10 Steps Using Which Even a Lazy Person Can Be a Millionaire

A million dollars is a lot of money. And generally the perception is that you have to work very hard to have a million dollars to your name. You need to pick up new degrees, new skill sets and work 100 hours per week. I agree. All that certainly helps. But if you are a content soul that finds life is most enjoyable when you can just go to work in the morning, come back in the evening and hang out with the family or veg out in front of the TV/Internet, then here is some good news for you. Follow the steps below, and you can still be a millionaire without overarching yourself or burning yourself out. All it takes is some patience and some change in everyday habits.

Part 1 has a summary of steps that you can skim through if you are in a hurry. Part 2 has a detailed example that shows it can really be done with as little as $200 per month and practically no effort. By the way, if you are looking for a get-rich-quick scheme, you should probably stop reading now. This here, is an outline of the good old time tested slow-and-steady approach.

Part 1: A quick summary of steps

  1. Start early

  2. Put the power of compounding on your side. The earlier you start the more time your money has for compounding. When you can have interest earning interest, you would be surprised by the way in which little amounts of money can turn into large fortunes.

  3. Don’t ever turn down free money

  4. Be it your employer offered 401K match, employee stock purchase options that offer immediate 10-15% returns, bonus for using one realtor versus the other when you buy a home, cash back on credit cards etc. I could go on and on, but you get the picture.

  5. Make savings automatic

  6. We are human and if things were left to us to do everything on our own, we would still all be stuck in the Stone Age. Just as we trust everything else in life to automation, put your savings on auto mode too. Make sure that every month, before your paycheck is delivered to you, a part of it is deposited into a savings account.

  7. Invest wisely

  8. If your money sits in your bank, then over the course of time due to inflation, it actually shrinks instead of growing! So choose your investment vehicle wisely, preferable something like the stock market or real estate which can offer you a growth percentage that is much more than the inflation rate. And a quick reminder – don’t get too greedy and gamble away your money on high risk investments.

  9. Plan for everyday expenses

  10. Be sure that you have planned for your everyday expenses in such a way that small variations will not force you to abandon your above savings plan. People use all sorts of budgeting with different degrees of granularity. Pick the one that works for you.

  11. Be prepared for unexpected expenses and emergencies

  12. The steps above can help you start building a nest egg. But, life has a way of throwing curve balls at you just when you start to get comfortable. And at such occasions, if you have to dip into your nest egg, you wipe out the benefits of compounding and your nest egg will never get a chance to grow exponentially. So make sure you have a separate fund to deal with all sorts of small and large unexpected expenses and emergencies.

  13. Live below your means

  14. Make sure you manage to live within your means. This doesn’t mean that you start depriving yourself and not indulge in any of life’s fine things. It just means that you prioritize your indulgences and give into only those whims that offer you the most pleasure and are things you can afford. Before you spend your money think if it is something that will bring you or your family joy or if your are just doing it to show off to your friends and relatives.

  15. Avoid consumer debt at all costs

  16. If you have a great offense but your defense sucks, you will still not be able to win many matches. Same thing applies to your financial plan. Unless you beef up your defense against consumer debt such as credit cards debt, auto loans etc., you will find it hard to reach your financial goals.

  17. Stop the money leaks

  18. Look at your personal life – do you have any weak spots that are causing money leaks? These could be harmful addictions such smoking, alcohol, drugs etc. or harmless ones such as addiction to buying the latest CDs, books, shoes whatever. If it is something you do compulsively and is draining your bank balance, you should look into plugging them or at least getting them under control so the little leaks don’t turn in to gushing money drains.

  19. Build up equity, set up streams of passive income etc.

  20. Finally, in addition to the money you are saving make some provisions for yourself as you retire. Buy only as much home as you can afford and pay towards equity instead of rent, so someday in the future you can have a roof over your head without paying either rent or mortgage. Set up a stream of passive income to help you retire early or enjoy additional indulgences while you get there. While setting up additional income streams will in general need you to do some additional work, there are a few lazy options like investing in dividend yielding stocks or funding an energetic friend’s upcoming startup :)

  21. Bonus step: Eat and live healthy

  22. This is really not obvious, but if you don’t take care of your health today, then as you grow older, a lot of that money you are saving will go toward paying your medical bills. Try to eat a balanced diet and incorporate some exercise in your daily routine. If you can go to the gym, great. If not then choose walking instead of driving, stairs instead of the elevators etc. Small changes can pay off huge dividends in the long run – both in your and your bank balance’s ability to live long and healthy lives.

That’s all it takes to make a million dollars. Those of you who are skeptical and don’t believe that you can do it (for any number of reasons), let’s work through an example and see if I can convince you.

Part 2: An Example

Step 1 says start early. Let’s say you start at 25. If you can start earlier – that’s great. If you are starting a little later, make suitable adjustments to the numbers in the following steps (which as you can see have a lot of leeway) and you should still be able to make it.

Step 2 says not to turn down free money. I am sure over your lifetime you will find a zillion different ways to get some free money. But for this calculation here, let’s focus on the 401K match from the employer. For ease of calculation, let’s say you save $100 every month in your 401K and get a match of $100 from your employer. These numbers are obtained assuming a salary of 40,000 a year and an employer match of 3% - if you earn more salary or can get a better match, you should increase your contribution.

Step 3 says make savings automatic. Say you set up an automatic deduction from your paycheck and put away $100 every month towards savings. Remember this is just an example. Depending on how soon or late you start and how your personal financial situation is, you should be able to tune that number to suit your needs.

Step 4 says invest wisely. I don’t want to give out investment advice but if you want a lazy way out, pick a reliable, diversified mutual fund or ETF such as a target retirement fund. These funds are usually a diversified mix of funds with the aggressiveness balanced based on your risk tolerance which in turn is calculated based on how close to retirement you are. Let’s assume that there is no severe recession or gotchas in our lifetime and we can get the average 8% returns over the long run, which is about what the stock market has been able to give over the past 20 years or so.

Using this calculator, you are already at a little over million dollars when you retire at 65! By just saving $200 per month and availing $100 from your employers 401K match you can become a millionaire!

Steps 5 and steps 6 will make sure that you can meet the financial requirements of your every day life without having to dip into the nest egg above that is on its way to a million dollars. Note that the main reason that just $300 per month allows you to become a millionaire is that you allow for the interest to earn interest in a continuous cycle. Having a budget and an emergency account is crucial to let your nest egg snowball into a fortune.

Think of steps 7 through 9 the protective casing they use for selling eggs in the grocery store. Your nest egg is fragile and there are a zillion things out there that can crack it. Living frugally, avoiding debt and plugging money leaks can offer some protection and cushion to make sure there isn’t an unnecessary pressure that will crack your nest egg.

Finally step 10 and the bonus step is that make sure that when you do retire as a millionaire, you can continue to enjoy the life of a millionaire :)

Remember that the example above assumes you can only save $200 per month beyond your everyday obligations and building the emergency account. If can manage to save more, imagine how much money you can have and how much sooner!

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W Tapscott said...

That is a good explanation of how to amass a million dollars by age 65 (i.e., retirement). If you do that, then you won't have to worry about money in old age.

Having enough money to live like a millionaire before retirement takes something more, though -- I am still trying to figure out what.

Lazy Man and Money said...

With a zillion ways to make free money, I just to earn a dollar from each of them, right? ;-)

On a serious note, my last 4 jobs did not have a 401k match, so I'm wondering how much people can depend on this "free money" source.

It's also worth noting that in 40 years one million dollars will only but as much as $300,000 does today, so while it's a good chunk of change, it's basically enough to buy a good house somewhere, not really enough to live an extravagent lifestyle or anything.

Anonymous said...

You forgot to mention that you're NOT entitled to have kids (you how much they cost), absolutely no vacation overseas (they really are a pain in the... wallet) and not buying new CDs, books or any other artistic/culture product means you'll be able to enjoy the world surrounding you with a 5-8 years delay.
But that's ok since you'll have a milion when you're 65.
That is if you don't die of a heart attack, stroke or something before.
Enjoy your million!

Anonymous said...

"...you're NOT entitled to have kids..., absolutely no vacation overseas..., and no buying new CDs, books or any other artistic/culture product... But that's ok since you'll have a million when you're 65.
That is if you don't die of a heart attack, stroke or something before.
Enjoy your million!"


Ah, where to begin. First, books and CDs don't amount to squat. Go ahead and buy them (or use the library). Kids? You're being melodramatic. I have three children (adults now). You're overestimating their cost. Overseas vacations? Sorry Bub, but if that's your excuse for not saving for the future, you're being a wimp.

I'm a millionaire+. I retired early, raised three kids, and never earned more than $65,000 in any single year. You can come up with excuses all day, but most people have the ability to do this. If you choose not to do it, power to you. But don't come on here and claim that it's not possible to have a good life and become a millionaire by 65. The truth is, most people could do it without breaking a sweat. They just choose not to.

ispf said...

W_tapscott: You are right. Having enough money to live like a millionaire before retirement ain't quite that "easy". But hey, keep you mind open for opportunities and you never know when your ship will come in :)

Lazy: Good catch. On all three accounts! But the point of the post is that anyone can become a millionaire with very little money and very little effort, if only they commit to it.

Anonymous 1: Please see what anonymous 2 has to say.

Anonymous 2: Thanks for the comment. It sounds a lot better coming from someone who has already made it. I am not there yet, but someday, I will be - have a reasonably good life *and* make my million(s). And your comment only strengthens my resolve - Thanks!

Anonymous said...

THINK PEOPLE MORONS OUT THERE. You think 10% over 30 years seems good since its "free money" but, you put away a dollar today its worth 1 dollar.. Now factor in 1 dollar in 1977 just 30 years ago.. Is worth 9 times the dollar we use today. so in actuality 1 million dollars then is worth 9 million dollars now. You use 15% increase. You now put away 1 million dollars and well. It's 1.15 million not worth nearly as much in perspective. As well as gas. It was 70 cents a gallon in america. Now it should be over 7 dollars a gallon so its actually CHEAPER per gallon now than it was. So you want free money.. All free money does it make your money worth less. Unless you make it big and bust your ass you won't make it via simple charts

Anonymous said...

At the exponential rate the USA is borrowing money, in 20 years a million dollars will buy a cup of coffee.

Micah said...

To the anonymous person who obviously does not know the power of investing. Here is a little bit of info for you:
Given the numbers that you state, 30 years, 15%, 1 million dollars. You say that the 1 million dollars in 1970 is worth 9 million of todays dollars.
If you put that 1 million dollars in a bank account and invested it at 15% and withdrew it today. You would NOT have 1.15 million dollars.
You would have $197,879,875. So.... please, learn the magic that is compound interest before you go spouting off garbage about the value of a dollar at some point in time. Unless inflation is higher than your rate of ROI(return on investment). You're money will not be loosing value.

Benjamin Franklin knew about this concept and left two investments to philidelphia and boston when he died in 1790. He left in his will, 1000 pounds(around 2000$ nowadays) to the two cities, on two conditions. The cities had to invest it at a measely 5% interest for 100 years, when they could take out 75% for city improvement. They then had to invest the rest for another 100 years before they could remove the rest. The value after 100 years, ~$657000.
Their first withdrawel in 1890 was
on the order of ~$493,000.
The rest of the money was reinvested at 5% for another hundred years.
The value was ~21,000,000.

If they had not withdrawn any money, they would've been able to withdraw ~$34,000,000.

And that is only at 5% interest. Money Market, CD's, bonds all get this or higher rates.

The U.S. stock market average 10% over the long term.

So, if they had invested in the stock market, that original 1000 pounds that Benjamin Franklin left, to each city would be worth now almost $380,000,000 and doubling about every 7.2 years.

Want to learn more?
Read the book:
"The Random Walk Guide to Investing"
By Burton G. Malkiel

You can fire your financial advisor after reading this book, because if you follow Dr. Malkiel's advice, you will be more successfull in investing than almost every financial advisor in existance. Period!

hugago said...

For people that say invesment is useles....
wake up!!! 1 million in the future is better than nothing...
spend all your money now and ejoy life, get kicked like a dog in the future when you don't have money

Calvint said...

If the the dollar suffers the same drop in value in the next forty years as it did in the last (1967 to present) 1 million dollars in 2047 dollars will be worth roughly 160K today, make sure some part of your investment portfolio is hedged against inflation.

Anonymous said...

Worried about the future or money, you forget to live. What stories are you going to tell your grandchildren by the age of 65? That you did nothing but save and watch TV in your life? The best advice I have ever recieved ... Before you invest in anything, invest in yourself.

paddymick said...

Very big, glaring, error... Just as the author says that static money in your savings account will actually lose value as inflation eats away at it, the "million dollars" you earn following this article's advice is a million dollars in "today's money"... which will be substantially less come retirement time.

Rick said...

Very good advise. Thanks.

Free From Broke said...

It seems a lot of people have mentioned that a million dollars won't be worth as much in the future as it does now but what about our salaries? Twenty years in the future I would hope to be making much more than I am now. As my salary goes up so will my 401K contributions as well as their match. A million might not be worth as much but what's to say I won't have much more than a million?

Jim | SevenActions said...

Each step seems simple and obvious...but the fact is that few people actually follow these steps.