What is rich? Being a millionaire is a good start. That said, millionaires are not what they used to be, especially those whose net worth is just a million, or a few millions. Because of inflation, high cost of living and high real estate prices, a few million dollars do not go that far.
Most recently, there also seems to be super inflated wages, especially in the tech industry. People with a few years of experience and in the right company, can make close to a million dollars a year - ONE SINGLE YEAR.
I was astounded when I heard that, but also an alarm went off in my head. Bubble much? Executives in the finance industry have been making multi million dollars a year on Wall Street, before the great recession and in the last couple of years when the market was good again. Another sign for an imminent crash, perhaps.
Anyway, it does seem like every influencer in the personal finance category is a millionaire nowadays. That’s what inspired me to write about this. There is no shame to admit it - I made that mark too.
People love to talk about money - how much they make, how much they spend and how much they keep. Let’s be honest, we are all here to learn about money - how to make more and how to keep more, but perhaps not how to spend more - there is already enough mainstream media to show you how to do that. I want to start with this intro, because this blog article is not about bragging. I got inspired by other influencers such as Tech Lead, Venessa Lau, Graham Stephan, Ali Abdaal, etc. Each of their journeys is different, or so it seems…
If you stick around to listen to my story, you will probably see that mine is different from theirs - I have never worked in the tech industry (unlike Tech Lead), I do not provide consulting or coaching services (unlike Vanessa), I did not start working when I turned 18 but much later (unlike Graham), and I’m not a medical doctor (unlike Ali). However, I want to pre-empt by saying that there is one common thing that made people millionaires - not only the ones that I mentioned before, but most of the millionaires out there. Yes there are people who became millionaires from their jobs, but that is more like the exception that proves the rule. Plus, those people’s jobs are very different from a traditional 9-5. OK, without further ado, let’s get into it - what is the one thing that can make you a millionaire?
First off, I have to admit that I do make good income from my W2 job. My starting salary right out of school was almost 6-figures, and now multi-6 figures. That said, money doesn’t go that far where I live. There are plenty of people I know who make multi-6 figures or even 7 to 8 figure salaries. They may have professional degrees or they may not. My point is, the salary itself is nothing worth bragging about at all.
To make my point clear with numbers, for a $200k salary:
tax will take away almost 40% ($80k),
housing would cost $4000 x 12 = $48k,
transportation would cost $2k x 12 = $24k,
food and other basic necessities would cost $2k x 12 = $24k,
So you are left with $24k. In order to save $1 million, it will take 42 years. And this is assuming no childcare, no vacation or other extravagances. OK, so this is NOT the way to become a millionaire - by saving money from a W2 job.
I’ve been working for almost 10 years now so in theory if I had been an aggressive saver, I may have saved my way to a millionaire. Oh, one thing I forgot to mention is that there were also student loan payments along the way, which was about $1k a month. Anyway, reality is that I didn’t become a millionaire by saving my way there.
Perhaps inheritance? Well, my parents did help me somewhat financially - they offered to pay for my wedding. BTW, my parents were fairly financially responsible and able to save, to which I applaud them. Growing up, we were very poor, which was a blessing in disguise. I learned the importance of gaining financial independence. As my mom would say, save for the rainy days during the sunny days. Anyway, the money my parents sent me to pay for my wedding didn’t actually end up going to pay for my wedding. As we started making income, my husband and I ended up paying various installments to the vendors gradually with our earned income. So no, inheritance is not an option for most people, myself included.
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What are some other possibilities? Winning a lottery? No, don't bother. To me, that’s a bigger waste of money than buying Starbucks coffee.
Lastly, perhaps buying Tesla stocks or Bitcoin or other "unicorn" assets and holding them long term through all the thick and thin? I wish I did. That would probably have been a much easier way. But, perhaps it would not have been easy at all. Most people cannot resist the lure of crowd mentality and end up buying high and selling low. So this is not a fool proof way to become a millionaire.
OK, if you don't know already, I love real estate. So if you guessed that the one thing I did is real estate, you are getting very close, but the matter of fact is that it’s still not quite the answer to riches.
Finally, here is the "secret", the one thing you need to do is take action. What I mean by that is I did something outside my day to day job to grow my net worth - I thought, studied, analyzed, and decided that real estate was the best route for me. But I didn’t stop at the prepping phase, which is where a lot of people get stuck, and this is the so-called analysis paralysis. It’s fairly easy to read a book, listen to a podcast, and take a course, but many people fall short to put what they learn into action. There is this fear of making mistakes, fear of failure and fear of humiliation if things don’t work out. The one book that changed many people's lives, myself included, is Rich Dad Poor Dad. Let me re-cite some of the quotes that really got me over the hump:
“In school we learn that mistakes are bad, and we are punished for making them. Yet, if you look at the way humans are designed to learn, we learn by making mistakes. We learn to walk by falling down. If we never fell down, we would never walk.”
“You’re only poor if you give up. The most important thing is that you did something. Most people only talk and dream of getting rich. You’ve done something.”
“There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”
It could well be any business venture other than real estate. As a matter of fact, the one thing in common that the influencers mentioned at the beginning all did was take action. Tech Lead started his YouTube channel while still at Facebook making a $500k salary. Venessa Lau quit her job at L'Oréal and started her consulting and coaching business. Graham Stephan became a real estate agent at the age 18 and worked his butt off in order to invest in his own real estate portfolio. Ali Abdaal ventured into many side businesses since he was a teen, and finally made his name in Youtube and blogging, while becoming a medical doctor in the meantime. And of course, there are so many more examples to provide.
Before I close out, I want to clarify that I am not advocating to take blind risks. Do study, research and experiment with what you can afford to lose first. For me, I had some seed money to start with. But if you don’t, there are plenty of side businesses you can do with little or no money, but it does require more of your time.
You can do it!