They all say the first million is the toughest. After that, it gets much easier.
I recently discussed that statement with my friend Jerry, a real-life millionaire next door with a portfolio that has recently surpassed $3 million. He certainly agreed, regaling me with stories about how, as a much younger man, he and his wife would avoid nights out with friends or intentionally turn down the thermostat, just to help them get closer to their goal of a $1 million net worth.
In fact, getting to the first million is so tough that many folks who are on the right path just give up. They’re unwilling to see the goal through. They lose motivation and are relegated to a life of financial mediocrity.
I don’t want to see that happen to you. Financial freedom is one of the best feelings in the world. You can choose to do anything, knowing you have the capital to back it up. That’s truly empowering.
Let’s take a closer look at three strategies you’ll want to use if your goal is to become a multi-millionaire.
Save aggressively
This one is a no-brainer, but it needs to be said. To become rich in a hurry, you’ll need to create a big savings rate.
This requires a relentless quest to slash your expenses. Nothing should be sacred. You’ll get the best bang for your buck by focusing on the big three household expenses — housing, transportation, and food. Minimize those, and you’re well on your way to creating the massive savings needed to become wealthy.
Of course, slashing costs is just one piece of the puzzle. The other way to maximize savings is to increase your top line. Some folks can do this easily by taking on additional shifts at work. Others might have to start a side hustle or get some further education to qualify for a promotion. You might even have to switch jobs.
Marry well
Jerry is quick to give his wife much of the credit for their family wealth. He says without her dedication and support, his goal of financial independence would have become overwhelming decades ago.
Some people don’t really care about accumulating assets. They’d rather have the things money can buy today. There’s nothing wrong with living life like that. But if you want to amass wealth, it’s best to avoid ending up with someone who has differing goals.
There aren’t many things sweeter than celebrating financial independence (or possibly retiring early) with your spouse after years of hard work. That feeling makes all the scrimping and saving worthwhile.
Invest well
You don’t have to find the next sexy growth stock to make your first million. Many Canadians have used boring ol’ blue-chip stocks to become fabulously wealthy.
Take Toronto-Dominion Bank (TSX:TD)(NYSE:TD) as an example. The company is Canada’s second-largest bank, and one of North America’s 10-largest financial institutions. It has quietly become a leader in important banking categories like mortgages, credit cards, and wealth management up here in Canada, and then it has reinvested those profits into growing operations in the United States.
It’s been a powerful combination for long-term investors. A $10,000 investment in TD shares made 20 years ago is now worth $85,348, assuming all dividends were reinvested along with way. That’s an annual return of 11.31%. If TD continued those kinds of returns going forward, it would take 22 years for a $10,000 annual investment in the stock to surpass $1 million.
TD’s future prospects look bright, too. It has a well-regarded management team — folks who are relentlessly pursuing profitable opportunities. There’s great growth potential helping to consolidate the fragmented U.S. banking system. And soon-to-be retiring baby boomers will help boost the wealth management business.
The company’s shares pay a 3.8% dividend — a payout that has been hiked at least once per year since 2011.
