Make Your First Million The Easy (And Boring) Way

Have you ever heard the saying “Making your first million is always the hardest?” While that may be the case for those looking to get rich quickly, it certainly doesn’t hold true for the rest of us. The only thing difficult about earning your first million is remaining patient while the magic of compound interest turns your savings into a small fortune. Remember, I said making your first million is easy - not quick, but if you think you can hang in there for a while, read on!

Step 1: Cough Up $50/week For The Cause

The very first thing you’ll need to do is budget for an additional $50 “expense” each week. Notice I said “week” instead of “month”. Personally, I find it much easier on my overall budget when I break my large expenses into weekly payments. Also keep in mind that while I consider this $50 an expense, the truth of the matter is that you’re paying this money to yourself, so it’ll still be there in case of an emergency.

Spend a couple months accumulating this money until you have about $500 saved. Once you reach that point, you’re ready to move onto step 2.

Step 2: Stash The Cash In A Mutual Fund

At this point, you’re making good progress: You have a total of $500 saved and you’re consistently saving an additional $200/month through your weekly contribution.

Now it’s time to go mutual fund shopping. What you’re looking for is a reliable growth stock mutual fund with a long track record (preferably ten years) of market-beating results. There are plenty of tools available on the internet to assist you in selecting mutual funds, but the one I always turn to is Morningstar’s Fund Screener.

I’ll cover the details and selection criteria of the fund screener in another post, but for the sake of this article, let’s just assume you chose the excellent American Funds Growth Fund of America (RGAEX). This fund will allow you to start investing with the $500 you saved in step 1 and is comprised of some terrific companies including Oracle, Google, Target, and Microsoft.

Now, through the brokerage of your choice, you’ll want to do two things. First, buy an initial position in the mutual fund you selected and secondly, set up a recurring purchase of either $50/week or $200/month - whichever works better for you. Don’t worry about trying to time the market to get a lower share price - you’ll be invested in this fund so long that it won’t matter. The most important thing is to stick to your guns and be consistent with your weekly or monthly contribution.

Step 3: Forget About It!

That’s right - once you’ve set up your recurring contribution, forget about it! Assuming you earn a reasonable 10% annual return on your investment, you’ll be a millionaire in about 38 and 1/2 years.

What’s most amazing about this investment plan is that over those 38 1/2 years, you’ll have only contributed $92,400 of your own money! The remaining $907,600 is courtesy of dividends and compound interest. If you’re in a position which allows you to save even more, say $400/month, you’d be a millionaire in only 32 years.

Additional Resources

• How To Make A Million Dollars (@ MSN Money)
• Eight Ways To Make A Million (@ Kiplinger.com)
• How To Make A Million Dollars In 10 Years (@ Free Money Finance)
• How To Make A Million Dollars Without Robbing a Bank (@ My Two Dollars)
• Your First Million Dollars (@ Millionaire Money Habits)

Image courtesy of: AMagill

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