Absolutely! During the past few decades, accumulating substantial wealth has been within the grasp of most people who are intelligent enough to learn a skill or develop a profession. The secret is to build wealth slowly, but surely, through maximizing your streams of income and minimizing your expenditures, while repeatedly investing the difference. Einstein is reputed to have said, “Compound interest is the 8th wonder of the world,” and while this quote may be falsely attributed to him, it captures the fact that compounding small amounts of wealth over a period of decades is a powerful method for building wealth.
In his post https://qr.ae/prSsRC, Robert Malone outlined how he reached millionaire status and beyond by using the power of compounding:
• I received by BA in Accounting from college in 1983.
• I immediately went to Business School receiving a MBA in Entrepreneurial Management.
• In 1985 I started working for one of the largest CPA firms in the world in Texas. I earned about $30,000 a year. I saved about $6,000 from my salary.
• In 1986 I started a side business preparing tax returns. Within a couple years I was making about $25,000 a year from that business. I was able to save about $20,000 a year.
•In 1987 I used my saving of about $40,000 to secure a line of credit to buy and sell houses. I started flipping about 12 homes a year, earning about $15,000 to $20,000 per house.
I now had 3 sources of income. I save all my income from flipping houses, from my side tax business, and my job. By age 31 I had saved a $1 million. I was a bona ride millionaire.
The key to becoming a millionaire is to grow your income, save the majority of that income, and invest your savings in growth investments like real estate or stocks.
To become a multi-millionaire, you merely follow Robert’s plan until you have a million dollars and then apply Curt Sutherland’s approach https://qr.ae/prcBCD described below.
When I finally achieved a net worth of $250,000, I realized that within a few years I could be a millionaire. By the time I had a net worth of $500,000, I realized that I was absolutely going to be a multimillionaire.
A few years later, when I became a millionaire, I realized that three million would be fairly easy to achieve. When I reached three million a few years later, I realized that I could be at five and ten million in no time at all. The time from five million to ten million was much shorter than the time that it took me to achieve my first $250,000.
The reason that wealth accumulates faster as you acquire more is two-fold. First, compounding is exponential, meaning that it increases like the geometric series, 1, 2, 4, 8, 16 …. You can think of this as a snowball rolling down a hill; it starts small and with each rotation, accumulates and ever-increasing amount of snow until it is a giant ball. Second, as your investments generate more money, your expenditures become a smaller fraction of your income, providing more money to invest.
In order to be implemented correctly, the approach described above requires several decades for significant compounding as well as a reasonably stable economy that is not interrupted by a great depression. It would be glib to suggest that the process of wealth building is easy. It requires a tight rein on expenditures and a constant observation of investment opportunities over a period of several decades. However, for many people, it’s worth the effort.
