Making your first million... is easy! (??)

Question

I've seen several people claim "making a million dollars isn't THAT hard these days". Heck, I've seen it here on this forum. Being a complete beginner with investing, business and finance, I wonder what strategy people have in mind for achieving this.

I did a web search, and it proved strikingly useless (you get a list of get-rich-quick sites).

So what do people mean by "it's easy" to make a million dollars? My guesses are that they mean

• (1) "Millionaire Next Door" style -- in other words, be extremely frugal for a long time
• (2) Find your niche, start a "lifestyle business" and persist with it
• (3) Invest some part of your income over a long period of time and let the stock market do the work

...or perhaps some other strategy? I realize that "a million dollars" is a completely arbitrary figure, but it's one people fixate on. Perhaps folks just meant it's getting easier because inflation has made it a far less lofty sum than when the word "millionaire" was coined.

Answer 1

It is difficult to become a millionaire in the short term (a few years) working at a 9-to-5 job, unless you get lucky (win the lottery, inheritance, gambling at a casino, etc).

However, if you max out your employer's Retirement Plan (401k, 403b) for the next 30 years, and you average a 5% rate of return on your investment, you will reach millionaire status. Many people would consider this "easy" and "automatic".

• If your employer matches your retirement contribution (most do) you will get there faster
• If your investments yield better that 5%, you will get there faster. 5% is pretty conservative for a multi-decade investment strategy.
• If you save additional money (Roth IRA, savings account, etc), you will get there faster.

Of course, this assumes you are able to max our your retirement savings at the start of your career, and keep it going. The idea is that if you get in the habit of saving early in your career and live modestly, it becomes an automatic thing.

Unfortunately, the value of $1 million after 30 years of inflation will be eroded somewhat. (Sorry.)

If you don't want to wait 30 years, then you need to look at a different strategy. Work harder or take risks. Some options:

1. Start your own business. Work hard and hope for some luck.
2. Get a job at a startup (the next Google, Facebook, etc) and get some equity. Hope they make it big.
3. If you aren't up to running your own business, maybe you can invest some of your savings in someone else's business. Do you have a friend with a big idea?
4. Gamble with the stock market, or futures contracts, etc.

Answer 2

I realize that "a million dollars" is a completely arbitrary figure, but it's one people fixate on. Perhaps folks just meant it's getting easier because inflation has made it a far less lofty sum than when the word "millionaire" was coined.

Your point is correct - it' relatively easier as the 1 million dollar nowadays is no where as valuable as compared in the old days after the inflation adjustment.

However the way to achieve that is easier said than done:

• The most possible way is to run your own business (assuming you will make profit).

• For most of the people running a job to earn a living - the job income is the biggest factor. Being extremely frugal wouldn't help much if you don't maximize your income potential.

• Earning a million dollar through investment? How much capitals are you able to invest in? 5k? 50k? 500k? I see no way to earn 1 million with 5k from investment, I wouldn't call it easy.

This again depends on your income. With better income of course you could dedicate a larger portion to investment, without exposing too much risk and having to affect your way of life.

(3) Invest some part of your income over a long period of time and let the stock market do the work

I'd say this is more geared towards beating the inflation and earn a few extra bucks instead of getting very rich (this is being very relative).

Just a word of cautions, the mindset of investment being the shortcut to wealth is very dangerous and often leads to speculative behavior.

Answer 3

Easy. Start with 2 millions and lose only one.

Jokes aside, if you want a million USD, you should be asking yourself how you can produce products or services worth $5 millions. (expect the extra to be eaten up by taxes, marketing, sales, workforce...)

If by investment you mean making risky bets on the stock market, you might have a better time going to Las Vegas. On the other hand, if by investment you mean finding something that will produce $$$ and getting involved, it's a different matter.

Answer 4

I think there's a measure of confirmation bias here. If you talk to somebody that started a successful business and got a million out of it, he'd say "it's easy, just do this and that, like I did". If you consider this as isolated incident, you would ignore thousands of others that did exactly the same and still struggle to break even, or are earning much less, or just went broke and moved on long time ago. You will almost never hear about these as books titled "How I tried to start a business and failed" sell much worse than success stories. So I do not think there's a guaranteed easy way - otherwise we'd have much more millionaires than we do now :) However, it does not mean any of those ways is not worth trying - whatever failure rate there is, it's less than 100% failure rate of not trying anything. You have to choose what fits your abilities and personality best - frugality, risk, inventiveness? Then hope you get as lucky as those "it's easy" people are, I guess.