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3 simple steps to retiring as an ASX millionaire

While becoming part of the Millionaires’ Club might seem like a far stretch for some, the reality is that with some hard work, solid investing and a touch of luck, almost anyone can reach that magic $1 million mark.

Here are 3 simple steps to use today in your journey towards becoming an ASX millionaire.

1. Cut back on your spending

I’ve put this at the top of the list because it really is critical to your success.

While not everyone can increase their income overnight to boost their discretionary income, it is possible to strip back to just the essentials and increase your ASX nest egg.

By consistently saving 20% or more of your paycheck, you can start increasing that extra cash and start investing it into your favourite ASX shares like Afterpay Touch Group Ltd  (ASX: APT) and accelerate your journey towards becoming a millionaire.

One of the biggest obstacles that people face when they receive a payrise is lifestyle inflation, where they start to spend more because they earn more.

Clearly, this just negates the payrise’s effect on your total net worth and leaves you treading water with your investments.

The key here is to keep expenses low, cut back on the eating out and fancy cocktails, which can have an instant impact on your ability to increase your retirement nest egg.

2. Invest in yourself

While we can often get so focused on our money coming in and money coming out, it’s easy to forget that spending money on your own development is actually an investment in and of itself.

While it can be hard to forgo that opportunity to invest $1,000 in Magellan Financial Group Ltd  (ASX: MFG) to put towards that professional certification, the reality is that the compound returns could be much higher.

Especially in your younger or prime earning years, investing in yourself could lead to further pay rises and a fast-tracked career, which over time can easily match a top ASX growth stock for return on investment.

3. Invest your hard-earning cash wisely

While throwing money at penny stocks might be fun, the reality is that a solid ‘buy and hold’ investment strategy can greatly increase your chances of becoming a millionaire.

By investing in long-term winners such as CSL Limited (ASX: CSL), Fools can make their cash work harder for them, while they focus on maximising their earnings potential and minimising their expenses.

Education is key when it comes to investing, and the ability to build a well-diversified ASX dividend and/or growth portfolio is the final component of the 3-part plan.

Once you’ve got all the pieces of the puzzle in place, it’s time to work hard, stay disciplined and keep your sights on that ultimate goal of retiring as an ASX millionaire.

For those who want more dividend income, look no further than these 3 hot stocks on the ASX.

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Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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