially means keeping different types of investments to help balance out the risk.
Then if something goes wrong with one of your investments, you’ve got the rest to hopefully act as a cushion to minimise the pain.
Diversification can involve investing in different industry sectors, geographies and asset types. For example, a diversified portfolio might have exposure to shares, funds and bonds from around the world.
- Reinvest dividends
Companies and funds often pay dividends every three to six months.
Think of these as rewards for taking the risk of owning their shares or fund units. While it can be tempting to pocket that income stream to spend on yourself, history suggests one of the biggest contributors to investment returns is reinvesting dividends back into your account to grow wealth faster.
Increasing your income
If you hope to become a millionaire, you’re most likely going to need to increase your income.
If you’re in a job you enjoy, asking for a pay rise should be your first port of call.
The more cash you have after the essentials, such as bills and food are covered each month, the more that can go into saving and investing to reach that £1million milestone.
Wages increased by 3.4% between October and December compared with a year earlier, according to the latest data from the Office for National Statistics (ONS).
This can help provide a benchmark for the amount you might expect your salary to go up.
There are numerous tools that show how much you can make in certain roles if you believe you are an asset to the company.
Asking for more money can feel intimidating, but in most situations, you have nothing to lose by having the conversation with your manager – even if they can’t grant it.
We have also revealed the jobs that pay up to £50,000 a year that don’t need a degree as well as 50 ways to boost your income – without even leaving your home.
Andrew Hunter, co-founder of job matching platform Adzuna, says: “The end or the beginning of the financial years or quarters can mark an ideal time to schedule a quarterly performance review with your line manager.
“Begin by gathering a list of your achievements and how you’ve added value to your team and company over the past year.”
You can then find out what you’re worth by researching your market value using AI tools such as ValueMyCV.
Andrew adds: “The final step is to share your reasons and future goals. Focus on how a pay rise could benefit your line manager, the broader team and the business.
“When it comes to negotiation, mentality is key. Be prepared to negotiate.
“If a pay rise is not possible, consider negotiating for enhanced perks, for example, a bonus, work-from-home option, additional days off, or professional development opportunities.”
Starting a side hustle can help bring in some extra cash[/caption]
Think about a career change
If you are not happy with the earnings potential from your current career, it could be worth changing into a more lucrative role.
Many assume that you need to be highly trained or skilled to earn a bumper sum but this isn’t always the case.
We spoke to a mortgage adviser earning £150,00 a year – you don’t need a degree and can train on the job.
Or lorry drivers can earn a tidy £60,000 a year and we spoke to one train driver earning £54,000 a year.
Some of the top earning careers that are accessible to young people without degrees include sales executive, voice-over artist, personal trainer, handyman, pet sitter, event sales assistant, and payroll clerk, according to job site Adzuna.
You can see advertised wages on job adverts or use tools to find out average wages to find out if they align with your goals.
Get lucky
Premium Bonds are a type of savings account that offers the chance to win prizes worth up to £1million every month.
You’ll need to put in a minimum of £25 to get started and you can invest up to £50,000.
Each £1 you put in Premium Bonds is an entry into the monthly draw with prizes ranging from £25 up to £1million.
The chances of winning are low. An individual bond has a 21,000 to one for a single prize of any value.
Finance experts at AJ Bell revealed that most Premium Bond holders will never win a prize.
Two-thirds of those holding the bonds have never won anything at all, according to a freedom of information request.
However, someone has to win and this month a saver from Yorkshire with £100 in bonds nabbed one of the top £1million prizes.
It goes without saying that this method is down to luck and you don’t earn any interest on savings kept in Premium Bonds so could see cash actually lose value thanks to the erosion from inflation.
But if you fancy your chances, you could end up lucky.
And there is no risk to your savings as you can withdraw your cash at any time.
How to increase your chances of winning the lottery
The odds of picking a winning lottery ticket are pretty slim but there are some ways to improve your chances .
Games with small jackpots tend to have better odds, so it’s worth taking notice of the difference. For example, EuroMillions is harder to win than UK Lotto.
Some lotteries may have bonus numbers or other features which could improve someone’s chance of winning.
Looking at these additional elements and understanding them can help someone make a more informed decision when choosing their numbers.
Each lottery draw is random and balls have the same chance of being drawn.
However, there are some balls that statistically have appeared more often than others which could make them seem a better bet.
For example, previous research has showed that number 38 was most common, 23 was second most drawn, followed by 31, 11, 45 and 25.
There is another easy way of getting more tickets at the same cost and that is by joining a syndicate.
Of course, you share the winnings, but the chances of matching the numbers drawn are vastly improved.
Set up a business
If you have an idea for a business that is unique or solves a problem in the market, you could be on to a money-spinner.
Setting up a business requires a lot of hard work but there is no minimum age to get started and stuck in.
And many of the country’s most successful earners have made their fortune from starting their own business.
Andreas Adamides, chief executive of founders community Helmclub.co says if you want to start a business you need to start with a clear vision.
This means understanding why you’re starting, who you’re serving and what makes your proposition unique.
Then it’s time to do your research. Who are your competitors? What gaps can your business fill? Your finances need to be a priority.
Andreas adds: “Money is the lifeblood of any business. Before you launch, have a financial plan in place.
“Know how much capital you will need, where it’s coming from, and how you will manage cash flow.”
You’ll also need to focus on compliance and legal structures and make sure you are following all regulations, from taxes to insurance.
How I made a million by the age of 28
LEWIS Camilleri, 37, is founder and chief executive of Boshhh Mobile. Here he explains how he earned £1million by the time he was 28.
I grew up in Manchester helping in my dad’s window cleaning business, so hard work was second nature.
At 18, I started my window cleaning business, built it up, and sold it after two years. That gave me my first real taste of business, but I wanted more.
I saw a huge opportunity in China, so I booked a one-way ticket and lined up meetings with manufacturers, from leather phone cases to granite tombstones.
Within two weeks of landing, I was importing products to the UK. Some things worked, some didn’t, but by 28, I’d hit my first million.
When I came home, I decided to start a financial services business.
I thought I’d made it. Then, we lost our biggest contract and the business collapsed.
Over the next seven years, I rebuilt, gaining 110 employees in financial services, 250,000 plus customers, and realising so many people were just like me, earning but struggling to get credit.
This was the catalyst for why I started Boshhh Mobile, to make financial education and credit building simple, accessible, and fair for everyone.
Boshhh now helps over 100,000 people build their credit scores through their SIM cards with an average credit score increase of 240 points.
That’s the difference between getting a mortgage and not.
For anyone wanting to building cash, my tips would be:
- Work hard
I got my hands dirty. It taught me discipline and how to run a business. It’s not about where you start, it’s about building momentum and learning as you go.
- Jump on opportunities
Overthinking kills ideas. If you spot a gap in the market, go for it. I took a chance on imports from China and later on financial services, both paid off because I moved fast.
- Use what you’ve got
My network became my biggest asset. Your strengths, skills, and connections can open doors, figure out what makes you valuable and double down on it.
- Look after your credit
Trust me, having money in the bank doesn’t mean much if your credit score is wrecked. I learned the hard way that bad credit can hold you back, no matter how successful you are. Stay on top of your finances from day one.
- Money follows value
If you focus on solving real problems for people, the money will come.
Set up a side hustle
Starting a side hustle can be a less risky way of starting a business.
You can start slowly, dipping your toe in the water to see if an idea could work and create decent earnings before fully committing.
As you haven’t quit your job, there is no pressure to earn lots of money quickly.
But if the idea takes off, you could then start to reduce or stop your day job to focus more on a lucrative side hustle.
There are lots of entrepreneurs that have started multi-million-pound businesses as a side hustle.
For example, Pascall Tolley, 33, started a solution to test-drive tattoo ideas before committing to permanent ink as a side hustle that went on to rake in £1.9m in a year.
Student Ciaran Finn, 25, originally started a side hustle to fund medical school but this quickly turned into his new career.
Two years on, he is the founder of an award-winning seven-figure digital marketing firm.
Make a plan
If you want to become a millionaire by the age of 30, you’re going to need to pull together a plan of how you hope this will happen.
Make your goals, breaking them down on a year-by-year, and then quarterly basis, including earnings, savings and spending for each.
If you want to pull together a million, it will likely mean that you’ll need to make some tough decisions about where your money goes and prioritise what is important to you.
You will also need to get a very thorough grip on your finances and make sure they are in the best possible shape. Every penny and pound counts.
Make sure that you are not spending more than necessary on your outgoings.
Shop around for insurance, broadband and energy providers so that you get the best value on each.
Comparison sites such as MoneySuperMarket and Uswitch can help you find the best deals for your circumstances.
And when you do spend, check whether you can get cashback through a site such as topcashback.co.uk.
Focus on sorting out and paying off debts. The more expensive the debt, the more you are wasting money on interest.
If you owe money on your credit card, switching to a zero-interest balance transfer card could be a good idea.
We have looked at some of the best deals currently available and explain how to pay off credit card debt quickly.
Spending your money wisely will also help you achieve your £1million goal[/caption]
How to effectively manage your money
Kara Gammell, finance expert at MoneySuperMarket, gives tips on how to get a handle on your finances so you have more left for saving,
- Analyse your spending
If you’re struggling to get a grip on your finances, the way to start is to do a proper inventory.
Try Emma, the money management app, which uses open banking to combine information from all your bank accounts, savings accounts and credit cards, plus investments. The app then highlights any wasteful subscriptions and costly debt and helps streamline your savings.
What’s more, it analyses your personal finances and recommends ways to conserve money so that you can get on track financially more easily than ever.
If you want to have a deep dive into your spending habits, go through your bank statement at the end of each month and give every purchase a rating of one, two or three.
Mark with a ‘one’ any purchases that didn’t make you feel good; give a ‘two’ rating to things that felt ‘sort of good but indifferent’; and mark with ‘three’ any purchases that you would make all over again in a heartbeat.
You’ll be surprised by what you learn.
- Monitor your credit report
From overdrafts to loans, credit cards, mobile phones and mortgages, it can be hard to keep track of your finances, and it can be all too simple to find yourself in the dark about how much debt you have in total.
But this information forms your credit score, which is used by lenders to determine whether you’ll be offered competitive rates and offers for financial products, or even whether you will even be accepted when you make an application.
I use MoneySuperMarket’s Credit Score tool, which is a free credit report tool that lets me see all my account balances in one place.
I’m automatically notified when my credit report is updated monthly, which can be a huge help in avoiding any financial problems from spiralling and means I always know what my overall financial situation is.
The tool also suggests ways to improve your credit score, so you’re more likely to be offered competitive interest rates, which helps you save money in the long run.
