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Practical, unsexy steps to become a millionaire

138 points by known 9y ago

lev99 9y ago
Thoughts on "thinking long term". I always translate monthly expenses as 2055 dollars, because that is my target retirement date. If something in 2018 costs $100/month that means it costs $1,200/yr. You can expect to see about 8% returns in the stock market over the long term. By saving $100/month for a year instead of spending it I will have ~$20,000 in 2055 money. If I continue to save the $100/month instead of spend it I will have ~$275,000 in 2055 money. Edit: Translating to your target retirement date dollars also works for one time purchases.
- gfodor 9y ago
  Have you accounted for inflation and the fact that your assumption about stock market returns may very well be completely false since past results do not imply future returns? The best way to get rich is to generate a large amount of value for a lot of people as fast as possible in a way that you will directly benefit on the upside (imho.) Not pinch pennies and put your fate in the hands of returns on a specific asset class.
  - lev99 9y ago
    1) I am aware of inflation, but my calculations shown don't consider them. A dollar today has slightly more then half the value it will have in 2055 if you assume yearly 2% inflation. I suspect we will have a few years with much more than 2% inflation between now and 2055 and we might be finished with years with very low inflation for awhile. 2) 8% returns at 2055 is a bit optimistic, but not unrealistic. I won't mind if I have to adjust the date +- 10 years to time the market. I feel comfortable putting the majority of my assets in the US stock market, but I do have some assets independent of it. The last the stock market crashed substance farming was popular.
  - tomkarlo 9y ago
    You have to account for the expected value of those two approaches. The payout on your strategy (generate a lot of value for a lot of people) is high, but the probability of success is very low. (And the payout is usually tied to the stock market, if you're talking about generating corporate equity value, private or public.) Conversely, a dollar saved is just a dollar plus it's return over time, but the probability of saving that dollar is essentially 100%.
    - andrewjl 9y ago
      The probability may be low but the number of attempts allowed is unlimited (barring time / energy / other obligations). So one can keep trying until something sticks. The important part is to keep trying.
      - tomkarlo 9y ago
        Even over a lifetime of trying, the probability remains pretty low. This is why articles like this emphasize that the more realistic was is via savings; lots of folks fail to save because they believe they're going to "hit it big" on the next deal / job / inheritance / lottery ticket, but it's usually just going to result in failing to save enough because you've over-estimated your future income. It's also a convenient way to justify not saving enough. I've watched fairly successful business owners make this mistake many times - they were making 400K or 500K (in some cases, millions) a year off a business, but not saving anything because they still expected it to grow a lot larger. If it fails to grow, then end up either broke or in debt. It's inherent to entrepreneurs that they believe in the big future payoff more than average, but that's also a big blind spot for financial planning.
        andrewjl 9y ago
        Probability of making onto the Forbes 400, very low for sure. Probability of building an income or capital base whose returns can match a typical salary, over a lifetime of attempts is very high. Your examples showcase the pitfalls of bad planning and not the probability of business success. Success doesn't absolve one of the responsibility to plan, but being someone who did succeed can open up additional doors and options for the said plan.
- 1337biz 9y ago
  But the example in the post is just utterly stupid. What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important.
  - madamelic 9y ago
    > What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important. Adding to this point: Don't make your life suck today so 2050 you can live. What happens if you die tomorrow? Strike a balance between making it rain and being a miser.
    - lev99 9y ago
      Thinking about costs as they apply to my finical situation in 2055 doesn't mean that I don't spend money in 2018 for enjoyment. I just look at the cost from a different point of view.
      - nightski 9y ago
        Your scaling is linear. It's not really different at all, the numbers are just larger. At the end of the day, lower cost = better.
  - lev99 9y ago
    I agree that connectivity is a great investment. I pay extra for more bandwidth in my home office and I would buy more if it was available.
- billf1953 9y ago
  You could also die and have zero spending dollars. Or less fatalistically see high inflation eat away your lower than expected returns
deleted 9y ago
[deleted]
1337biz 9y ago
Suprised to see a generic post like this becoming so popular. It is like somebody watched a Warren Buffet documentary and used his personality traits as universally appliable rules. I bet if someone took the time to collect anecdotes of some flashy yachting billionairs, one would draw just the opposite take aways.
- rhizome 9y ago
  Flag it and move on.
  - 1337biz 9y ago
    No, I don't want to flag posts that I probably just didn't understand. That's why I am trying to participate in the discussion.
    - rhizome 9y ago
      There's a question in your mind about whether or not you understood this article?
meuk 9y ago
Of course, living on 10% of your income is just impossible when you're earning 1000-2000 a month. I would also add: read the terms and conditions before you spend money on something, and go as far as you reasonably can to get your money back when you deserve it (legally speaking). Just in the past month I agree that working smarter, not harder is something that really pays off. Unfortunately, this mentality has not really landed in a lot of places. At the consulting company I work, most people work 5 * 8 hours and commute 3+ hours, which leaves very little opportunity to get a second income. The company characterizes this as 'work hard, play hard'. Indeed, I see consultants working hard and managers playing hard.
croshan 9y ago
Sounds like humility is a common personal trait, from the article. And among the people I know, patience with others seems to be a common personal trait. I feel like the cocky entrepreneur stereotype only has the slightest success because of their persistence.
frgtpsswrdlame 9y ago
Oh come on, this is just survivorship bias, self-help crap. Millionaires are just normal people with lots of money, there's nothing particularly unique about them.
- abakker 9y ago
  Claiming that this is survivorship bias is off the mark. That is not a criticism that you can level at any long-term study just because you heard it on the internet. If the intent of the study is to evaluate what terms lead to survivorship, then of course your study is going to be full of survivors - as this one is. While the assessment undoubtedly suffers from some bias, that is also the intent, to some degree. It does not seek to say that these are the only reasons people became millionaires, but instead that these were common, correlated behaviors, and that the logical conclusion you might draw from them is that they are also causative.
  - frgtpsswrdlame 9y ago
    If you only study millionaires and not the rest of society you have no control. You can't say humility makes people millionaires without looking at all the people with humility who aren't millionaires. This guy hung out with millionaires and is pretending their virtuous traits are somehow unique or somehow the reason they're millionaires. That's the definition of survivorship bias.
- TehCorwiz 9y ago
  The millionaires down-voting you would beg to differ. But the main conceit isn't that they're normal people, it's that success is most often a combination of luck and the resources (financial, social, etc.) to take advantage of advantageous situations. That's not to say that wealthy don't work hard, but we as people often discount the influence that our uncontrollable circumstances have on where we end up, and almost no-one wants to admit they are where they are because of dumb luck.
  - DaiPlusPlus 9y ago
    It’s entirely predicated on luck, but rephrase luck as “opportunity” and see you then need to also have the skills and perseverence to capitalise on that opportunity. Of course, the problem is there is having the luck to be born into a situation where you could develop those skills and attitude, either through genetics or an encouraging family environment.
ideonexus 9y ago
Overall, I think this is great article, but I have two quibbles: 1. Start a business if you want to get rich: you can also start a business if you want to lose a lot of money. I lost nearly $100k that would have otherwise gone into my retirement trying to start a business. Most businesses fail. So think starting a business should be seen as a high-risk investment. 2. You can't get rich on a salary: My wife and I have never made six-figure salaries. We are in our mid-40s and we will be breaking $1 million in retirement savings this year if the economy stays stable. We did this by maxing out our 401k contributions since our 20s. Becoming a millionaire is a lot of hard work, but if the recommendations in this article are too extreme I've always appreciated Elizabeth Warren's advice of 50/30/20: 50% of spending on necessities, 30% on fun, and 20% on savings. Using this a guide, I've been able to tell when I need to downsize my spending and I've been able to spend on fun without feeling guilty.
- kelukelugames 9y ago
  You can get rich on salary. I think a portion of us are making more than 200k, 300k, or even higher in income per year.
  - cryoshon 9y ago
    what, a laughably small proportion relative to the country's population? median income is in the 50k range...
    - randlet 9y ago
      Yes, and that's median household income, not individual. It's closer to $60k in the US [1] but your point still stands. [1] http://www.businessinsider.com/us-census-median-income-2017-9 http://www.businessinsider.com/us-census-median-income-2017-...
      - adventured 9y ago
        No, that's the median full-time wage. It'll be just near $50,000 for 2018. Two full-time incomes for a household, you can easily get to $85,000 to $120,000. What you're referring to, includes every person that generates any bit of consequential income. Part-time workers, or people earning $8k-$10k over the Summer, are included in the total median figure (which is closer to $30k).
awjr 9y ago
One of the pieces of advice I did not heed from my Dad was to try and save/invest 30% of your salary. This one is hard to understand until you are in your 40s and realise you are probably going to continue to work well into your 50s. I love my job, but I'm now involved a lot more in the political arena, knowing I can make a difference there, but being held back. 'Having' to hold down a job is getting in the way. I'm at peace with the choices I made but I also recognise I could not be working now if I'd been a bit more prudent.
- aphextron 9y ago
  >One of the pieces of advice I did not heed from my Dad was to try and save/invest 30% of your salary. This one is hard to understand until you are in your 40s and realise you are probably going to continue to work well into your 50s. A single, healthy, 20 something SWE can easily save 60-70% and retire before age 40 if you really try. I’m right around 50% now. The key is getting over that mental hurdle to where you start enjoying saving more than spending. I feel infinitely more fulfilled seeing $1,000 in my bank account than anything an iPhone X could ever do for me.
  - everdev 9y ago
    Exactly. If you don't need the new car, new house, etc. you can save a ton of money. You really only need a room and healthy food and enough clothes for the week. Everything else is "cashing in early"
  - nunez 9y ago
    You totally can do that if you hate fun
    - qu4z-2 9y ago
      Or if you know how to have fun without just throwing money at the problem :P
kelukelugames 9y ago
Can you please remove the word unsexy from the title? That would make it sound less click baity.
defen 9y ago
The real answer: save $20,000 a year at 3% growth for 30 years. If you want to do it in 20 years you need 8% growth, which is probably not sustainable; or you can save $35,000 per year at 3%.
- everdev 9y ago
  8% annual average return is not unrealistic for the US stock market. I did it using this method. I worked hard and lived within my means for 5 years. You'll quickly realize that after taxes a million isn't close to retirement money in the Bay area.
  - defen 9y ago
    Cumulative return for the S&P 500 over the past 9 years (conveniently leaving out the 2008 crash), with dividend reinvestment, is equivalent to a YoY gain of 16.25%, which gets you to a million on $46,000 per year for those 9 years. However I think it would be foolish to presume that the stock market will continue to post those kind of gains forever. Edit: adjusted ambiguous wording about S&P gains
    - yakitori 9y ago
      > Cumulative return for the S&P 500 over the past 9 years (conveniently leaving out the 2008 crash), with dividend reinvestment, is equivalent to a YoY gain of 16.25% That's a bit disingenuous to use the generational market lows of 2009 as your starting point. It would be like using the all-time highs of 2000 and the 2009 lows as your range. Then the cumulative returns would be negative ( including dividends ). > However I think it would be foolish to presume that the stock market will continue to post those kind of gains forever. It's impossible for any economy/market/whatever to maintain a 16% return every year.
      - defen 9y ago
        > That's a bit disingenuous to use the generational market lows of 2009 as your starting point. It would be like using the all-time highs of 2000 and the 2009 lows as your range. Then the cumulative returns would be negative ( including dividends ). Right, I did that on purpose, just as a way of showing that luck (in terms of accidental market timing) has a huge impact on returns. As I said in top comment, even 8% is not sustainable, let alone 16.
tabeth 9y ago
My steps: 1. Buy a house in a place where it's normal for people for rent rooms or have roommates. 2. Rent out all of the rooms other than the one you live in. 3. Renovate the house, depreciating all expenses. 4. Make all necessary repairs, deducting all expenses. 5. Buy things like solar panels, which also can be depreciated (5 years) and improve the cost basis of your home. 6. When the house is paid off from rental income + what you had to pay in mortgage anyway (this will take between 5 to 10 years. This means if you're mortgage is $3000 and your rental income is $3500, don't pocket the cash. Put most of the rental income towards the principal and save some for repairs/improvements.) Buy another house and do a 1031 exchange. 7. Repeat step (1) with a nicer house, ideally with a duplex/triplex/four-plex. Stop repeating when you're seeing diminishing returns on the cash flow of your home (this will likely be at the multi-family level). Eventually all of your housing related expenses will be 0. Take the money you would've had to spend and put it into an index fund. Unlike most advice, the above steps are guaranteed to work as long as you buy a house you're capable and willing to pay the mortgage of without renting it out. Finally, because you're an owner occupant you have the ultimate leverage and it's effectively zero risk, since costs are spread across your tenants and benefits go to the property you own. What's the catch you're thinking? Why doesn't everyone do this if it's guaranteed? Turns out people don't like being a landlord or living with others. Swallow that pill and financial success is inevitable as long as you don't try to become an investor (that's an entirely different set of problems). You also have to be willing to do this even if you have a family -- however if you started this early enough (up to late 30s) you should be able to transition over to a multi-family in most markets and still have some privacy for you and your family. --- Unlike a lot of other advice, you don't even have to make a lot of money to do the above.
- cryoshon 9y ago
  >1. Buy a house in a place where it's normal for people for rent rooms or have roommates sorry can you explain how you start with this step if your net worth is zero?
  - tabeth 9y ago
    If you buy a multifamily you can do so with as little as 3% down. Rent out the rooms in your unit and you're generally good for most markets.
cryoshon 9y ago
have to disagree on the following grounds: 1. most people aren't even exposed to the opportunity to gain any appreciable wealth. step one is getting out of salaryman slavery existence and getting into companymaking, rent extraction, financial swindling/legal tax evasion, etc. the author mentions the last point, but it's too far down the line. step one is to start playing the game to win, and start trying to make real money rather than subsistence... 2. luck is probably more influential than what people suspect. see: zuck, bitcoin millionaires 3. compound interest is real, but most people in the US are living hand to mouth so reaping the benefits takes far longer than they are willing to wait-- this isn't a failure of patience but a pragmatic choice to survive until tomorrow. you ask them to stash thousands of bucks today for twenty years down the line, and they'll tell you they're already running on empty. you ask them to stash $20 today for 50 years down the line, and they'll say they'd rather have it in their pocket to pay for medicine. and they are not wrong; they can't risk even temporarily losing some of their wealth because they have so very little to gamble on investments. 4. being frugal is real, but the opportunities don't exist in places where being frugal is very effective. the more expensive the place, the more opportunities flow through it. cities have more expensive food, very expensive rent, and 100% of the opportunities that someone will need to get rich. 5. oh yeah, and it's impossible to be frugal when you have student loans bleeding you right out of the gate. 6.5% interest loans does a great job of snuffing out potential millionaires everywhere through no fault of their own. 6. learning and writing stuff down is great. but becoming rich isn't a matter of knowing the path. it's necessary to know stuff, but you need to actually walk the path to wealth without stumbling-- different skills entirely. disclaimer: i'm not a millionaire yet so YMMV
- paulsutter 9y ago
  > it's impossible to be frugal when you have student loans bleeding you...through no fault of their own. I had a little trouble parsing your logic there, student loans get forced on people?
  - cryoshon 9y ago
    de facto, yes. imagine if you knew nothing, and then the people you trust said you need X to succeed. you go and get X with the means you have. most people only have the means of borrowing.
monsieurgaufre 9y ago
The real answer is: have old money or kbow people who havenit and want to lend it / give it to you. The rest is survivor bias that doesn't take into account all that it should.
outsidetheparty 9y ago
This section is angry-making: > a lot of millionaires live on something like 10% of their income. Everything they own, their house, their cars, even boat, doesn’t surpass 10%. You can apply this thinking too! Something tells me the people able to live on 10% of their income have at least one "multi-" prepended to their "millionaire" label. In SF, doing this while living in a 1BR apartment would require a yearly income over $430,000. San Jose, over $300,000. In NYC, DC, Boston, Miami or LA, you'll need at least $240,000 a year. National median rent ($1234/mo) still needs above $150K/year. And that's just rent, no frivolities like "eating food" or "wearing clothes". (Rent data from http://time.com/money/4359971/average-apartment-cost-us-cities/ http://time.com/money/4359971/average-apartment-cost-us-citi... 2016; current numbers likely worse) It's easy to save money when you already have much more than you could possibly need. Otherwise, less so.
- bloaf 9y ago
  That section is confuse-making. Presumably their house, car, and boats DO cost more than 10% of their income. Their payments on those items might not exceed 10%.
  - gowld 9y ago
    That's still patently absurd for anyone making <$500K/yr (OK, less if they don't have a family)
- jogjayr 9y ago
  Presumably once you're a millionaire, you're past the point of needing to rent a 1-bed apartment in high CoL like the other working stiffs. You can retire to a lower CoL area and live off your investments, or switch careers.
matte_black 9y ago
Invest on margin, at least 2 to 1 leverage, though more does exist. Do it right and you supercharge your gains. Also a good way to go flat broke and get wiped out, but most ways of becoming a millionaire quickly come with that risk.
JeanMarcS 9y ago
I don't get something : how 520 weeks (10 years, on a false base of 52 weeks per years) result in multiplying by 752 a weekly expense for the equivalent f 10 years. Is it because of inflation ?
- LyndsySimon 9y ago
  I'm guessing it's opportunity cost. The money you are spending on Starbucks could be earning ~4% in a low-risk investment.
nunez 9y ago
Many of the wealthy folks I've met didn't get there by saving and scrimping. They either founded a business and won (usually after a few losses), landed the right job or inherited it. Spending your prime years focussing on nothing but retirement seems foolish to me.
- TheAdamAndChe 9y ago
  It takes capital and the capacity to take on risk to start your own business. Many younger people nowadays start their careers with tens or hundreds of thousands of dollars of debt. It's suspected that this is what is causing the declining startup rates[1]. [1] https://www.washingtonpost.com/news/on-small-business/wp/2015/02/12/the-decline-of-american-entrepreneurship-in-five-charts/?utm_term=.3038c1e98663 https://www.washingtonpost.com/news/on-small-business/wp/201...

138 points by known 9y ago

Thoughts on "thinking long term". I always translate monthly expenses as 2055 dollars, because that is my target retirement date. If something in 2018 costs $100/month that means it costs $1,200/yr. You can expect to see about 8% returns in the stock market over the long term. By saving $100/month for a year instead of spending it I will have ~$20,000 in 2055 money. If I continue to save the $100/month instead of spend it I will have ~$275,000 in 2055 money. Edit: Translating to your target retirement date dollars also works for one time purchases.

gfodor 9y ago
Have you accounted for inflation and the fact that your assumption about stock market returns may very well be completely false since past results do not imply future returns? The best way to get rich is to generate a large amount of value for a lot of people as fast as possible in a way that you will directly benefit on the upside (imho.) Not pinch pennies and put your fate in the hands of returns on a specific asset class.
- lev99 9y ago
  1) I am aware of inflation, but my calculations shown don't consider them. A dollar today has slightly more then half the value it will have in 2055 if you assume yearly 2% inflation. I suspect we will have a few years with much more than 2% inflation between now and 2055 and we might be finished with years with very low inflation for awhile. 2) 8% returns at 2055 is a bit optimistic, but not unrealistic. I won't mind if I have to adjust the date +- 10 years to time the market. I feel comfortable putting the majority of my assets in the US stock market, but I do have some assets independent of it. The last the stock market crashed substance farming was popular.
- tomkarlo 9y ago
  You have to account for the expected value of those two approaches. The payout on your strategy (generate a lot of value for a lot of people) is high, but the probability of success is very low. (And the payout is usually tied to the stock market, if you're talking about generating corporate equity value, private or public.) Conversely, a dollar saved is just a dollar plus it's return over time, but the probability of saving that dollar is essentially 100%.
  - andrewjl 9y ago
    The probability may be low but the number of attempts allowed is unlimited (barring time / energy / other obligations). So one can keep trying until something sticks. The important part is to keep trying.
    - tomkarlo 9y ago
      Even over a lifetime of trying, the probability remains pretty low. This is why articles like this emphasize that the more realistic was is via savings; lots of folks fail to save because they believe they're going to "hit it big" on the next deal / job / inheritance / lottery ticket, but it's usually just going to result in failing to save enough because you've over-estimated your future income. It's also a convenient way to justify not saving enough. I've watched fairly successful business owners make this mistake many times - they were making 400K or 500K (in some cases, millions) a year off a business, but not saving anything because they still expected it to grow a lot larger. If it fails to grow, then end up either broke or in debt. It's inherent to entrepreneurs that they believe in the big future payoff more than average, but that's also a big blind spot for financial planning.
      - andrewjl 9y ago
        Probability of making onto the Forbes 400, very low for sure. Probability of building an income or capital base whose returns can match a typical salary, over a lifetime of attempts is very high. Your examples showcase the pitfalls of bad planning and not the probability of business success. Success doesn't absolve one of the responsibility to plan, but being someone who did succeed can open up additional doors and options for the said plan.
1337biz 9y ago
But the example in the post is just utterly stupid. What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important.
- madamelic 9y ago
  > What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important. Adding to this point: Don't make your life suck today so 2050 you can live. What happens if you die tomorrow? Strike a balance between making it rain and being a miser.
  - lev99 9y ago
    Thinking about costs as they apply to my finical situation in 2055 doesn't mean that I don't spend money in 2018 for enjoyment. I just look at the cost from a different point of view.
    - nightski 9y ago
      Your scaling is linear. It's not really different at all, the numbers are just larger. At the end of the day, lower cost = better.
- lev99 9y ago
  I agree that connectivity is a great investment. I pay extra for more bandwidth in my home office and I would buy more if it was available.
billf1953 9y ago
You could also die and have zero spending dollars. Or less fatalistically see high inflation eat away your lower than expected returns

deleted 9y ago

[deleted]

1337biz 9y ago

Suprised to see a generic post like this becoming so popular. It is like somebody watched a Warren Buffet documentary and used his personality traits as universally appliable rules. I bet if someone took the time to collect anecdotes of some flashy yachting billionairs, one would draw just the opposite take aways.

rhizome 9y ago
Flag it and move on.
- 1337biz 9y ago
  No, I don't want to flag posts that I probably just didn't understand. That's why I am trying to participate in the discussion.
  - rhizome 9y ago
    There's a question in your mind about whether or not you understood this article?

meuk 9y ago

Of course, living on 10% of your income is just impossible when you're earning 1000-2000 a month. I would also add: read the terms and conditions before you spend money on something, and go as far as you reasonably can to get your money back when you deserve it (legally speaking). Just in the past month I agree that working smarter, not harder is something that really pays off. Unfortunately, this mentality has not really landed in a lot of places. At the consulting company I work, most people work 5 * 8 hours and commute 3+ hours, which leaves very little opportunity to get a second income. The company characterizes this as 'work hard, play hard'. Indeed, I see consultants working hard and managers playing hard.

croshan 9y ago

Sounds like humility is a common personal trait, from the article. And among the people I know, patience with others seems to be a common personal trait. I feel like the cocky entrepreneur stereotype only has the slightest success because of their persistence.

frgtpsswrdlame 9y ago

Oh come on, this is just survivorship bias, self-help crap. Millionaires are just normal people with lots of money, there's nothing particularly unique about them.

abakker 9y ago
Claiming that this is survivorship bias is off the mark. That is not a criticism that you can level at any long-term study just because you heard it on the internet. If the intent of the study is to evaluate what terms lead to survivorship, then of course your study is going to be full of survivors - as this one is. While the assessment undoubtedly suffers from some bias, that is also the intent, to some degree. It does not seek to say that these are the only reasons people became millionaires, but instead that these were common, correlated behaviors, and that the logical conclusion you might draw from them is that they are also causative.
- frgtpsswrdlame 9y ago
  If you only study millionaires and not the rest of society you have no control. You can't say humility makes people millionaires without looking at all the people with humility who aren't millionaires. This guy hung out with millionaires and is pretending their virtuous traits are somehow unique or somehow the reason they're millionaires. That's the definition of survivorship bias.
TehCorwiz 9y ago
The millionaires down-voting you would beg to differ. But the main conceit isn't that they're normal people, it's that success is most often a combination of luck and the resources (financial, social, etc.) to take advantage of advantageous situations. That's not to say that wealthy don't work hard, but we as people often discount the influence that our uncontrollable circumstances have on where we end up, and almost no-one wants to admit they are where they are because of dumb luck.
- DaiPlusPlus 9y ago
  It’s entirely predicated on luck, but rephrase luck as “opportunity” and see you then need to also have the skills and perseverence to capitalise on that opportunity. Of course, the problem is there is having the luck to be born into a situation where you could develop those skills and attitude, either through genetics or an encouraging family environment.

ideonexus 9y ago

Overall, I think this is great article, but I have two quibbles: 1. Start a business if you want to get rich: you can also start a business if you want to lose a lot of money. I lost nearly $100k that would have otherwise gone into my retirement trying to start a business. Most businesses fail. So think starting a business should be seen as a high-risk investment. 2. You can't get rich on a salary: My wife and I have never made six-figure salaries. We are in our mid-40s and we will be breaking $1 million in retirement savings this year if the economy stays stable. We did this by maxing out our 401k contributions since our 20s. Becoming a millionaire is a lot of hard work, but if the recommendations in this article are too extreme I've always appreciated Elizabeth Warren's advice of 50/30/20: 50% of spending on necessities, 30% on fun, and 20% on savings. Using this a guide, I've been able to tell when I need to downsize my spending and I've been able to spend on fun without feeling guilty.

kelukelugames 9y ago
You can get rich on salary. I think a portion of us are making more than 200k, 300k, or even higher in income per year.
- cryoshon 9y ago
  what, a laughably small proportion relative to the country's population? median income is in the 50k range...
  - randlet 9y ago
    Yes, and that's median household income, not individual. It's closer to $60k in the US [1] but your point still stands. [1] http://www.businessinsider.com/us-census-median-income-2017-9 http://www.businessinsider.com/us-census-median-income-2017-...
    - adventured 9y ago
      No, that's the median full-time wage. It'll be just near $50,000 for 2018. Two full-time incomes for a household, you can easily get to $85,000 to $120,000. What you're referring to, includes every person that generates any bit of consequential income. Part-time workers, or people earning $8k-$10k over the Summer, are included in the total median figure (which is closer to $30k).

awjr 9y ago

One of the pieces of advice I did not heed from my Dad was to try and save/invest 30% of your salary. This one is hard to understand until you are in your 40s and realise you are probably going to continue to work well into your 50s. I love my job, but I'm now involved a lot more in the political arena, knowing I can make a difference there, but being held back. 'Having' to hold down a job is getting in the way. I'm at peace with the choices I made but I also recognise I could not be working now if I'd been a bit more prudent.

aphextron 9y ago
>One of the pieces of advice I did not heed from my Dad was to try and save/invest 30% of your salary. This one is hard to understand until you are in your 40s and realise you are probably going to continue to work well into your 50s. A single, healthy, 20 something SWE can easily save 60-70% and retire before age 40 if you really try. I’m right around 50% now. The key is getting over that mental hurdle to where you start enjoying saving more than spending. I feel infinitely more fulfilled seeing $1,000 in my bank account than anything an iPhone X could ever do for me.
- everdev 9y ago
  Exactly. If you don't need the new car, new house, etc. you can save a ton of money. You really only need a room and healthy food and enough clothes for the week. Everything else is "cashing in early"
- nunez 9y ago
  You totally can do that if you hate fun
  - qu4z-2 9y ago
    Or if you know how to have fun without just throwing money at the problem :P

kelukelugames 9y ago

Can you please remove the word unsexy from the title? That would make it sound less click baity.

defen 9y ago

The real answer: save $20,000 a year at 3% growth for 30 years. If you want to do it in 20 years you need 8% growth, which is probably not sustainable; or you can save $35,000 per year at 3%.

everdev 9y ago
8% annual average return is not unrealistic for the US stock market. I did it using this method. I worked hard and lived within my means for 5 years. You'll quickly realize that after taxes a million isn't close to retirement money in the Bay area.
- defen 9y ago
  Cumulative return for the S&P 500 over the past 9 years (conveniently leaving out the 2008 crash), with dividend reinvestment, is equivalent to a YoY gain of 16.25%, which gets you to a million on $46,000 per year for those 9 years. However I think it would be foolish to presume that the stock market will continue to post those kind of gains forever. Edit: adjusted ambiguous wording about S&P gains
  - yakitori 9y ago
    > Cumulative return for the S&P 500 over the past 9 years (conveniently leaving out the 2008 crash), with dividend reinvestment, is equivalent to a YoY gain of 16.25% That's a bit disingenuous to use the generational market lows of 2009 as your starting point. It would be like using the all-time highs of 2000 and the 2009 lows as your range. Then the cumulative returns would be negative ( including dividends ). > However I think it would be foolish to presume that the stock market will continue to post those kind of gains forever. It's impossible for any economy/market/whatever to maintain a 16% return every year.
    - defen 9y ago
      > That's a bit disingenuous to use the generational market lows of 2009 as your starting point. It would be like using the all-time highs of 2000 and the 2009 lows as your range. Then the cumulative returns would be negative ( including dividends ). Right, I did that on purpose, just as a way of showing that luck (in terms of accidental market timing) has a huge impact on returns. As I said in top comment, even 8% is not sustainable, let alone 16.

tabeth 9y ago

My steps: 1. Buy a house in a place where it's normal for people for rent rooms or have roommates. 2. Rent out all of the rooms other than the one you live in. 3. Renovate the house, depreciating all expenses. 4. Make all necessary repairs, deducting all expenses. 5. Buy things like solar panels, which also can be depreciated (5 years) and improve the cost basis of your home. 6. When the house is paid off from rental income + what you had to pay in mortgage anyway (this will take between 5 to 10 years. This means if you're mortgage is $3000 and your rental income is $3500, don't pocket the cash. Put most of the rental income towards the principal and save some for repairs/improvements.) Buy another house and do a 1031 exchange. 7. Repeat step (1) with a nicer house, ideally with a duplex/triplex/four-plex. Stop repeating when you're seeing diminishing returns on the cash flow of your home (this will likely be at the multi-family level). Eventually all of your housing related expenses will be 0. Take the money you would've had to spend and put it into an index fund. Unlike most advice, the above steps are guaranteed to work as long as you buy a house you're capable and willing to pay the mortgage of without renting it out. Finally, because you're an owner occupant you have the ultimate leverage and it's effectively zero risk, since costs are spread across your tenants and benefits go to the property you own. What's the catch you're thinking? Why doesn't everyone do this if it's guaranteed? Turns out people don't like being a landlord or living with others. Swallow that pill and financial success is inevitable as long as you don't try to become an investor (that's an entirely different set of problems). You also have to be willing to do this even if you have a family -- however if you started this early enough (up to late 30s) you should be able to transition over to a multi-family in most markets and still have some privacy for you and your family. --- Unlike a lot of other advice, you don't even have to make a lot of money to do the above.

cryoshon 9y ago
>1. Buy a house in a place where it's normal for people for rent rooms or have roommates sorry can you explain how you start with this step if your net worth is zero?
- tabeth 9y ago
  If you buy a multifamily you can do so with as little as 3% down. Rent out the rooms in your unit and you're generally good for most markets.

cryoshon 9y ago

have to disagree on the following grounds: 1. most people aren't even exposed to the opportunity to gain any appreciable wealth. step one is getting out of salaryman slavery existence and getting into companymaking, rent extraction, financial swindling/legal tax evasion, etc. the author mentions the last point, but it's too far down the line. step one is to start playing the game to win, and start trying to make real money rather than subsistence... 2. luck is probably more influential than what people suspect. see: zuck, bitcoin millionaires 3. compound interest is real, but most people in the US are living hand to mouth so reaping the benefits takes far longer than they are willing to wait-- this isn't a failure of patience but a pragmatic choice to survive until tomorrow. you ask them to stash thousands of bucks today for twenty years down the line, and they'll tell you they're already running on empty. you ask them to stash $20 today for 50 years down the line, and they'll say they'd rather have it in their pocket to pay for medicine. and they are not wrong; they can't risk even temporarily losing some of their wealth because they have so very little to gamble on investments. 4. being frugal is real, but the opportunities don't exist in places where being frugal is very effective. the more expensive the place, the more opportunities flow through it. cities have more expensive food, very expensive rent, and 100% of the opportunities that someone will need to get rich. 5. oh yeah, and it's impossible to be frugal when you have student loans bleeding you right out of the gate. 6.5% interest loans does a great job of snuffing out potential millionaires everywhere through no fault of their own. 6. learning and writing stuff down is great. but becoming rich isn't a matter of knowing the path. it's necessary to know stuff, but you need to actually walk the path to wealth without stumbling-- different skills entirely. disclaimer: i'm not a millionaire yet so YMMV

paulsutter 9y ago
> it's impossible to be frugal when you have student loans bleeding you...through no fault of their own. I had a little trouble parsing your logic there, student loans get forced on people?
- cryoshon 9y ago
  de facto, yes. imagine if you knew nothing, and then the people you trust said you need X to succeed. you go and get X with the means you have. most people only have the means of borrowing.

monsieurgaufre 9y ago

The real answer is: have old money or kbow people who havenit and want to lend it / give it to you. The rest is survivor bias that doesn't take into account all that it should.

outsidetheparty 9y ago

This section is angry-making: > a lot of millionaires live on something like 10% of their income. Everything they own, their house, their cars, even boat, doesn’t surpass 10%. You can apply this thinking too! Something tells me the people able to live on 10% of their income have at least one "multi-" prepended to their "millionaire" label. In SF, doing this while living in a 1BR apartment would require a yearly income over $430,000. San Jose, over $300,000. In NYC, DC, Boston, Miami or LA, you'll need at least $240,000 a year. National median rent ($1234/mo) still needs above $150K/year. And that's just rent, no frivolities like "eating food" or "wearing clothes". (Rent data from http://time.com/money/4359971/average-apartment-cost-us-cities/ http://time.com/money/4359971/average-apartment-cost-us-citi... 2016; current numbers likely worse) It's easy to save money when you already have much more than you could possibly need. Otherwise, less so.

bloaf 9y ago
That section is confuse-making. Presumably their house, car, and boats DO cost more than 10% of their income. Their payments on those items might not exceed 10%.
- gowld 9y ago
  That's still patently absurd for anyone making <$500K/yr (OK, less if they don't have a family)
jogjayr 9y ago
Presumably once you're a millionaire, you're past the point of needing to rent a 1-bed apartment in high CoL like the other working stiffs. You can retire to a lower CoL area and live off your investments, or switch careers.

matte_black 9y ago

Invest on margin, at least 2 to 1 leverage, though more does exist. Do it right and you supercharge your gains. Also a good way to go flat broke and get wiped out, but most ways of becoming a millionaire quickly come with that risk.

JeanMarcS 9y ago

I don't get something : how 520 weeks (10 years, on a false base of 52 weeks per years) result in multiplying by 752 a weekly expense for the equivalent f 10 years. Is it because of inflation ?

LyndsySimon 9y ago
I'm guessing it's opportunity cost. The money you are spending on Starbucks could be earning ~4% in a low-risk investment.

nunez 9y ago

Many of the wealthy folks I've met didn't get there by saving and scrimping. They either founded a business and won (usually after a few losses), landed the right job or inherited it. Spending your prime years focussing on nothing but retirement seems foolish to me.

TheAdamAndChe 9y ago
It takes capital and the capacity to take on risk to start your own business. Many younger people nowadays start their careers with tens or hundreds of thousands of dollars of debt. It's suspected that this is what is causing the declining startup rates[1]. [1] https://www.washingtonpost.com/news/on-small-business/wp/2015/02/12/the-decline-of-american-entrepreneurship-in-five-charts/?utm_term=.3038c1e98663 https://www.washingtonpost.com/news/on-small-business/wp/201...