5 Paths to Becoming a Millionaire
http://greatsmallbusinessideas.com/articles/29343/1/5-Paths-to-Becoming-a-Millionaire/Page1.html
G. Brian Davis
Brian is a real estate investor, who keeps a diverse securities portfolio and has owned a graphics company. Additionally, he contributes educational content to several online real estate resources, including EZ Landlord Forms, a provider of custom rental agreement forms and a free real estate investing articles library. By G. Brian Davis
Published on 22/02/2010
A recent survey of Americans showed that one in three Americans believe they will become “rich” in their lifetime, but of course rich is a relative term There are plenty of people who earn $100,000/year and have so many bills that they don’t consider themselves even close to rich; there are also plenty of people who earn $35,000/year and believe wholeheartedly that if they were suddenly earning $100,000 they would be rich
A recent survey of Americans showed that one in three Americans believe they will become “rich” in their lifetime, but of course rich is a relative term. There are plenty of people who earn $100,000/year and have so many bills that they don’t consider themselves even close to rich; there are also plenty of people who earn $35,000/year and believe wholeheartedly that if they were suddenly earning $100,000 they would be rich.
But what does it mean to be rich? Some of those surveyed described being rich as no longer having to worry about their finances, others described it as being able to quit their jobs and no longer work, others mentioned physical possessions they aim to afford, and none of those surveyed would agree on a specific dollar figure or income level that would make them “rich.”
Still, one of the most common definitions for being “rich” is being a millionaire. Unfortunately, this is not so easily defined either; some people consider millionaires to be anyone with a net worth of over $1 million, others exclude primary residences from the net worth requirement, while others believe that the defining characteristic is to hold $1 million in liquid assets, and still others allow for “easily liquidated assets.” For our purposes here, we’ll definite being a millionaire as having a net worth of $1 million excluding primary residences, and it may interest you to know that there are over 2 million Americans who qualify as millionaires by this definition.
Path to Millions – Entrepreneurship
Many Americans believe that starting a successful business is the most reliable path to millions, and in some ways they’re right. Entrepreneurs share with real estate investors two common traits that are ingredients for success: tax advantages and leverage. A cursory look at the most successful Americans will in fact reveal that most achieved their wealth by either starting and investing in a business, or investing in real estate, both of which allow the ambitious to primarily invest other people’s money, and write off most of their investing expenses as tax deductible, leaving more of their own money for putting back into their business. An unfortunate caveat, however, is that while many of America’s rich got there by starting a business, most Americans who start businesses unfortunately fail in their venture; over 90% of new businesses fail within the first few years.
Path to Millions – Real Estate Investing
Buying real estate, whether to renovate shells to create equity or to create income by buying and signing a rental agreement, whether residential or commercial, low-end properties or 100-story skyscrapers, is easily the surest way to build wealth over time. While real estate markets rise and fall, they do so far less erratically than securities, and with a far higher probability of appreciation. Still, real estate investing carries its own drawbacks, including the high cost of entry (even low-end real estate investment properties typically require at least $10,000 at the settlement table), and unpredictable expenses. Sometimes a renovation costs $15,000 more than budgeted, once the plaster has been peeled away to reveal the mechanicals, and sometimes tenants stop paying their rental agreement, or abandon the property halfway through the rental agreement term and leave a $1,500 mess behind them and six months of vacancy that the landlord has to carry.
Path to Millions – Lottery or Inheritance
A small percentage of people do in fact inherit substantial sums of money, and a few lucky people each year actually win massive sums in the lottery, but a far higher percentage (a disturbing 15%) of Americans actually believe this will happen to them. You might get lucky – a few people do, after all – but if this is your only plan for growing rich, you probably won’t get there.
Path to Millions – Saving Money and Living Frugally
Another 15% of Americans believe that the best path to riches is living a frugal lifestyle and saving substantial amounts of their income. The good news is that it works: even at minimum wage, if someone were to save half of their paycheck from the time they were 18 and invest it in low-yield, safe investments until they were 62, they would become a millionaire. The bad news is that it takes a long time and requires a lot of sacrifices along the way, and perhaps most discouraging is the sheer determination and discipline required, which most people simply don’t have.
Path to Millions – Securities Investing
Unlike real estate and rental agreement investing, investing in securities (stocks, bonds, futures, options, etc) offers much steeper and faster fluctuations in value, which creates both more opportunity for fast wealth creation, and more risk. Even stocks that are considered safe fluctuate far faster in value than real estate values or rental agreement market rates, which makes securities investing something of a gamble. For most Americans, securities investing makes for an excellent secondary investment for extra cash and income, giving them an opportunity for fast and lucrative gains without risking the proverbial farm.
No matter which path to millions appeals most to you, the old truism of “it takes money to make money” applies to each of them; even lottery tickets cost money. Live sparingly, invest heavily, and retire a young millionaire.
But what does it mean to be rich? Some of those surveyed described being rich as no longer having to worry about their finances, others described it as being able to quit their jobs and no longer work, others mentioned physical possessions they aim to afford, and none of those surveyed would agree on a specific dollar figure or income level that would make them “rich.”
Still, one of the most common definitions for being “rich” is being a millionaire. Unfortunately, this is not so easily defined either; some people consider millionaires to be anyone with a net worth of over $1 million, others exclude primary residences from the net worth requirement, while others believe that the defining characteristic is to hold $1 million in liquid assets, and still others allow for “easily liquidated assets.” For our purposes here, we’ll definite being a millionaire as having a net worth of $1 million excluding primary residences, and it may interest you to know that there are over 2 million Americans who qualify as millionaires by this definition.
Path to Millions – Entrepreneurship
Many Americans believe that starting a successful business is the most reliable path to millions, and in some ways they’re right. Entrepreneurs share with real estate investors two common traits that are ingredients for success: tax advantages and leverage. A cursory look at the most successful Americans will in fact reveal that most achieved their wealth by either starting and investing in a business, or investing in real estate, both of which allow the ambitious to primarily invest other people’s money, and write off most of their investing expenses as tax deductible, leaving more of their own money for putting back into their business. An unfortunate caveat, however, is that while many of America’s rich got there by starting a business, most Americans who start businesses unfortunately fail in their venture; over 90% of new businesses fail within the first few years.
Path to Millions – Real Estate Investing
Buying real estate, whether to renovate shells to create equity or to create income by buying and signing a rental agreement, whether residential or commercial, low-end properties or 100-story skyscrapers, is easily the surest way to build wealth over time. While real estate markets rise and fall, they do so far less erratically than securities, and with a far higher probability of appreciation. Still, real estate investing carries its own drawbacks, including the high cost of entry (even low-end real estate investment properties typically require at least $10,000 at the settlement table), and unpredictable expenses. Sometimes a renovation costs $15,000 more than budgeted, once the plaster has been peeled away to reveal the mechanicals, and sometimes tenants stop paying their rental agreement, or abandon the property halfway through the rental agreement term and leave a $1,500 mess behind them and six months of vacancy that the landlord has to carry.
Path to Millions – Lottery or Inheritance
A small percentage of people do in fact inherit substantial sums of money, and a few lucky people each year actually win massive sums in the lottery, but a far higher percentage (a disturbing 15%) of Americans actually believe this will happen to them. You might get lucky – a few people do, after all – but if this is your only plan for growing rich, you probably won’t get there.
Path to Millions – Saving Money and Living Frugally
Another 15% of Americans believe that the best path to riches is living a frugal lifestyle and saving substantial amounts of their income. The good news is that it works: even at minimum wage, if someone were to save half of their paycheck from the time they were 18 and invest it in low-yield, safe investments until they were 62, they would become a millionaire. The bad news is that it takes a long time and requires a lot of sacrifices along the way, and perhaps most discouraging is the sheer determination and discipline required, which most people simply don’t have.
Path to Millions – Securities Investing
Unlike real estate and rental agreement investing, investing in securities (stocks, bonds, futures, options, etc) offers much steeper and faster fluctuations in value, which creates both more opportunity for fast wealth creation, and more risk. Even stocks that are considered safe fluctuate far faster in value than real estate values or rental agreement market rates, which makes securities investing something of a gamble. For most Americans, securities investing makes for an excellent secondary investment for extra cash and income, giving them an opportunity for fast and lucrative gains without risking the proverbial farm.
No matter which path to millions appeals most to you, the old truism of “it takes money to make money” applies to each of them; even lottery tickets cost money. Live sparingly, invest heavily, and retire a young millionaire.