When dreaming of reaching a million dollars in networth, one sad thing most people are guilty of–including me–is looking for shortcuts to success. I can tell you from first-hand experience that they don’t exist. Anyone that claims to reach the results you are looking for in a relatively short period of time is usually lying. You’ve probably seen this in other people’s blogs, with tacky titles like these:
- How I was able to retire with a million dollars in just 10 years
- How to work from your home and make $10,000 a month in just 30 days.
- How would you like to make what you make every year every month instead?
One blogger claims to have reached a million dollars in networth through investing in index stocks in just ten short years. She lives in New York but will not share concrete processes or systems she actually used to reach her goals, claiming it is her right to maintain privacy.
You can imagine she does indeed hide behind a pseudonym. I don’t doubt you will reach wealth if you invest in the right stocks. After all, I have a friend who just make a million-plus US dollars through investing in crypto-currency.
But I also will not do business with or trust people who do not have their pictures and their real names posted on their websites. It just makes their stories that much more suspect, like a get-rich quick scheme.
It Is Possible to Reach a Million Dollars
While I don’t doubt it’s possible to reach these financial goals, I’m also well aware of the fact that many of them exaggerate the time table upon which they are able to achieve these goals. Many of these people also have businesses teaching other people how to reach a million dollars. Of course, this blog is no exception. And if you have a unique skillset or knowledge you can market and provide value to people in need, then you should be running your own business, too.
It’s the most likely way you can reach a million dollars or more in networth than to wait 30+ years, which is what this article is about.
That being said, this blog article will show you how to reach a million dollars in network if you do not have a business. I have to warn you, though, that this approach is no-frills, no gimmicks, and downright just hard work and hustle.
And many people don’t want to hear that.
You Have to Save and Invest Your Money
It’s really that simply. Every month, invest the very minimum contribution your employer will match into your 401(k) plan. Better yet, max it out to the amount allowed by tax laws. Over the course of the next 20 or 30 years, you will reach over a million dollars in networth. It’s nice to have that money from which to draw on when you are in your golden years, enjoying life and playing with the grandchildren and great-grandchildren.
It’s also that boring. You have to watch your budget like a hawk and slash costs. For example, do you really need a $100 cell phone plan when $75 will do? Will your employer reimburse your private cell phone bill in full because it’s also used as a business line? Maybe a Pay-as-You-Go plan works.
How about your TV service? Would a streaming service such as Netflix or Hulu work for you? The savings will be tremendous and you can put your money towards saving and investing.
It Takes Time to Build Up Networth
Everybody loves shortcuts and want instant gratification. But that’s the thing about any type of goals you set: It takes time.
The same goes for building wealth. Through the power of compounded interest, you can see how contributing money into investment accounts will grow. This simple graph shows the power of compounded interest.
Let’s say you joined the workforce at the age of 21 and have a yearly salary of $50,000 a year. If you invest 5% of your income and assume a 1% yearly raise (these numbers are on the conservative side, by the way), then you can expect a $1 million retirement by age 65. Now, imagine having a higher pay increase and contributing more every year. That 401(k) amount will easily exceed $1 million in a shorter time, by about 5 or 10 years depending on how much more you invest.
The downside, of course, is you cannot draw on your money before 59 1/2 years of age (this may also change by the time this article is written) without incurring a 10% penalty from the IRS. Of course, you can’t put off retirement until much later, either, without drawing from your 401(k), because the IRS wants to start collecting taxes.
This is by far the most simple, no-nonsense way of building a million dollars in networth. It takes time and patience. Financial success, like any other success out there, is boring. It is monotonous. It requires you to do the same things over and over, day in and day out.
That’s why most people fail at succeeding at goals. They don’t have the patience for the long game. They have troubles taking the downs with the ups, the rare successes with the frequent failures. Oftentimes, you don’t even know if you’re marching on the right path.
I like to compare success and failure as a labyrinth. You frequently take the wrong way as you navigate your way out of the labyrinth. The right way is frequently just a fork in the maze. But you have to first go down the wrong way in order to discover the right way.
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