How to Build Your First $1 Million (Faster Than You Think)

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1:16Bring it this season with grills that deliver flavor and patios that set the vibe from the Home Depot. Start your spring with low prices guaranteed at the Home Depot. Exclusion Supply, see HomeDepo.com slash price match for details. On this episode of the Personal Finance Podcast, how to build your first million and do it faster than you think.

1:42What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be talking about how to build your first million and do it faster than you think. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co slash newsletter. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player.

2:20Now today, we're going to be talking through the process of getting to your first million dollars. One of my favorite topics to talk about is how to get to your first hundred thousand because getting to your first hundred thousand makes a big difference when it comes to compound interest and you can watch that take over. But in this episode, what I want to talk through is A, if you haven't gotten to your first hundred thousand yet, there's nothing wrong with that. But B, we want to talk about how to get from that hundred thousand all the way up to a million. We're going to talk through just some of the statistics behind millionaires and what we see with a lot of millionaires out there.

2:53But in addition, we're also going to be talking through how long it takes you to go from having your first 100K all the way to getting a million. And then I'm going to give you step by step what I would do if I was starting over trying to get to my first million dollars. Now, when I first started my wealth building journey, I thought that millionaires were folks who lived the high life. They lived in a really nice house. They drove Lamborghinis or Ferraris. They had the fancy clothes. They had the fancy shoes. They had nice jewelry. They all wore Rolexes and or Cartiers, and they were spending left and right.

3:27But once you start to look at the data, you realize that no matter what your income is, no matter where you came from, no matter who you are, you can become a millionaire. And so once I started to read through some of the studies out there, especially early on, the first finance book that I read that really turned this light bulb on was a book called The Millionaire Next Door. Now they have an updated version called The Next Millionaire Next Door. And there have been numerous studies done since then. And what The Millionaire Next Door did is it looked at millionaires to see exactly how they acted.

3:58We're gonna talk about those statistics here in a second. But I want you to understand this first. No matter who you are, no matter what your financial background was, maybe you grew up poor, your family never had money, you never ever were told that you could actually become a millionaire even with a modest salary. Even if you don't make a lot of money, you can become a millionaire. And I believe that for every single person listening to this podcast, the reason why this podcast exists is to ignite that fire in your gut, to ignite that fire inside your brain for you to understand that you can do this.

4:32You have the greatest opportunity of your entire life right now is that you can become a millionaire. And I want you to know that. And I want you to feel that inside because if you are working towards building wealth, this is the time to take advantage of that. Contrary to popular belief, contrary to what the news is saying from CNN to Fox News, I don't care who it is. They are all saying the same exact thing that you are being brought down. But guess what? You are in the greatest wealth building time ever. One of the greatest wealth building times ever. You know why? Because you have access to more information than anybody else.

5:08Now, too much information is a big problem. But I'm going to show you the simple way to get there. And if you combine time with a little bit of sweat equity, with a little bit of effort into your income, with a little bit of thought on how you are going to do this, we can develop a plan for you to become a millionaire. Because as you're going to see, most millionaires did not inherit their money. Most people out there, if you go out and interview them, they're going to say a huge portion of millionaires inherited their money. Guess what? They're wrong. That's not what the statistics show. And our statistics are being pulled from all different directions, including the Bureau of Labor Statistics, the government-backed stats.

5:47And so we're going to go through this and show you what real millionaires look like. Then I'm going to show you how long it's going to take you from getting from that 100K to that million. And then I'm going to give you the exact steps I would take. So if that is something you're into, and if you're ready to get on your path to becoming a millionaire, then let's get into it. now the first thing i want to do is i want to show you how millionaires act and i want to show you some of the things that millionaires do now we pulled this from a number of different places one we looked at the bureau of labor statistics which shows how people become millionaires we looked at ramsey solutions who did the largest millionaire survey ever as of recent we looked at different global wealth reports like credit swiss and a bunch of other places like wealth x who did all these different surveys of millionaires.

6:36In addition, we pulled information from The Next Millionaire Next Door, which is the latest and updated version of all the research done originally by Thomas Stanley in The Millionaire Next Door. And we pulled all this information and compiled it to find this data for you. And I want you to think through as I tell you some of the things about millionaires on how you can apply this to your life. So number one is the million dollar path is shockingly boring, and that's the advantage. So 75 % to 80 % of millionaires credit long-term consistent investing, not business exits, not stock picking, and not luck, to them becoming millionaires.

7:12It's long-term consistent investing. Now, if you heard our episode recently where we talked about how to build wealth on a low salary, we talked about a guy named Ronald Reed. Ronald Reed was a janitor from Vermont, and Ronald Reed was the guy who never made much money. And you know what Ronald Reed did? When he died, he had over$8 million because he just invested consistently in blue chip stocks. That's exactly what his strategy was. And so the blueprint for a lot of folks who want to become a millionaire is threefold. It is focusing on your career income and increasing that income over time, knowing what to do with that income by automatically investing it and making sure that time and compounding are on your side.

7:49See, a lot of people on TikTok or Instagram or YouTube, they're gonna try to tell you about the fast way to build wealth. They're gonna try to teach you, hey, let's build wealth as fast as we possibly can. But guess what comes with speed? Risk. And risk can completely wipe you out and you have to start all the way over again. And so for a lot of us out there, sure, let's get our footing down first to get to our first million. Let's get the process down so that if we wanna take more risk, that goes above and beyond. The extra cash that you have on hand, This is your foolproof backup plan if you need it.

8:21Then if you wanna take risk on a business or you wanna take risks somewhere else to try to get there even faster, you absolutely can. But this always needs to be working in the background and you can set it up automatically so you don't have to worry about it. So here's the lesson I want you to learn from the first tip is most millionaires are not exceptional, they're consistent. And you need to take that to heart. Consistency is the key. So once you set your plan up, you need to consistently make sure you're investing. And guess what? That is not that hard to do when you set up money automations.

8:51Now, the deciding factor number two, this is actually amazing, is that income helps. And income is going to help a lot. We'll talk more about income in this episode. But it is not the deciding factor. In fact, 33 % of millionaires, folks who became millionaires, never earned over six figures. Let me say that again, because a lot of people out there say six figures is now middle class or poor. I just heard a report come out that said$180 ,000 per year and you are living at the poverty level. Well, that was debunked really, really quickly. And the author of that revised it to$94 ,000 a year. And I still think that's ridiculous because you can figure out exactly how to become a millionaire living on less than six figures.

9:33And only 15 % of these millionaires held C-suite or even VP roles. So that means 85 % of people who were millionaires were either middle-level managers or below, and they were still able to become millionaires. Now, top millionaire careers, this is absolutely amazing, and this came from Ramsey Solutions, was teachers, accountants, and engineers. Those were the top three. Now, engineers make good money, accountants make good money, but do teachers make good money? No, but they're consistent, and they're investing, and they understand what to do. School systems do a great job of giving them investment opportunities, And a lot of teachers are just really good at learning things and taking action on those things.

10:14So your savings rate and your behavior matter more than your income. And I want you to note that because if you can increase your income and you can increase your savings rate and make sure you have the correct behaviors in place, oh boy, you are an unstoppable force. And that's what I want for each and every single one of you. So focus less on how much income you're making. we're going to focus a lot on our income and growing our income, but I want you to focus less on exactly how much you're making right now and focus more on the behaviors that you are going to be taking going forward. Focus on margin creation, meaning creating more margin between your income and expenses, thinking about your expense control, and also automating your investments.

10:53That's going to help you not have to worry about your willpower anymore or rely on your willpower. Number three is living below your means is a non-negotiable. Now, what does it mean to live below your means. If you do just this alone, meaning you live on less than you make and you invest the difference, you will become very wealthy. That is the golden rule of building wealth is to live on less than you make and invest the difference. If you can do that and you can just say that to yourself over and over and over again and grain that in your brain, that that's really all you have to do to be able to build wealth.

11:2794 % of millionaires live below their means? Well, duh, because the 6 % that don't most likely inherited it or they got it in some other way, shape or form. And 75 % never carry a credit card balance. So for those of you out there who are carrying credit card debt, it's time to get rid of that debt because if you live on less than you make and you avoid debt, you will really and truthfully build wealth. Now, one thing I want to note is that most of them came back and said that they were frugal. Now, frugal is not cheap. Frugal and cheap are two very different things. The way that I see frugal is folks who have decided I value spending money on certain things and spending less on other things.

12:08And they have decided to master the art of spending. Spending is an art form. Spending is not something that you just do, but instead is an art form that you need to learn how to think about this. So spending more dollars on wealth accelerators, things that are going to increase your net worth or allow you to buy your finding natural freedom, that is a great place to put your money instead of a wealth killer, like an appreciating asset, like a vehicle or something else. But you have to figure out what you value. Maybe you value vehicles and you want to spend more on vehicles and you don't care about freedom as much as you do buying that brand new car.

12:40That's completely fine. If that's what you like, use money as a tool to do what you want in life. Just know it's going to take you longer to become a millionaire. Insight number four is investing is a system, not a skill. So no millionaire cited stock picking, no millionaire cited day trading or options trading as something that they utilize to become a millionaire. Instead, most used their 401ks, they invested in low cost index funds, they had broad diversification, and they had automatic contributions. A good number of them also were a real estate investor. A good number of them also were interested in real estate and some of them were even real estate investors, meaning they had rental properties and they had tenants go into those rental properties.

13:23Now, a key stat to include is that the average 401k millionaire invested for 26 years. So if you feel like you're behind with your investments right now and you're 30 years old and you feel like, oh, I should be a millionaire already, the average 401k millionaire, it took them 26 years to even get there. So if you feel like you're behind, this statistic shows you that you're not behind. It takes time. And as time progresses, as you'll see in a minute, then it starts to really accelerate your path to wealth. The average contribution rate for millionaires was 17%. So where did I get that number to begin to invest 20 % of your income as the bare minimum?

14:01I think 10 % is too low. I think 15 % is too low. 20 % ensures that you would only have to work typically around 29 years or less. And so when you are investing 20%, The average millionaire invested 17%. So do you think if you invested 20 % of your income, the chances of you becoming a millionaire are going to increase dramatically? Absolutely. That's where we get those numbers. And that's why I want you to be able to do this. So what matters more here is automation over over-optimization. People over-complicate finances, especially when it comes to investing. Let me tell you right now, you can turn on CNBC right now and you can see all the different stock charts and the tickers moving across the bottom.

14:45They are having arguments about what the best stocks are right now, why the market is moving in one direction versus another direction. I see all these TikTok experts all of a sudden come on and they're saying, this is why the market is moving, is going down. This is why the market is going up. It's all just noise. It's all just market noise. They tend to overcomplicate investing intentionally. Wall Street loves to overcomplicate investing. In fact, I would argue that a lot of people talking about some of these investments don't even really know what they're talking about. And in fact, most of them most likely don't even believe in some of the things that they are saying.

15:20And this is where it gets amazing. That if you simplify and you automate, you can build wealth literally on autopilot. And that's the overall key, the overarching key that I want you to understand. Number five, home ownership is a major wealth multiplier. So a lot of millionaires out there in this country, they're homeowners. Why? They built up some home equity. And so a lot of people who are classified as millionaires, they have a lot of their wealth on their home. I don't want that for you as a wealth builder. So as a wealth builder, sure, you can have equity in your home and that's fantastic.

15:54It's fantastic to have that as a backup. It's fantastic to be able to say you're a millionaire because you have home equity. But also you don't want that in the long run to be the majority of your wealth. There are too many Americans right now who have the majority of their net worth in their home. And when that happens, it's not like you can draw down on your home and have the ability to not go deeper into debt and live off that in retirement. So sure, it is amazing to have a home. It is amazing to have equity in a home. That is an asset. That is a true asset where some people will say this is not an asset.

16:25It's an asset. But it is not what I want to be. My primary asset is not where I want to be the majority of my assets to be. Instead, I want them to be in investments that can produce an income that I can live off every single year in retirement. But in America, homeownership is going to accelerate your path to becoming a millionaire, where you don't have to be a landlord. You don't have to be someone out there who has a bunch of exposure to real estate assets. Your own personal residence can help you get to the millionaire path. And so the good thing about homes is they do give you forced savings.

16:55They do give you somewhat of an inflation hedge, and they do give you a stability tool. And so when you get to retirement age, if you have a paid off home, you're in a much better situation than you could be, depending on what the expenses are. And we've talked about running numbers so many times in this podcast. But if you do total cost of ownership and you have a paid off home and it is less than what it would cost you to rent, then you're in a pretty good situation overall. Number six is entrepreneurship is optional, but entrepreneurship is also very powerful. So 33 % of millionaires that were surveyed, they actually own a business.

17:26And 15 % of small business owners became millionaires. Most of these businesses took 10 plus years to create real wealth. They took a really, really long time. And business can increase your upside. I love having businesses in my portfolio. I would never want to have a portfolio without a business in place because it is the way that I love to build wealth. It is one of the ways, and one of my favorite ways to build wealth is to have businesses on hand. But do you have to have a business? No, there are plenty of people who have W-2, nine to five jobs who have built plenty of wealth becoming 401k millionaires.

17:58And so you don't have to have a business to be able to do this, but it does help and it does accelerate your path to millionaire status if you can get that business to work. Now, there are a lot of businesses out there who also fail. So you need to know what you're doing and it's not for everyone. Business is not for every single person. You have to be able to dive in and have an understanding of what's going on. This is the parallel path, not the default. This is not what you have to do where a lot of people think, well, I need to own some big business or I need to be able to cash out on some tech investment in order to be able to build wealth.

18:30No, you can do the slow and steady path, but it does absolutely help. Number seven is time is the secret ingredient to building wealth. This is the ingredient that most people don't want to hear. They don't want to talk about, but this is the ingredient that you need to know about is time will absolutely change the way that you think about money. Most of you out there are saying to yourself, I feel like I'm behind. I feel like I should be a millionaire by now, but guess what? The average millionaire, according to all these studies, and we went through all of it, the average millionaire is 61 years old.

18:59Do you feel behind now? Do you feel like you're actually behind? Because I'm going to guarantee that you're not. You have so much time left to build wealth that you don't have to worry about it as much as you currently are. If you have a lot of stress and anxiety about feeling behind, guess what? Now's the time to get it together. Now's the time to get your dollars invested so that we can grow our wealth. But you are not behind. Two thirds of those millionaires were between the ages of 60 to 79. And less than 3 % are under the age of 35. So for all my people under the age of 35 who listen to this podcast, only 3 % were millionaires.

19:37So 97 % were not under the age of 35. So this is going to reset your expectations where you think this is going to be a 10-year plan. It can absolutely be a 10-year plan if you lock in and you really want to dial in. We'll have an episode coming up on how to build a retirement plan in 10 years or less. So make sure you're subscribed to this podcast if you're not. But at the same time, over the course of 20 to 30 years, you should reset your expectations because it really takes 20, 30, 40 years for you to become a millionaire. The early decades feel slow. It feels like you're in a slog. It feels like you're really taking forever to even get there, but you know why?

20:08Because your savings rate has to do the majority of the work. Your first 100K, your savings rate is doing all the work. Then you get to your second 100K, then your third 100K, and you'll see how this starts to compound as time goes on. So number eight is starting early matters more than almost anything else. So the earlier you can start, the better off you can become. Whereas two to three K a year starting at age 20 means that you can become a millionaire by age 65. If you start at age 30, you have to put in$6 ,000 per year. If you start at age 40, it's$14 ,000 per year, more than double of age 30.

20:38And starting at age 50 means$36 ,000 per year to get to millionaire status by age 65. So time lowers the required effort that you need to make to become a millionaire. If you're listening right now and you're in your 20s and you have not started investing yet, now is the time to get started. If you're in your 30s right now and you're listening and you're like, I just got started somewhat early on, but I'm not really pushing it, it's time to push the envelope right now because the effort that you have to make is so much lower than someone who is in their 40s or someone who is in their 50s. And if you're in your 40s just getting started, you just saw 14 ,000 bucks a year starting at age 40.

21:14My friends, you can do this and you can make a huge, huge impact. And time is going to lower that required effort. And delaying is going to dramatically increase the likelihood that you will not succeed becoming a millionaire. So the longer you delay, that is going to just make it so much harder. So I want you to think through this and make sure that you are getting started today. Number nine is millionaires thinking systems and not events. So they all have repeated behavior. One, they automate their investments. Two, They pay themselves first. They don't wait for all their bills to go into play and then they pay themselves.

21:45No, they invest first into themselves. Then they spend what is left over. Three is they build an emergency fund to protect themselves against life because life is going to happen. And when your car breaks down, you don't want that to derail your progress on building wealth. They make sure they prioritize insurance and risk management and they have diversified income streams over time. So your thought process here when you hear this should be, let's set this up once. so it runs forever instead of let's do these 17 things every single month? How many of you are just running all over the place trying to keep up with what you need to do day to day?

22:19The last thing you wanna do is spend a bunch more time on your finances. Instead, you wanna make sure that you set up an automated system. So if you wanna learn how to automate your money, you can download our free money automation checklist. We'll link it up down in the show notes below so that you can check that out. And I highly encourage you to look at it because it is one of my favorite things that we have done in the last couple of years. And then number 10 is millionaires play defense as much as they play offense. So defense means they get the right insurances. They have the emergency fund in place.

22:48They're defending against things that could happen in life. And they are anticipating that going to happen before it actually happens. If you let life happen to you, life is going to be so much harder than if you actually anticipate some of these things. So I highly encourage most of you to make sure that this is a mandatory step in your wealth building journey. So now what I want to do is I want to look at how long it's going to take you to become a millionaire if you start at 100K. So we have an episode talking about how long it would take you to get to your first 100K. If you haven't heard that one, check that one out.