A Quora post caught my eye.
It asked the question:
"How did you make your first million dollars and how can you repeat that process?"
This launched me into a deep rabbit hole.
I read through all the answers, and the answers to all the similar questions on Quora. And Reddit.
Overall, I was not surprised by what I found.
But I thought it would be interesting to share my notes with you.
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6 Ways to Make Your First Million Dollars
According to people's stories shared on Quora and Reddit (so take everything with a grain of salt).
- Earn an above average salary while investing in mutual funds, living frugally, and waiting for 10 or more years of time to pass. This is the most common, boring, and low-risk way to make $1 million. If you can make six-figures in salary and as long as you don't make any serious personal finance mistakes (e.g., credit card debt, over-concentrated risk exposure) and avoid unfortunate negative personal finance scenarios (e.g., divorce, medical complications), you'll reach your first million. Slowly. The jobs that most people in this category fall into are an engineer, a lawyer, a trader, or a doctor. So if you have a good job, stay reasonably frugal, and invest safely over a decade or more, you'll make a million dollars eventually.
- Own stock in a startup. One person made their first million in their late 30s by negotiating a deal where they earned stock in lieu of part of their salary. When the company exited, the early employee's stock became millions. So whenever you have the chance to earn stock over cash, and you're in a safe enough position to support yourself, and you believe in the future of the company, take the risk. Founders make a far larger payout because they absorb more of the risk, but early employees who own stock options can make well into the millions in a favorable liquidity event (e.g., a secondary, IPO or acquisition). Another startup employee leaped from a $230,000 net worth to $3,000,000 liquid because their company filed for an IPO. No risk, no reward.
- Pick a "winning" company stock at the right time. One person said they bought NVDA at 2011 at $17 a share. "The stock traded below my buy price for 2 years and 10 months," the millionaire shared on Quora. At the time of this writing, NVDA trades at $596.54 a share. That is a 3,505.88% return. "I sold just enough shares to live on," the person wrote. So if you can identify a market opportunity before a company "shoots off," you can make a million dollars.
- Family inheritance. First, this is not a repeatable process. Whether it's lump sums of cash or paid off residences, inheriting assets from deceased relatives can catapult one's net worth above a million in short time. Most recipients seemed to use the inheritance money to pay off debt and buy a house outright.
- High commission sales jobs. One millionaire got into a sports and media agency at age 27 and became a sports agent working off commission. He took a base salary of $50,000. However, he makes a 7.5% commission on clients who pull in around $73 million from contracts alone. So if you're good at sales (most entrepreneurs are), you can figure out a way to scale your net worth to seven figures.
- Own a real estate portfolio. The millionaire who wrote the longest answer said he got his start in real estate, beginning with a $405k house he rented to his college friends and sold for $120,000 profit after graduation. This opened his eyes to real estate as a wealth building tool. He eventually accumulated 11 buildings worth $3.5 million… by raising $500,000 in cash from friends and family (almost none of it was his own money, he admits). So the lesson is real estate is a proven path to a net worth of a million dollars.
There are only three ways to build true wealth in America:
- Ownership in a private business
- Investing in the stock market
- Owning real estate
That's it. Everything else isn't sustainable or repeatable, or could be lost instantly. Only these three build true wealth in the USA.
So ask yourself, do you have a plan to use one of these? Do you have a good understanding of how each of these assets work? If not, it's time to start learning.
Fortunately, you're already reading Entrepreneurship Handbook, a great resource to learn how to build wealth. But ultimately, it's up to you to take ownership of the plan.
Do you have a story of how you made your first million? We'd love to publish it. Email me directly at editors@ehandbook.com to get started.
This story was originally published in our newsletter at https://mail.ehandbook.com.
