How to Become a Millionaire 11 Step-by-Step Guide
Updated on February 25th, 2022
I am a great believer in Luck. The harder I work, the more of it I seem to have.Coleman Cox
The Secret Millionaires Club
The millionaire status sounds like a lot of money when you have nothing to your name or even $100,000 to your name. You might look up to that level of wealth as being set for life. I think everybody has those thoughts when they are just starting out in their career and dreaming about what their future life will be like and maybe becoming wealthy someday. Images of exotic sports cars floated through my mind when I was in college, especially because the city I lived in at the time had a lot of them driving around and I wanted one (I ended up realizing that dream, still in my thirties, this year).
The fact is that millionaires are more common than people realize and most lead unassuming lifestyles as secret millionaires. Decades of inflation has whittled away this once coveted status and is much less significant than it used to be.
Now don’t get me wrong, $1 million buys you comfort and peace of mind about not worrying where your next rent payment is coming from and provides the opportunity to have a few luxuries. But for most people, it still means they have to work and can’t just walk away from their job.
It seems that everyone wants to know how to get rich quick, and then they end up buying into stupid courses on trading stocks and cryptocurrencies only to finally realize that the way the course seller got rich was by selling snake oil to everyone else.
Of course the easy and fast way is most desirable, but it is not a reality for most and you can’t stake your future on luck. Make your own luck and tilt the odds of success into your favor.
Keep reading to see the simple math on becoming a millionaire and my own personal story of getting there in under ten years of working full time. The last section summarizes these 11 steps.
How To Become a Millionaire
To become a millionaire you need to use money to make you more money. Having only a job isn’t going to cut it.
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First, You Need a Primary Income Stream
If you are starting with nothing you need to first develop a skill that is marketable and something employers will pay for.
But this doesn’t mean you have to go to college. That is one way, but a lot of trade crafts earn very decent salaries and you can get on-the-job training to learn as you go.
Alternatively there is always the entrepreneurial route. Maybe that photography hobby of yours is something you could make courses or Youtube videos on.
The point is that first need some extra money that you can take to step 2, investing.
Make Your Money Work For You
The critical piece to the millionaire puzzle is investing. Not many people have saved their way to a million dollars without taking some risk, calculated risk.
Look at these two tables. Table I shows you how much money you will have at the end of 10 years if you contribute a certain amount of dollars and earn a certain rate of return. I have highlighted 8%, since the simplest way to earn a return like that over the long run is to invest in a passive index fund and doesn’t require any special skill.
Those who start their own business, or invest in real estate in a growing area will likely see rates of return higher than this, especially after accounting for tax incentives. Those avenues require a little more effort and skill, however.
I have highlighted in green the amounts that have crossed over a million dollars.
As you can see, only a few boxes cross into the millionaire category and it takes both a high level of savings and a high return.
But look at Table II by doubling the time to 20 years:
Now even modest levels of saving and investing get you to the goal. Even earning 0% will get you there with enough contributions, but don’t ignore inflation.
Most people can become an “automatic millionaire” by maximizing retirement accounts and investing in index funds. It’s really that simple.
You can safety skip this section, if you want to. It is a long personal story, but I do hope you will keep reading and see the underlying themes in this story that I summarize at the end.
I took the “classic” way, going to college and saving and investing aggressively. I didn’t know any better when I was starting out and a lot of the ways to make money with the internet didn’t really exist at the time, or were unknown to me.
The only path I thought there was, was to go to college, get a marketable degree, roll that into a good job, save aggressively and invest and wealth would come. It kind of worked out like that over ten years after finishing college, but to get there I lived in tiny, cramped apartments, kept my cheap college car, didn’t really buy much along the way and changed jobs and cities multiple times to score higher compensation.
People Google all the time for “How To Be a Millionaire” like there is some kind of playbook that you must follow, but there are many roads to success. What I write about here is just my account.
I’ve always had the millionaire mindset. I have always been a saver, started selling door-to-door catalog products when I was 11, worked “under the table” at two different businesses when I was 12 and 13, started investing in mutual funds when I was 14, got my first “on-the-books” job at age 14 and opened my first stock brokerage account when I was 17.
Everything I made went right into a savings or investment account and I didn’t have the same desires that other kids had to buy the latest toy, sneakers or have the largest CD collection on the block.
Some people are born with these millionaire success habits, but other people have to learn them. I would have chosen two marshmallows.
I started out taking classes at a community college before moving onto a public university in the city I was living in. It was significantly cheaper than the university and honestly, I wasn’t sure if college was going to be for me because nobody in my family had ever gotten a college degree before. Was college going to be too hard? I was a testing the waters, but as it would turn out, learning was something I really enjoyed and vying for an A was something that played to my competitiveness.
I was a very serious student (boring!), and my life and even spring breaks literally revolved around the library and studying for the next exam. I had to stay at the library most of the time anyway because I had roommates who didn’t create an atmosphere conducive for studying. I had a part-time job to cover my living expenses.
This was not a fun time in my life. This is probably what you might expect from a student getting a degree in mathematics, however, I didn’t know that was going to be my major in the beginning since it wasn’t really a subject I enjoyed in high school. I poked around during the first couple of years taking the general education classes and exploring some different classes in different fields. As it would turn out, I had a lot of interests and it was hard to decide which direction to go in. I just knew that I wanted a difficult degree that fewer people obtained that could maybe open up some doors to graduate school so that was the route I went.
Towards the end of my bachelor’s degree, the next bout of studying was for the standardized exams: the GRE (kind of like the SAT, but for graduate school) and the GMAT (business school). I got good scores for both exams, but didn’t get accepted to any of the top graduate schools I had applied to. What a setback. I thought all I had to do was get a hard degree, get a high GPA, and ace the standardized exams and I would be set. Nope.
The goal never changed, but the route to get there did. Instead I enrolled into the master’s program in economics at the same university. Econometrics played right into my math background and it was fascinating to be able to use control variables in a multivariate regression.
I then worked for a year in a role that applied modeling and economics. The job wasn’t bad, I just had bigger goals in my life and really wanted to break into the financial field. In the evenings I would review past classes in statistics, linear algebra, differential equations and programming, preparing for the next graduate degree I was determined to get.
I saved about half my net salary in preparation for what I was planning for next.
Back on Track
Already having a graduate degree and some work experience upped my chances for admittance into some of the graduate schools I wanted to go to. I re-applied to two of the schools that had rejected me previously and was admitted to both and applied to a new school and was rejected there. I chose the best of the bunch.
I was at a crossroads however. I had a decent, stable job, the economy was teetering on a recession, I would need to borrow $75,000 and move across the country to a city far from my friends and family. It was a tough decision, but I figured if I didn’t take the leap then, I never would, so I did.
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When I thought I didn’t have a life during undergrad, this was even worse. It was the most challenging coursework I had ever encountered. It was a revolving door of studying, homework assignments, 3 hour evening classes (and a professor who liked to run the time over by 40 minutes each class, ahem, Seppi), and exams testing concepts we hadn’t actually even seen before. Sometimes the entire grade would be based on the final exam, no pressure! It was brutal. Most of us equated the experience to educational hell since they were basically stuffing 3 years of material into 1.5 years of classes.
I rented a dirt-cheap, ancient apartment close to campus during this period. I didn’t have a social life so I didn’t need to impress anyone with my apartment.
All the while during this educational curriculum, we also had to study for interviews (brain teaser style: how many primes are in a number with 100 zeros?), and travel to interviews between classes. I managed to land two offers before graduating even though the economy was still in the crapper. Unfortunately, the salaries were depressed, as what always happens during and after a recession when there are plenty of fresh grads competing for a limited number of roles.
But the investment in the second master’s degree did pay out and my compensation was about 66% more than what I was making with only my first one. I negotiated a few extra thousand to the offer I accepted, which is about the best investment anyone can make since it pays out eternally.
I moved to an apartment about 45 minutes away from the city by train to save on rent and started reading a lot more books on investing (such as Dividends Still Don’t Lie, Dual Momentum Investing, McMillan on Options, Get Rich with Options, Quantitative Value, Quantitative Momentum, Single Best Investment, What Works on Wallstreet, all recommended books) now that I actually had some real money to invest with and had a 90 minute daily train commute.
I continued living like a college student and saved about 80% of my salary that first year, investing it all in index funds. I maxed all my retirement accounts and saved additional in taxable accounts. This is the time when I started planning for the future and determining how much I should save, where I should save and what I should invest in. I performed some calculations and determined that a regular 401(k) will beat a Roth 401(k) for most people, contrary to pop-finance websites.
The job wasn’t exactly the one that I wanted, but I figured I would pursue that after getting a year of professional finance experience. I started interviewing after a year or so and found an opportunity and moved again, this time 400 miles away to another city I had never been to before the interview and again didn’t know anyone.
It’s hard to start over and make new friends each time you move to a new city. The first few months are pretty lonely, every time.
My employer matched my offer to stay with them which gave me more bargaining power to negotiate a few extra thousand dollars into my new offer bringing the comp increase to about 20%. The new city wasn’t terribly more expensive than the old one, but I soon moved into a 320 square foot apartment to save on rent. I was only spending about 25% of my gross salary and investing the the difference in index funds.
But here’s the magic: in about 3 years I had managed to double my salary through an additional degree and by changing jobs and cities. The cost of living was higher than my starting city though, so that increase in living standard wasn’t quite 100%.
This was really the first time I felt like I could settle down a little bit. I liked my new job, the people I worked with, and since moving sucks and starting over with new friends is tough, I worked there for several years.
While I really enjoyed my portfolio strategy role in asset management, and my boss was awesome I wanted more career growth. Also, the job was located in a bona fide city with vagrants, violent crime, trash and unpleasant smells everywhere you walked. I really didn’t see myself staying there permanently.
I also wanted more money, but I was kind of at a point where corporate recruiters and HR just price shop everyone they “interview.” I put that in quotes because when HR schedules the first phone interview, the 10 minutes they spend is only trying to get to their most important question “what is your current salary?” Click.
Talk to any hiring manager and how see how much they complain about the skills deficiency. They never even get to talk to any candidates because HR is busy pre-screening only the cheapest or most junior people they can find. If the hiring managers would actually sift through the resumes themselves they might actually be surprised at what they find, just at a price higher than they want to pay. It’s a classic supply and demand problem. Increase the price, get more supply.
One thing I have learned is that career growth happens through 4 avenues:
- random chance, where your boss leaves and you are next in line and have the chance to fill the void, perhaps on an interim position, or
- you have personal connections to get your jobs with minimal interviews involved (huge in finance, unfortunately I don’t have these connections), or
- you use a headhunter (mostly useless parasites), or
- you just look around and interview at dozens of places and hope the interviewer is having a good day that day and you hit it off with them and they pass you to the next round (usually 3-5 interviews consisting with a couple of phone interviews and the final interview involving 5-7 individual interviews with people you’ll be working with and people you won’t).
Very rarely are you just given a promotion out of the blue in your current job, unless it’s a token title promotion from Junior to Senior. If you’re already working at a place and making X, what is going to incentivize them to pay you X + 20%? They will come up will all kinds of B.S. reasons why you can’t be paid more due to your job title, your pay level, that there is a policy on the maximum salary increase an employee can get, etc.
Since my boss was only 10 years older than me, option 1 was out, option 2 was already out, so option 3 or 4 were my only hopes. I found out later that headhunters are looking what is best for them, not you, and aren’t generally that helpful because all they end up doing is bombing your resume along with 100 others to their contact at the firm.
I must have interviewed at 40 firms (mostly phone interviews) over that last year. This is when I noticed the 3 question interview that always ended with the comp question and then never hearing from them again.
HR is like a talent blockade. It’s grueling and frustrating to never get to talk to someone that could actually determine if you are a good skill fit for a position.
And if you do, HR might still block your candidacy because they don’t like you for some trivial reason. I still “talk shop” to a portfolio manager I hit it off with who wanted me on his team but HR torpedoed.
Catching a Break
I finally caught a break with a financial start-up that didn’t have an internal HR. However, it would again require moving to a new, more expensive city, I was a little worried about the size of the firm, I wasn’t sure of the career direction, and I had a new budding relationship, but when they offered to raise my compensation 50%, I knew that this was an opportunity I couldn’t pass up.
Again I chose an apartment outside of the city, but still conveniently located near the subway and saved about 50% on the rent. My savings continued to be about 75% of my salary.
That role didn’t end up working out, and I ended up getting a different job a short time later, but the morale of the story is that I took the chance on it.
The Unifying Theme
It’s very possible to become a millionaire in 10 years; it just requires investment in yourself for a marketable skill to start your first income stream, self-sacrifice to save a lot of what you make, and investment in your portfolio to grow your saved assets.
For 10 years I saved and invested the lion’s share of my income. I chose cheap apartments and economy cars and lifestyle inflation never crept up with me and nobody outside of my family knew I had money, until recently.
Furthermore, about 5 years into my career I started taking a more active role in my own investment success. I had a formal education in finance, and had read dozens of finance books for the masses about how the only way to play the game is through index funds, but I no longer believe that to be true given the excessive valuation in today’s markets.
If you put in the hours, you can be rewarded, just like anything else. Over the last few years, my goal has shifted to building passive income streams because I would like to stop working within the next 5-10 years. Unlike some other bloggers, I don’t think living off of $30,000 a year for the rest of my life is considered “retirement.”
The Career Route Is Not Easy
The hardest part of the slow career way is that building your primary income stream is about getting through other people’s blockades.
You might not get accepted to the college you want to go to. You might be passed over for a role not because the guy who gets the role is a smarter, but because the other guy has an inside connection fast tracking him there.
In the corporate game, you cannot overcome a lot of the obstacles simply by being smart, studying longer or harder or doing more work. A lot of it depends on political maneuvering, forming factions with people (or having existing friendships or family connections) who can help you get you a job, or resume to the right place, and self-promoting.
My introverted personality is more suited to figuring out a problem and solving it, and not being fake with people for personal gain. It takes a certain kind of personality for corporate success.
Should You Go To College?
Maybe, maybe not. I’m sure we’ve all seen the statistics on the salary comparisons between college graduates and high school graduates, but you aren’t going to become a millionaire in 5 years working for other people. You can become a millionaire in 5 years if you invoke the 21st century power of the internet and work for yourself (but no guarantees).
Additionally, many young people continue to pile into worthless degrees mainly because they are easy and they think that just being a college graduate is enough. “I just need a piece of paper,” I once heard from a classmate and unfortunately that was all it was worth too. Even my own parents, who are not college graduates, said something similar. Having just any degree is not the golden ticket.
Unfortunately this bad advice causes them to waste 4 years, and possibly load up on debt while doing it.
I’ve met plenty of people who didn’t go to college and did very well for themselves. Millionaires existed long before college was the norm. Of course these cases are anecdotal, but I want to mention that both my brothers never went to college and one of them makes as much as me and the other earned a six figure income before selling his successful business.
The College Degree is Watered Down
A college degree isn’t like it used to be. It’s basically the new high school diploma equivalent now, and you spend years learning so many aspects of a field and when you get out into the field, you use probably about 10% of what you learned. With a targeted degree there is no guarantee you will even get a job in your desired profession. There are only a limited number of museum curators for all the museum studies majors, for instance.
Or you might want to get a job in a field saturated with nepotism, like finance. Not only does all the money attract a lot of smart people, an MBA will help, but your dad being the golfing buddy of the managing director will get you a lot further. A lot of brilliant people slip through the cracks when their resume is submitted into the black hole of a clueless HR recruiter.
Some collegeless jobs have terrific outcomes, such as trade jobs in plumbing or carpentry and you are being paid while you learn the craft, but unfortunately, parents look down on these blue collar professions and have a tendency to steer their children away from them. Other examples that require limited educational and licensing requirements and have a lot of upside potential are insurance and real estate agents.
An insurance agency is what business my brother sold.
How to Become a Millionaire Summary
Becoming a millionaire in your 20s or 30s with just a job is not impossible, but it requires a lot of sacrifices that few people will adhere to. I focused on growing my primary income stream but I should have started secondary income streams sooner. If I could go back in time and give myself that advice, I would. You should.
My Millionaire Steps:
- Sacrificed earning now for more earnings later by investing in myself with college.
- Invested money, time and frustration to get several degrees.
- Took calculated risks, like:
- Going to college for marketable degrees.
- Giving up a stable job to get an additional degree.
- Changing jobs and cities multiple times for increased compensation.
- I created a plan and a roadmap of how to get there.
- I persevered and overcame road-blocks instead of just giving up.
- Sacrificed friends and living near family.
- Negotiated every offer.
- Lived frugally and aggressively saved and didn’t succumb to lifestyle inflation.
- Invested in the S&P500 in the beginning, right at the start of a new bull market.
- I continued my personal education by reading dozens of investment books.
- I started taking an active role in my own investment success.
To become a self made millionaire, you must first invest in yourself, but then invest your earnings in the markets to grow your capital.
Maybe the college route isn’t for you; I suggest you read the Millionaire Fast-Lane for some motivation.
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