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The First Million is the Hardest

The First Million is the Hardest

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As you work on your journey to become a millionaire, one thing you should realize is that the first million is the hardest million to make. It will take a lot of time and effort to get to your $1 million mark, but once you’re there, things will get easier! It takes longer to earn your first million is because you’re just starting out and you don’t have that much money working for you yet. The next million is easier because of the power of compound interest, and by that time, you have a million dollar bills working for you.

The First Million is the Hardest 1

How to Get Your First Million

Among all the ideas out there, I think these three best ideas will catapult you to your first million:

  1. Investing in the Stock Market
  2. Investing in Real Estate
  3. Starting Your Own Business

I personally used all these three methods to get to my first million (obviously, I got rid of my debt first), specifically:

  • I started investing early on in my career and maxed out my 401(k) and IRAs whenever I could.
  • I bought my first house at the first possible opportunity…and I got lucky with timing since I bought it in 1998.
  • I started this blog (my first business), which gave me a real boost financially.

The point here is you have to hustle and do everything you can (and not relying on just one method) to get to your first million.

Once you get to your first million, things will snowball from there…because you will have money working for you.

Let’s take a look at this scenario.

Using Investment Calculator by Bankrate, let’s assume a 20 years old invest $500 a month at an annualized rate of return of 9%.

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As you can see, the first million took 31 years in this scenario, but the next million took only 8 years, and the third took only 4 years!

This is not limited to investing. When you have money you can reinvest it to make more money. For example, you can reinvest money back into your business to grow it faster or use extra money to buy your first, second, and third rental property.

Why the First Million is the Hardest

The first million is physically, psychologically, and mathematically challenging. It is hard for people to break through this barrier. It is also mathematically challenging. Yet, people do it all the time!

According to research conducted by Thomas J Stanley, the author of The Millionaire Next Door, 80% of the millionaires are first-generation millionaire. This means they started from nothing, worked their way through the process, and broke through the $1 million barrier!

Bottom Line

Yes, the first million is definitely the hardest unless you’re the 20% that inherited your first million; but you can be one of the 80 percent that are self-made, first-generation millionaires.

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DavidYin
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DavidYin

Yes, I agree with you. The first 1 million is so hard.

shadox
Guest

Yes, you are right on some levels, but it’s important to note that to go from 100K to 1M you need to increase your money ten fold, while to go from $5M to $6M you only need to add 20% to your net worth. So while in absolute numbers your argument is absilutely correct, naturally things get easier when your percentage gain gets smaller and smaller.

CHESSNOID
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CHESSNOID

This is a great post to show how time and compounding works. Of course, the longer you’re in it, the greater the effect.

DR
Guest

The point of the post was the snowball effect of investments. Investments start off slow, but over time, really pick up speed. I know mine have to the point that in an “average” year my investment returns now far exceed my annual contributions. The assumed interest rate (10% or 12% or 8%) is not the point. The snowball effect remains the same regardless of the interest rate (i.e., the time it takes to reach $2M will be a lot less than the time it took to reach $1M). The distinction between the arithmetic mean and geometric mean is an important… Read more »

Jake
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Jake

This is a GREAT post. It highlights the power of compound interest and given that I am 25, I’ll honestly try to make this happen!

Debbie M
Guest
Debbie M

That’s funny, when I learned this lesson, it was worded that the first $100,000 was the hardest. And it felt just as true to me as this post.

Back when I was 25, I was not even grossing $15,000 per year. I feel like one of those old people: “In my day, …” On the other hand, I will never come anywhere near the $1 million mark because I am retiring long before then (I don’t live in New York!).

Alex H
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Alex H

I agree with your basic premise about how quickly compounding picks up over time and I think even your model would more or less work as is. I’ve tracked my investments closely for twenty years and my net worth has pretty much escalated on pace with it. I’ve saved about $15k per year (on a librarian’s salary), have always kept a high percentage in stocks – because stocks have categorically performed better than any other investment over time; kept my investments diversified in index funds ranked 5 stars by Morningstar; I set savings goals and always paid myself first; I… Read more »

Amanda
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Amanda

I am so incredibly inspired by this post! Not only could I be a millionaire one day… but a multi-millionaire… and all I have to do is diligently save each year? What a wonderful post. Thank you.

fiscal musings
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fiscal musings

I think it’s interesting that everyone is so caught up in the unpredictability of the stock market and the associated gains. There hasn’t been any mention of other forms of investing.

I understand that real estate is getting a bad rap right now, but the gains there can be quite good and oftentimes predictable. My point is that there are other options and it’s not all that difficult to imagine 10% yearly returns.

Jonathan
Guest
Jonathan

Totally agree Pinyo the first million is the hardest. What you have shown is how easy it is to accumulate more money once you already have a lot, ah the joys of compound interest!

Dividend growth investor
Guest

To me the first million would be easy to achieve. I would start with a billion i would have to lose 99.99% which would be super tough. If I could certainly lose 99.99% with a strategy, then playing against the opposite strategy would yield a huge gain..

Money
Guest
Money

Goals are nice, but money isn’t everything. The first million isn’t hard if you don’t care about it. Think about it. Enjoy your life and what you have, people. It’s good for you.

Kevin Mulligan
Member

@Money: Imagine how much you could really enjoy life if you diligently saved for that first million? $6,000 per year isn’t all that much for a 2 income family.

Alex Pino
Guest
Alex Pino

That’s awesome but personally I can’t wait that long to enjoy life. That’s why I’ve jumped from being an employee to owning my own business that I’m passionate about. Good luck man!

mykscott
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mykscott

5 months later I stumble on this post. From my experience, this money goal thing can really take over your life. My first goal was to save $10,000 by the time I was 20. Then my goal was to get to $100,000. I just reached $1million last year at 48. Yippee! I’m really an exciting conversationalist…I learned how to save money from my dad….he retired at 45 years old when I was a senior in high school. He’s actually pretty exciting also… I turned things around just now…remodeled kitchen, Europe trip, flying lessons…but I think back how/what I could have… Read more »

Frank
Guest
Frank

What if your goal was to get to at least a billion $.

Is it harder to go from scratch to becoming a millionaire?

Or harder from already having a million dollars, to becoming a billionaire?

The First Million is the Hardest

by Pinyo Bhulipongsanon time to read: 2 min
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