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Mike_T · 03-18-2007, 04:14 PM

I don't think there is a best way--I think that's the wrong question.

Closer would be "what is the best way for ME to become a millionaire". The answer for you is probably different than it is for me.

Some people have a knack for real estate, love the challenges and opportunities, have connections, have capital, live in a good place for it, have the life circumstances that make it easier for them to succeed at it, etc., making it the best choice for them. Others would absolutely abhor being a landlord, looking over closing documents, worrying about a foreclosure before they get enough cash flow going, etc. and it might be the worst choice for them.

Similar arguments could be made for each of the choices you listed, and there's also no reason they must be mutually exclusive. "Other" is also a pretty large category in my opinion, which is why I chose that one for your poll.

One of the big flaws in a lot of financial advice is that it is presented as a one-size-fits-all solution, ignoring the vast differences in personality, risk tolerance, skills, interests, etc. of the people receiving the advice. To answer this question for yourself, you need to know (and be honest with) yourself, and based on that knowledge the answer may become more clear.

I also agree with tipsypixie in saying that being a millionaire isn't exactly easy street. Certainly reaching that figure is a good step towards being wealthy, and it offers you more choices than being broke, but there are a lot of millionaires that don't consider themselves wealthy or financially independent.

According to Quicken, my wife and I are millionaires (over $1 million net worth), and we reached that milestone at age 34. I feel very fortunate financially, and at the same time we're not going to be retiring to a beach house in Fiji any time soon.

One of the reasons I don't like your poll categorization is that I can't clearly put our family's success to date into any one of those categories, while I also don't consider our means of achieving millionaire status to be particularly unique. How did we get where we are today?

- A significant portion of our net worth is equity in our home. We were fortunate to buy our first home in a rapidly appreciating neighborhood, and our second home has also appreciated well. Some might not even include home equity in their definition of being a millionaire. I can understand why since I'm not likely to sell my home or take more loans against the equity, so barring any desperate measures I'm not expecting to "realize" this appreciation any time soon. Nevertheless, it is part of my net worth, and if we did retire and move somewhere less expensive, it would contribute to our nest egg, and it will likely continue to appreciate in value. Is this something that would fall in the "real estate" category? I wouldn't consider it that way since I've never owned an investment/rental property.

- We received an unexpected inheritance, which is not a huge percentage of our total assets, but it was enough to be a noticeable boost in net worth. That's not anything you can plan for, and isn't likely to happen again, but it is a part of how we got here.

- My career has been pretty successful, mostly as an employee. My income rose rapidly over the years, and I expect to have a high income for the remainder of my career. My wife also had a sizable income (also as an employee) until we had kids and she gave up her job to stay home with them while they are young (and she may choose to return to work soon). If there was any one factor in this list that "made us millionaires", this would be it, and it would be squarely in your "other" category.

- I did join a startup for a couple of years, and a chunk of our Quicken net worth is stock in that company (part stock grant, part personal investment), which I currently value at the price the initial investors paid for it (I haven't adjusted it up or down since the company was launched). The company is growing and has a chance of becoming very big, but it's not profitable yet and there's still a risk that it could end up going out of business.

- The majority of our financial assets are invested in the stock market, and those investments have done well over the years--we've done slightly better than the market averages. Most years we fully funded our 401k / IRAs, and our companies offered some matching. We do have some non-retirement stock market investments, but the vast majority is in retirement accounts.

The bottom line for us is that without every one of these things, we would not have over $1 million net worth (and it's possible we might not stay there, depending on what happens in the future). I could put one of them in the real estate category (or not), and I could put one of them in the entrepreneur category, but if you asked me how we got this far, I'd say something like:

- Developed a financially valued skill, and ambitiously followed a career path in an industry that values that skill

- Got married

- Bought a desirable and affordable home in a desirable neighborhood

- Spent less than we earned, eliminated all debt except our home mortgage, and invested our savings wisely

That last item is key, and has little to do with income. Without it we'd be broke no matter how much we made in income, and with it I think we'd have become millionaires at some point even with a much lower income.

As I've said, I don't consider having a $1 million net worth to be The Promised Land, but I certainly feel fortunate, and I think there's a "formula" in there that's just as applicable as "real estate" or "entrepreneurship". And once again, what has worked for me may or may not be the best strategy for you. My original point stands--I think knowing yourself, and evaluating your choices with that in mind, is probably the most important thing in choosing the best strategy for success.

03-18-2007, 04:14 PM	#40 (permalink)
Mike_T Junior Member Join Date: Mar 2007 Posts: 11	I don't think there is a best way--I think that's the wrong question. Closer would be "what is the best way for ME to become a millionaire". The answer for you is probably different than it is for me. Some people have a knack for real estate, love the challenges and opportunities, have connections, have capital, live in a good place for it, have the life circumstances that make it easier for them to succeed at it, etc., making it the best choice for them. Others would absolutely abhor being a landlord, looking over closing documents, worrying about a foreclosure before they get enough cash flow going, etc. and it might be the worst choice for them. Similar arguments could be made for each of the choices you listed, and there's also no reason they must be mutually exclusive. "Other" is also a pretty large category in my opinion, which is why I chose that one for your poll. One of the big flaws in a lot of financial advice is that it is presented as a one-size-fits-all solution, ignoring the vast differences in personality, risk tolerance, skills, interests, etc. of the people receiving the advice. To answer this question for yourself, you need to know (and be honest with) yourself, and based on that knowledge the answer may become more clear. I also agree with tipsypixie in saying that being a millionaire isn't exactly easy street. Certainly reaching that figure is a good step towards being wealthy, and it offers you more choices than being broke, but there are a lot of millionaires that don't consider themselves wealthy or financially independent. According to Quicken, my wife and I are millionaires (over $1 million net worth), and we reached that milestone at age 34. I feel very fortunate financially, and at the same time we're not going to be retiring to a beach house in Fiji any time soon. One of the reasons I don't like your poll categorization is that I can't clearly put our family's success to date into any one of those categories, while I also don't consider our means of achieving millionaire status to be particularly unique. How did we get where we are today? - A significant portion of our net worth is equity in our home. We were fortunate to buy our first home in a rapidly appreciating neighborhood, and our second home has also appreciated well. Some might not even include home equity in their definition of being a millionaire. I can understand why since I'm not likely to sell my home or take more loans against the equity, so barring any desperate measures I'm not expecting to "realize" this appreciation any time soon. Nevertheless, it is part of my net worth, and if we did retire and move somewhere less expensive, it would contribute to our nest egg, and it will likely continue to appreciate in value. Is this something that would fall in the "real estate" category? I wouldn't consider it that way since I've never owned an investment/rental property. - We received an unexpected inheritance, which is not a huge percentage of our total assets, but it was enough to be a noticeable boost in net worth. That's not anything you can plan for, and isn't likely to happen again, but it is a part of how we got here. - My career has been pretty successful, mostly as an employee. My income rose rapidly over the years, and I expect to have a high income for the remainder of my career. My wife also had a sizable income (also as an employee) until we had kids and she gave up her job to stay home with them while they are young (and she may choose to return to work soon). If there was any one factor in this list that "made us millionaires", this would be it, and it would be squarely in your "other" category. - I did join a startup for a couple of years, and a chunk of our Quicken net worth is stock in that company (part stock grant, part personal investment), which I currently value at the price the initial investors paid for it (I haven't adjusted it up or down since the company was launched). The company is growing and has a chance of becoming very big, but it's not profitable yet and there's still a risk that it could end up going out of business. - The majority of our financial assets are invested in the stock market, and those investments have done well over the years--we've done slightly better than the market averages. Most years we fully funded our 401k / IRAs, and our companies offered some matching. We do have some non-retirement stock market investments, but the vast majority is in retirement accounts. The bottom line for us is that without every one of these things, we would not have over $1 million net worth (and it's possible we might not stay there, depending on what happens in the future). I could put one of them in the real estate category (or not), and I could put one of them in the entrepreneur category, but if you asked me how we got this far, I'd say something like: - Developed a financially valued skill, and ambitiously followed a career path in an industry that values that skill - Got married - Bought a desirable and affordable home in a desirable neighborhood - Spent less than we earned, eliminated all debt except our home mortgage, and invested our savings wisely That last item is key, and has little to do with income. Without it we'd be broke no matter how much we made in income, and with it I think we'd have become millionaires at some point even with a much lower income. As I've said, I don't consider having a $1 million net worth to be The Promised Land, but I certainly feel fortunate, and I think there's a "formula" in there that's just as applicable as "real estate" or "entrepreneurship". And once again, what has worked for me may or may not be the best strategy for you. My original point stands--I think knowing yourself, and evaluating your choices with that in mind, is probably the most important thing in choosing the best strategy for success.