How to MAKE a million bucks!

[HaroldCrump]

I have a few more suggestions: plant your corn early, buy low sell high, don't urinate into the wind, look both ways before you cross the street.

You forgot : Don't eat yellow snow

[Square Root]

As someone with many multiples of the "figure" , I find many of these posts pretty naive. Those of you who have succeeded may agree. It's pretty simple:work hard, save as much as you can ,be careful with your money, and don't over invest in personal use real estate. $1mm is certainly in reach for someone with a reasonable income. I do agree that $1mm is not what it used to be and really only provides about $40,000 in income if you retire in your 50's. Not exactly lifestyle of the rich and famous.

[Square Root]

You forgot : Don't eat yellow snow

Good one. This may be a corollary of urinating into the wind?

[Dave]

once our income from dividends equals about 2/3rd's of my current salary, I can finally quit working

Jon, is your 1,2 M invested only in the stock market, or did you diversify in real estate, land, or other assets (excluding your principal residence) ? I will be in a similar position as you at that age, but right now I am at the beginning of the journey and I am getting all kinds of advice from different directions. For example, my family wants me to invest in real estate but I know deep down that I would not enjoy or even have time to be a landlord (I love REITs though). So I am curious about what others in a similar situation are doing.

Dave

[Plugging Along]

It's easy if you start early and plan your way:
- Complete education for a good paying job, preferably by age 23. A goal of starting at 60k and growing to 100k in 10 years should be enough.
- Get a partner with the same goals.
- Postpone having children.
- Learn to invest in financial markets.
- Invest 50% of your gross income.- Don't get a mtg. over 300k
- $50k/year in investments will produce $1M in 12 to 14 years (for growth rates between 6% and 10%).
- Then have children (if you want them) and be a stay at home parent.

If you start late, invest 50% of your gross income and adjust your spending accordingly.

I agree with alot of these things, its not that difficult with a good income and partner. That's pretty much what we did was focus on the careers in the beginning, and held off on kids until we were established. This gave us alot more choices in terms of when returning (if we decided) after maternity leaves. However, I have to disagree with the stay at home part after the kids come, that's a lifestyle choice, not a financial one. In fact, it can be a bad financial one if you have held off having kids until you are established. That's a side point though.

I also can't figure out how some one saves 50% of their GROSS income. If you are in a higher income bracket and are paying over 40% taxes, you would have to live on under 15% of your gross income. That seems pretty sparse (I know doable)

[Plugging Along]

I don't quite understand the obsession from some to have a million by 40, it really isn't that much to live off of, and if you choose to have kids, then I don't think I would feel comfortable retiring with 3 times that amount until my kids are our of school.

We hit our the magic number in our early thirties (I think 32 to be exact), this included our primary residence. We dropped to just below that number during the market crash. Right now, we're really close to that number again, not including our primary residence, because we choose to liquidate some investments and pay off our mortgage last year. Honestly, I don't think we've 'made it', nor do I feel like we have very much, or our close to our goals.

Our focus early on was not to make a million but really just to focus on establishing our carreers and our skills as much as possible. Both my partner and I finished university, and got jobs right away (not anything close to 50K at the time). I focused on developing skills and learning as much as I could to get promoted, money was and still is always secondary. My spouse realized that climbing the corporate ladder wasn't for him, so decided to consult. He gave up stability for a higher income. I continued climbing the ladder until we had kids.

We weren't always the best savers, but did always save a small amount, and paid off our debt (mortgage) as fast as possible. We increased our savings to match every promotion or raise we received by at least the same percertage. I do all the investing for us, and will admit, that I can be somewhat of a gambler (not in a good way like Marina), so I had that offset by getting an advisor that I really trust. I know that I pay higher fees, but have to admit, as of right now, I'm okay with that. He does our investing for the long term that is a more reasonable, safer approach. I have been with him, since I started investing at 21.

We lived off of mostly my salary, and the play money and savings money came from my partners consulting, which was less stable. We managed to save a larger down payment about 38% down at the time. My partner also had a condo which we kept and rented out. We made sure that we could pay the mortgage and bills off of my lower, but more stable income. We used his consulting as extra payments, and for our high risk investments.

I have a two fold 'investment' strategy. First is, that I have someone that I trust to manage my 'safe' investments aka the ones for retirement. Like I said before, he is a good balance for my personality. The plan we have with him will have us in good shape for retirement if nothing else happens. My second strategy is to take my gambles. I do 'week' trading (not quite as frequent as day trading, and my own little thing), I have had opportunities to invest in starts up which are very high risk, and overall have done well for me, but have lost all my investments at times. I am willing to take much higher risks, because I know we are well on our track to retirement with our advisor and other real estate. . Anything I invest outside of this, I have always been willing to take the gamble and lose it all.

I really feel that the best investment one can make is in themselves.

[1.5M]

I also can't figure out how some one saves 50% of their GROSS income. If you are in a higher income bracket and are paying over 40% taxes, you would have to live on under 15% of your gross income. That seems pretty sparse (I know doable)

I don't understand why would anyone willingly pay 40% taxes, no mater the income bracket. There are so many ways to reduce that percentage, especially for the rich, but even the middle class can optimize it.
Here's a few numbers:

(a) Two $60k incomes, with rrsp maximized => $15.8k taxes (in BC) => $44k to live on
$60k investment/year -> $1M in 11 years at 8% growth (net of capital gains taxes on the non-registered part of investments)

(b) Two $100k incomes, with rrsp maximized => $35.2k taxes (in BC) => $65k to live on
$100k investment/year -> $1M in 8 years at 8% growth (net of capital gains taxes on the non-registered part of investments).

Here's how 2 people could live on $44k/year:
$19k mtg + prop taxes(for a $300k principal)
$7k food
$3k utilities
$2k phones/tv/internet
$7k cars + gas
$2k misc
$4k vacation

[Causalien]

"Buy low and sell high"

People need to stop spewing this nonsense.

[Young&Ambitious]

Causalien, can you explain further what you mean? Do you follow the idea of buying a good company at a good value and holding on?

[Causalien]

Low and highs are relative. When the stock market is low, usually deflation is also going on in the real world. Therefore if you with draw the money and spend it on certain item that has fallen more than the stock itself, you still earned money. Just as the opposite, as stock market rise, inflation increases and things are more expensive. A better metric is Sell high when the stock in particular rose relative to the targeted purchase you want.

The math being taken cared of, let's get to the psychology of buy low and sell high. What is high? You cannot possibly know that. Apple at $300 was pretty high and expensive, but was it a "bad" high? Bear Sterns was a great buy at $10 and the after market inside information that you just heard about them finding a buyer was amazing on that fateful day. But did you know the buyout price was $2?

Buy, when you know that the chance of going higher, (due to all the circumstances helping a stock) is greater than the chance of going lower. Accounting fraud (and any associated politically correct managerial speak) is -10%, bankruptcy is -10000% bad earnings is -5% good earnings is +3% etc. Bet on the trend will continue when the sum of all the points points to a significant sway in one direction.

You hold, only when the stock is performing exactly as you predicted. You sell when it does not and have fallen off your previously set target "GET ME OUT" price.
You hold even more firmly when it is outperforming but only if it is out performing the average.