By Adam Jusko, ProudMoney.com, firstname.lastname@example.org
If you’re dreaming of a hard-won financial independence secured by multiple millions of dollars in the bank, you may be wondering how anyone gets there. You see the stories of multi-millionaires who retire by 30, 40, 50, and you think — how? Is that really possible?
Well, it’s not easy, but it is possible. And know this: the first million is the hardest.
After reaching the $1 million mark, you may be surprised at how quickly your net worth builds. It may take years and years to get that first million dollars, and then under 10 years to get the next million.
There are multiple reasons why the first million is the hardest and the next million is so much easier:
The First Million Comes Mostly from Your Income
When you are working toward that first million, a good chunk of your income is going toward your daily survival, including food, clothing, shelter and some modest luxuries here and there. You don’t have much extra to save, which means you don’t have much to invest. While you eventually will make good returns if you invest wisely, a very large piece of that first million dollars comes from your ongoing income.
However, once you have a million dollars, you have a large hunk of money that does nothing but feed on itself, growing without you doing any work. If you have $1 million in money to invest and it makes a 5% return per year, which is very achievable, you are making $50,000 without lifting a finger. And, thanks to the beauty of compound interest, the next year you’re making 5% on $1,050,000, which means you make $52,500 without lifting a finger. If your investments do better, your money adds up even quicker.