Millionaire Milestones

Milestone 1

Find Your Why

We all want to be millionaires, but why? Articulating your own unique answer will positively influence your wealth journey and help lay out a road map for success. Start by answering these main questions:

1. What's your motivation to save? In other words, what are the first three things you would do with a million dollars?

2. What purposes would a million dollars serve for you, and how would it change your life from what it is now?

Have you ever sat down and really thought about why you want to become a millionaire? For many people, the main goal is to secure their financial future for retirement. That purpose may not have the zing you're looking for, but trust me, after a lifetime of work, the last thing you want is to feel too financially insecure to actually retire.

Perhaps your reasons for getting rich are something else entirely. Maybe you are laser focused on the now, such as buying a house, paying for a loved one's surgery, affording steep tuition costs for two kids, or funding your own start-up. Whatever the reason, you need to have a clear purpose in mind.

Why a Clear Purpose Is a Fundamental Requisite to Wealth

You'd be surprised by how many people go through life aimlessly and fail to build wealth simply because they lack clarity and purpose. Wanting to get rich simply because adulting is expensive is not specific enough to get you to a million dollars. The general desire to afford more things and improve your lifestyle is understandable, but it's too vague. Over time, vagueness and a lack of concrete objectives tends to induce people to overspend, undercontribute to their savings and investment accounts, and drift significantly from their desired path.

A lack of clear purpose also makes it harder to motivate yourself to succeed. Just think about how many New Year's resolutions you failed to follow through on because your goal was too broad and lacked both direction and meaning. There's a big difference between I want to buy a house and I want to save $300,000 for a down payment on a three-bedroom home over the next five years by saving 40 percent of my paycheck, investing in an S&P 500 ETF, and taking public transit instead of buying a car, because I want a place to raise a family.

When it comes to growing wealth, target explicit, big-ticket expenses and detailed goals that span the coming years and decades. To achieve great success, hold yourself accountable over the long haul. The purposes you identify for building wealth will also influence how you choose to earn, keep, and spend your money. They can also guide you toward an ideal income level that balances your financial needs, happiness, sense of fulfillment, freedom, and time. Just like a racehorse in blinders, stop worrying so much about what everyone else is doing and get laser focused on your own path forward.

List Your Motivations for Greater Wealth

If you don't yet have a clear picture of what you want to do with a million dollars, spend the next five minutes writing down what you would love to do with it. Then, narrow down your list to the three most impactful applications. With the right mindset and specific purposes in hand, you will have the motivation and determination to make real, positive changes toward your pursuit of a million dollars.

Even if you already know why you want more money, chances are there are some other reasons you've overlooked. Here are some examples of various purposes greater wealth can serve in your life. Highlight your favorites and jot down any others you find particularly meaningful.

Lifestyle:

- To do what you want when you want
- To increase life expectancy (e.g., by comfortably affording better foods, health care, and safer transportation)
- To fly in comfort, travel the world, and experience new cultures
- To reveal your true self and be less fearful of judgment

Family:

- To start a family (which may involve expensive fertility treatments and procedures)
- To spend more time with your children before they start school full time or leave home for good
- To give your children opportunities that weren't available to you
- To act as an insurance policy in case your children are unable to make a good living themselves

Career:

- To reduce your stress and work hours
- To have the freedom to say no to an unreasonable work request
- To tell your micromanager to jump in a lake
- To switch careers or work at a lower-paying job that provides more meaning and fulfillment
- To start your own entrepreneurial endeavors
- To retire early

Values:

- To spend more time helping people in need
- To speak up against injustice, bullies, bigots, and racists without fear of financial ruin
- To feel more secure in this brutally competitive world
- To give more to the most important charities

Health:

- To get the best medical treatment possible for a disability or illness
- To pay for a private chef or dietician to improve your nutrition
- To not be afraid of the cost of going to the doctor or emergency room
- To hire personal trainers for any type of fitness goal
- To pay for a therapist

What comes to mind for you? Write down as many items as you can and make them specific.

Once you have a list of purposes in writing-yes, I want you to actually write your answers down or type them out-reorder your objectives, from greatest to least priority, and circle your top three. Now you have the precise motivation to save and invest for your future.

Having, Earning, and Spending a Million Dollars

Once you have a grasp on why you want to become a millionaire and the purposes the money will serve in your life, it's time to consider the differences between having a million dollars, earning a million dollars, and spending a million dollars. These differences will impact the timeline and strategies you use to acquire, maintain, and consume money.

Here's the good news: after a lifetime of saving and investing, if you achieve the milestones in this book, I'm confident you can get to a million-dollar net worth. And, depending on how your net worth is structured, having $1 million could generate $30,000 to $50,000 a year in a low-risk manner.

More difficult than acquiring that first million is earning seven figures a year. Earning a million dollars a year puts you in the top 0.1 percent of income earners in America. Getting to a top income requires longevity, hard work, and, well, a whole lot of luck!

In the next chapter, we'll explore who makes $1 million or more a year. These income earners might seem ubiquitous, but, I assure you, they are not.Finally, spending a million dollars a year is actually the hardest to do of the three. To be able to spend a million dollars, you first need to accumulate a million dollars posttax. To spend a million dollars a year consistently, you need to have multiple millions of dollars (unless you want to end up broke). Anyone spending a million a year likely has a net worth of at least $50 million.

Be mindful of just how different one millionaire can be from the next. People achieve millionaire status in a multitude of ways and time frames. An awareness of the many roads to a million dollars can help prevent you from getting discouraged along the way. The route you take will be unique in duration and direction based on your own goals, choices, actions, and efficiencies (or lack thereof). There's no one right way to wealth and freedom. You get to choose your own path.

Keep in mind that your reasons for accumulating wealth will change as you age.

When I was in high school, I wanted money so I could buy a rich friend's 1990 Mustang 5.0 GT for $12,000. I imagined listening to the engine's sweet rumble while waiting outside my date's house before taking her to the movies. Alas, all I could afford was a bike.

At my first job at a major investment bank in New York City, I made a $40,000 base salary and could only afford a studio apartment with my high school buddy. The last thing I wanted was to rely on my parents for financial help. That would have been too embarrassing after four years of college and their financial support.

Now, as a father of two young children, I mainly want money to buy my wife and myself more time with our kids. It is estimated that by the time children turn nineteen, almost 90 percent of the time they will ever spend with their parents is already over. The image of our children graduating high school and finally leaving home is both joyful and sad. Time is our most precious commodity.

Having anticipated the ever-increasing scarcity of time as we age and the challenges of juggling work and raising children long before I became a father, I delayed having kids until I felt financially secure. I wanted to be able to care for my kids on my own schedule, not around the needs of a demanding employer. Unfortunately, I failed to consider that having children later means I'll be in their lives for less time. Now I'm doing my best to play catch-up.

As time passes, the main purposes you assign to your financial growth will also change. Pause, assess, pivot, and always keep evolving.

How Far Can a Million Get You?

Let's look at roughly how much some things can cost in your working years and in retirement to give you a better idea of what you can and can't do with $1 million.

$300,000: The average cost to raise a child until age eighteen
$200,000: Cost of two years at community college plus two more at a state school by the year 2042*
$651,000: The expected all-in cost of four years at a private university by the year 2042'
$315,000: Average health-care expenses for a sixty-five-year-old couple in retirement
$26,000: Average annual housing and transportation expenses for older retirees
$115,000: Average annual cost of a private nursing home room

* Assumes a two-year cost of $26,000 for tuition, fees, room, and board at a community college plus a two-year cost of $44,000 for in-state tuition, fees, room, and board at a public state school at a 6 percent annual compound growth rate for eighteen years.

' Assumes a four-year cost of $42,000 for tuition and fees plus $15,000 for room and board at a6 percent annual compound growth rate for eighteen years.

Now that you have a sense of how far $1 million can take you, revisit your list of key purposes for earning wealth. Make revisions if you grossly underestimated how much you may need in retirement, or if your priorities shift. Your goals and motivations to save can help guide your decision-making as to what lifestyle changes will make becoming a millionaire more achievable more quickly.

Depending on your age and family situation, you may need at least $1 million just to make ends meet. The big three expenses are shelter, health care, and education. If you want to reduce your need for money, stay fit and don't have children. For the rest of us, who want kids and don't run ten miles after enjoying a cheeseburger, the cost of living will be much greater. Please choose your lifestyle accordingly.

The Ideal Income for Maximum Happiness

Nobody said becoming a millionaire is easy. Sacrifices must be made! For most of us, the sacrifice will be in the amount of time we spend on our careers. The harder and smarter you work each day, and cumulatively over time, the greater your chance of becoming a millionaire. But, at some point, we must all decide how much is enough. How much annual income is sufficient to achieve your goals? The answer is different for everyone, because everyone's desires and cost of living are different.

As someone whose salaries have ranged from $4 per hour working at McDonald's to much more as an entrepreneur, I believe happiness is more about family, friends, health, and purpose than about wealth. Once you earn enough to take care of your basic living expenses, what keeps you happy is better relationships, good health, and a strong purpose-not more money.

Think about the goals you wrote down. Go through your budget and calculate how much posttax income you need to cover everything comfortably. Then tack on 20 percent for saving and investing. This is your ideal income for maximum happiness.

For example, let's say for the past three years your family of four spends $8,000 a month on food, clothing, shelter, transportation, and miscellaneous items for a comfortable lifestyle. That's $96,000 a year. Multiply $96,000 by 1.2 to account for the 20 percent saving and investing, and you get $115,200. Thus, somewhere around $115,200 after tax would be your ideal, steady-state income level. Any additional income you could make over $115,200 would be unlikely to result in additional happiness in your life. Once you make about $100,000 per adult in the Midwest, or $250,000 per adult on the coast, both adjusted for inflation, there is no significant incremental increase in happiness as your income rises further.

For more perspective, in 2010, Nobel Prize winners Daniel Kahneman and Angus Deaton of Princeton University argued that $75,000 was the ideal income, above which happiness increased no further. If we adjust for inflation at a rate of 3 percent, that $75,000 equates to roughly $117,000 in 2025, $157,000 in 2035, and $182,000 in 2040. In 2023, Kahneman published a follow-up study, with coauthor Matthew Killingsworth of the University of Pennsylvania, claiming that happiness continues to rise up to $500,000 in annual income for most people. "The exception is people who are financially well-off but unhappy," Killingsworth explained. About 15-20 percent of people fall into this "unhappy minority." For them, additional income above $100,000 per year didn't have a major impact on their emotional well-being.

You may want to earn more than my suggested, inflation-adjusted $100,000 in the Midwest and $250,000 on the coast. If so, you should try to do so. Just be careful. The more active income you make, the more stressful your work will become. For example, when I was working in investment banking, the managing directors made the most money. They had base salaries of $400,000 and up and would regularly make $1 million in total compensation per year. They also had dozens of people to manage, were responsible for the profitability of various divisions in the firm, and were constantly stressed out. When downturns came, the MDs were often the first to be let go. CEOs of large companies might be making millions of dollars, but at what cost? With multiple direct reports, quarterly shareholder meetings, media scrutiny, nonstop business trips, and multiple fires to put out on a weekly basis, they have much less free time than the average person. Some hardly ever get to see their children grow up, which can result in their kids struggling with a lifetime of emotional damage. Studies even show that CEOs who experience unusual stress can lose roughly one to two years of life expectancy, which is the ultimate negative.

Now compare those CEOs with an average employee who gets to work forty hours a week or less, always has time to exercise, and reliably comes home in time to eat dinner with their family. Is a CEO's lifestyle really much better than that of the average person who has more control over their time and less stress? I'm not so sure. Time is more valuable than money, especially as you get older.What may augment your happiness more than just making extra money is how you earn it. If you can increase the percentage of your total income derived from passive sources (e.g., stock dividends) versus active sources (e.g., your job), your happiness may improve further.