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Many people believe that making the first 1 million of wealth is impossible or unimaginable. But unfortunately, several compelling arguments also prove there is nothing as challenging as making that first 1 million dollars on the road to riches.
However, I still believe that the more people are aware of the challenges involved in acquiring their initial 1 million dollar wealth, the higher the chances of conquering the obstacles.
To begin, it is vital to know the difference between earning an entire million dollars or being a millionaire. Although having a net worth of at least $1 million is a feasible objective for many folks, only a tiny percentage of people will be able to earn this much in one year. Furthermore, “earning” a million-dollar salary might not make one with the same amount of wealth as is commonly believed. Recent time is filled with stories of entertainers, athletes, business people, and lottery winners who waste their funds in the waste of huge sums of money for frivolous pursuits.
It’s also important to remember that plenty of “million-dollar earners” do not really make $1 million. One could own a company that generates $1 million in profits. However, they have to pay the bulk of it as expenses. Equally, owning a million dollar piece of property that is secured by $2 million of debt isn’t really becoming a millionaire.
One of the major challenges to having a million dollars in the bank is the slow pace of saving earlier in their lives. Although some companies provide starting salaries that are in excess of $60,000, they’re not the norm. Most of the time, fresh graduates are struggling to pay for rent, make payments on student loans, and build up enough funds to enjoy at least a semblance of a lifestyle. For the few who are able to save $15,000 or $10,000 per year, it would require an entire 66 years to earn one million dollars with no charges or compounding.
However, as they grow in age and experience, the situation changes. In addition, they typically see their earnings increase, but they also discover that they don’t need to shell out so much to cover the “starting expenses”–student debts are paid off and they own furniture that they desire, and maybe they even have a partner in love with whom they be able to share expenses.
One reason why the first 1 million is difficult is because it’s an enormous sum of money in comparison to the place where most people begin. The transition from $500,000 worth of capital assets, to $1 million, you need the return to be 100%–a kind of performance that is difficult to attain in less than six years. Moving between $1 million and $2 million requires 100% growth but the subsequent million after that will require only 50 percent growth (and after that 33%, and so on).
In actuality the majority of wealthy individuals can as well “live off of the investment.” This means that they invest the bulk of their wealth in a relatively secure portfolio of income-generating assets, and get by on that, allowing them to go on a more adventurous journey.
Think about it like that $1 million in an AAA-rated portfolio of corporate bonds will yield over $50,000 in earnings from interest (pre-tax) And you can appreciate the potential of an income stream that is passive and compounding.
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For at the very least, in one important aspect, the wealthy differ from the rest of us because they have access to investment choices that ordinary people don’t. But, on the other hand, they are not for everyone because they don’t meet the minimum levels of income or wealth set by regulators (to mention only the minimums that individual companies/funds impose).
It’s also difficult for investors to get into “ground floor” opportunities without money. Venture capitalists and start-ups are looking to draw billionaires and millionaires and not ordinary people who can afford just a couple of thousand (or even hundreds of thousands) dollars. In the same way, it is highly challenging to make investments in high-value investment classes such as farmland and timberland without a significant sum of wealth in order to start.
The fear of risk is another overlooked factor that hinders the accumulation of wealth and wealth. When people are beginning to save money and invest and save, they are zealously guarding the grubstake of risk in fear of losing everything.
Although this is normal, the truth is that the bonds between reward and risk are difficult to break. At the same time, investors might be able to understand the minimal chance of “losing it all,” being cautious means they’re earning less and making it harder to achieve the first 1 million. A portfolio of conservative stocks and bonds might outperform inflation, but it will make the journey to $1 million a long one indeed.
In contrast, once they have enough money, they feel secure and not overly susceptible to a downturn in the economy, and the bear market tends to be more apt to take the risk. Many wealthy people do not have this type of investment (Warren Buffett is a well-known example of a successful and very prudent investor) However, a lot do.
There’s no need to negate the fact that it’s difficult to create the first 1 million dollars of wealth. However, the fact that it’s difficult doesn’t mean there’s a reason not to try. Make an effort to save the most money you can, invest it with an appropriate balance of opportunities and risk, and stay constantly looking for ways to be more efficient, faster, smarter, and harder.
The success rewards are patiently waiting for you to prevail, and the challenge of figuring out how you can earn another million is a task that’s certainly worth having.