Saturday, 24 December 2016

How do I become a millionaire before the age of 30?

I always get a kick out of "how to be a millionaire" answers, especially the "get rich quick variety".  

My favorite on this chain is "become a professional athlete".  The odds of actually making
a living as a pro-athelete are very small.  It also takes a lifetime of practice and dedication to even play at the collegiate level, let alone be good enough to make the NFL.  Get rich?  Highly unlikely.  Quick?  Definite no.

There are only 3 asset classes that reliably churn out wealthy people:

  • Stocks
  • Real Estate
  • Owning Your Own Business

There is also one, core path that reliably allows people to acquire those three assets.
  1. Live below your means - so you have money leftover to do interesting things with.  This is the golden key that gives you the confidence, safety, and capital to take on investment risk.  It's powerful and freeing to say,"I don't NEED this money.  If something bad happens, I'll have more to try again with".
  2. Reduce your financial drag - pay off all the high interest rate debt.  It's very hard to out perform even 7% post tax interest like the kind you pay on car loans and credit cards.  Take the guaranteed 7% to 15%+ return and pay off the debt.
  3. Invest - first, build up a 3 - 6 month buffer of cash just in case bad things happen, and then use the rest to invest in stocks, real estate, and maybe even starting your own business.
  4. Repeat - very, very few people get rich quick.  It often looks like it, but upon closer inspection, most rich folks got there over decades of slow but sure investing and business building.  Compound interest is also an amazing super-power and it takes decades for the effects to become really noticeable.
  5. Boring?  Yes.  Very high chance of successfully becoming rich over 20 - 30 years.  Also yes.

    Learn from those that have come before and follow their path...or maybe toss the football around in your front yard and hope to get noticed by a talent scout.  Your choice.

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