Editor’s note: This article was first published in May 2014. The timeline of the second acquaintance, who invested 550,000 euros during 2012 and reached a million “a week ago”, is as of May 2014.
Although there is no single recipe for becoming a millionaire, there are some common steps. Even so, this goal can be reached in many ways. In our article “what you need to know to get rich” we talked about work, saving and investing as the main requirements, and once you have those, perhaps the fastest way to reach 1 million euros is by starting your own business.
Today, though, we are going to look at the different routes taken by several people who have reached this goal by different paths, in the hope that they serve as ideas for anyone who wants to get there too.
How can I make 1 million? In what ways?
1. Without starting any business.
I know several salaried employees on “moderately modest” salaries who crossed the one-million-euro threshold at 43 and 53 respectively. Both agree that roughly two-thirds of their wealth comes from the money they saved and invested between the ages of 20 and 30. They are proof that the magic of compound interest does its job. And yes, it works in Spain too.
What they have in common is a solid early financial education, so they have not spent much on depreciating assets such as cars, motorbikes or boats. They followed the advice of not living like millionaires if you want to become one, so from a very young age they have put a large part of their salary into savings and enjoyed few luxury holidays.
Saving and simple stock-market investing, luckily on target: they rode several bull markets, got out when the market was overheating (when prices shot up), and made the most of dividends while they were invested. In the second case specifically, this person spread 550,000 euros across the stock market during 2012, and a week ago he told me he was now a millionaire. For him the stock market has been very profitable and his biggest springboard to reach the million.
(Read: 5 steps to getting rich, by Charlie Munger, Buffett’s right-hand man)
2. Creating other kinds of assets.
Across the pond, in the United States, we have my much-admired James Altucher, whom we wrote about in “6 things I learned while trading millions of dollars“. I like Altucher because he has made 1 million dollars several times and by different routes. For Altucher, making a million is very easy. In fact, losing all his money was easy for him too, although he is a millionaire again.
Altucher made a million dollars on the stock market and lost it. He also started around 20 companies; some made him a millionaire and others ruined him.
Once broke, Altucher looked for another of the ways to make money. This time he does it through Amazon. That’s right: this man with so many battles to tell now devotes himself to writing books about his business and investing experiences, and he has already earned more than 1 million dollars from his books. I counted roughly 14 books, with at least 4 or 5 bestsellers. In other words, a lot of money.
Altucher is one of those people who knows that money comes and goes. He has said, jokingly, that he does not understand why people cannot make 1 million these days, when it is really easy to do in a few years. That is how he sees it, and in fact he does not just see it that way: he has shown he can do it again and again.
3. And if you start a business… what kind of business is best?
See also: 4 psychological traps we can fall into when it comes to money
If we listen to Altucher, he said in one of his books that your business should be boring. And it makes a lot of sense, because there is a lot of talk about innovation and visionaries these days. People often pitch me business ideas so complicated that I never quite understand them. I start from the assumption that there must be people in this world much smarter than me, just as I imagine there must be others like me, and maybe even some people who are less clever than me. So if your business ideas are hard to understand, your product or service will be very hard to sell.
(Read: You don’t need an original business idea to get rich)
Everyone is looking for the new gold mine, to be the discoverer of the technology of the future, the next Mark Zuckerberg, or the inventor of the next iPhone. Sometimes it is simpler to create a business that supplies these big companies, or a classic, boring business to get started in entrepreneurship. You will have time to complicate your life later.
In a highly technological world where big tech companies start from the mistaken premise that everyone understands, or ought to understand, technology, offer a personal service to the customers who have been left behind. They are out there.
4. Making a little money, but many times over.
It is all a matter of repetition. As the Warren Buffett book 1,000 ways to make $1,000 put it, many people set themselves the goal of making 1 million dollars, and that is exactly why they never achieve it. Find a business or a way to make 1,000 dollars or euros, and then repeat that formula another 1,000 times. There you have 1 million dollars.
How can I make 10,000 euros next month?, someone asked a finance expert. The expert replied: “Buy a second-hand car for 2,000 euros and sell it to a customer for 4,000 euros. Repeat this five times and you will have made your 10,000 euros.”
There are many ways we can go about making our first million, from growing our capital through investments to creating various profitable businesses, small or medium-sized, or building different assets. What is the fastest way to get there?
Although the most effective approach is to plan a strategy, I do not think it is crazy to use these four formulas in parallel. It is perfectly possible, and by now even highly advisable, to diversify the way we pursue wealth.
Further reading
- The secret of millionaires, told by millionaires
- 12 things millionaires know
- 8 habits of millionaires
- The best books on financial education
- The 2 best books for getting rich are over 70 years old and tackle the root of the problem
Featured image: Czbik, CC0 1.0, via Wikimedia Commons.
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