I am currently 36 years old and making $120K in Southern California, but I made my million 3 years ago.
So, let’s start:
1. If you have any debt, pay it off.
Suppress your expenses in the meanwhile: bunk with roommate, stay with your parents (swallow your pride for now), buy everything used but always inspect for quality, and learn about investing. The money you pay for interest to a lender is not the money you build toward your $1M. Yes, you can play leverage/differentials later on, but you are not ready for this yet. All the activities I mentioned is not free. You are paying it with your time and brain power instead of currency. It’s not a lost cause.
2. Once you are debt free, now we can focus on wealth accumulation.
The easiest thing to do for beginner is max out enrolling in 401(k), or 403(b) plan for non-profit org. I didn’t my first 3 years of working and I’m kicking myself in the groin even after I made my $1M. Over 15 years, had I put in 2000 my $10,500 401k at lets say conservatively 5% (that’s really conservative because the stock market practically took off since 2000 even with the great recession) would be $21828.74 today. At 10% performance it would be $43861.10. 3 years of doing this you will have $120K on $30K investment! My point here: time lost is literally money lost. Locking your money into retirement plan also gives you an additional barrier preventing you from spending it before you need it (some call it saving vehicle).
3. Hopefully if you did your homework on no 1. you now at least know the in-and-outs of the market.
Go open your Roth IRA account. It’s basically a post-tax tax-free trading platform. 401(k) and 403(b) are pre-tax trading platform but you get taxed on your gain at the end, while Roth IRA is post-tax trading platform but you are not liable for tax on any of your gain at the end. This is very similar to no. 2. It minimizes your tax liability.
4. Next is figuring out your longer term wealth strategy.
This is where I diverge from many people. I personally prefer equities to properties. Both have pro and cons. For me I like my mobility a lot due to the nature of my job, so owning a property is kind of down in my list. On the other end many people also struck it rich owning and flipping houses, for example. My current allocation is 80% equities 20% cash, with no debt. Yes, on bad days you have to stomach your net worth dropping by $60K a day, but they can also bounce back up the same amount the following week. With property owning you can’t get that definitive pricing without appraisals, so the day-to-day fluctuations is somewhat more palatable. So balance it out. Doing both is actually the most recommended way so you don’t dump all your assets in one basket.
I’ve struck gold on a few stocks (1200% in one), and struck abyss on the others (-95% in several). This is not a stock forum; you need to also build a good strategy and not bank for home runs. Go educate yourself on how to choose a proper investment strategy; but get in the game, ASAP. The sooner you learn the in-and-outs of the market, the better your strategy is. If you are really advanced, you can start playing with options, but that may requires a FT attention from you. As far as paying money managers to do those for you, I haven’t done it. Some are worth their fees, but most don’t.
5. Invest in your health.
Especially preventative health care. The money you spend on your remedial health care is not the money you are putting into building your $1M. Oh, did I tell you remedial health care cost a lot more too? Think of one time triple bypass compared to your gym membership. I’m not saying skimp on fixing your ailment, but merely focus on prevention side of it because it’s a lot cheaper and less painful to do so. Think of lost wages/productivity and the pain when you get that triple bypass. Wouldn’t you rather slog it out in the swimming pool or treadmill at the gym? Or several less drinks a week compared to weekly dialysis? Do your annual checkup. It’s free with most health insurances.
Now, go get your $1M. And post how you do it here!