Transcript of If I Wanted to Become a Millionaire in 2025, I’d Do This

you want to hit a million dollars by 40 I've done it and I've helped a lot of other people do it too let's take a look at my track record I've built a business that generates millions of dollars in Revenue totally bootstrapped hosted my own show on Netflix called how to get rich I wrote two New York Times best selling books about personal finance in fact they're both on the New York Times list right now and I've coached thousands of people with their money over the past 20 years I've studied how people grow their wealth and I've helped them build it themselves today I'm sharing everything I've learned with you so you know the exact steps to follow no BS no fluff just proven strategies that actually work step one work backwards from 40 the first step is to really understand your number it's easy to say I want a million dollar but what exactly does that mean a million dollar in the bank a million dollar in a house how close are you to that goal and how much do you need to save to get there let me show you how to figure it out when it comes to investing I personally am more conservative that means instead of calculating my annual returns at 10% which is about the average nominal return over the past 100 Years of the stock market I use 7% That's the real return which accounts for inflation that gives me a buffer because I would rather get better returns than I project than to end up 50 years from now short by a million milon dollar so going forward let's assume a 7% annual return when doing our calculations next figure out how many years you have until you turn 40 anyone who's 55 years old and leaves a comment saying I wish I'd had this 15 years ago you're banned I already know if you're over 40 just adapt the lessons we're about to learn all right use an investment calculator to plug in the following Target amount $1 million starting amount this is whatever you currently have invested in things like your 401k Ira ETC number of years you'll invest this is the number of years until you're 40 return rate 7% and then compound you can just choose annually it doesn't really matter right now with all of this plugged into the calculator you will quickly see how much you need to contribute to reach your goal by 40 now I want to take a look at some scenarios to show you how to make the numbers work let's look at three starting ages as examples and I'll assume that you are starting with z 0 invested this makes it clear that the earlier you start the easier it will be for you to hit a million do age 18 it's 22 years until you turn 40 you need to invest $1,639 per month age 25 it's 15 years until you turn 40 you need to invest $3,196 a month that's a lot especially for a 25-year-old and finally if you wait until 30 you have 10 years until you turn 40 you need to invest $583 per month every month to hit a million dollar now there's two big lessons you can take one REM I'm demoralized I'm depressed I hate you I'm turning off this video you suck the inflation economy is crushing me no that's the wrong lesson the second lesson is wow time really matters maybe I started a little bit later than I wished but I better start investing aggressively right now because my future self will thank me down the line so I don't want you to wait I want you to work backwards to your goal and calculate your number today and don't panic remember we are learning the mechanics of how investing works there's one little piece of nuance that I want to add when I talk about investing 1,000 or $3,000 or $5,000 a month those numbers are terrifyingly high however we should remember that when you are younger you make less money and most people's income increases over time so if you have to invest an average of $33,000 a month you're probably not going to invest that much when you're 25 26 27 28 but when you're 40 45 46 50 you're likely to be investing more while there is some Nuance to early investing and compounding you should just remember that people's incomes tend to go up and if you are investing by percentage you have a very good chance of investing a lot of money let's walk through some more steps to get to your your goal step two invest 15% or more immediately in fact I'm the only person on YouTube who's going to tell you shut this video off and go open up your Vanguard Fidelity or Schwab account and start investing I don't want to see you back here again until your money's automated oh what suddenly my channel just disappeared hey where' everybody go okay come back come back don't do that until later now if I were doing this if I were starting to invest right now my aim would be to invest at least 15% of my income in fact even more if possible why because time is your biggest Ally which we just saw in the previous example and next the amount you invest makes a big difference now we should remember that real wealth is created by investing so it's a little ironic that most people agonize over the price of red onions for their entire life but they don't actually think hard about the percentage of their income that they are investing it's really important to be aggressive especially if you're starting out a little later in life here's a simple breakdown of the order that I recommend you invest in number one start with employer sponsored accounts like a 401k especially if there is an employer match that is essentially free money now with an employer match you can actually reach your goal of a million dollars faster I'll show you an example let's say that you make $100,000 for easy math at your job and your employer will match up to 5% of your salary in contributions check this out after 20 years I'm not even factoring in any raises you'd have $425,500 but without that 5% match you would have half of that $212,000 that is why you always start with your employer sponsored retirement plans especially if they have a match number two max out a Roth IRA for tax-free growth let's continue with the example of your salary being 100K since the current contribution limit for Roth IAS is $7,000 a year you can max out the account by contributing up to 7% of your salary that's post tax if we add this with your 401k and employer match you would have $723,000 after 20 years we're getting closer to that $1 million goal but hold on a second at this point you're only contributing 12% of your salary what if we keep going number three go back to your 401k and contribute above and beyond that company match instead of only contributing 5% to your 401k go back and add another 3% that's a total of 8% that means after 20 years with all your contributions and Company match you'd have $850,000 that's closer still not a million dollar though but we have more options the current contribution limit for a 401k is $23,500 and that does not include what your employer contributes so without factoring in any raises or changes in contribution rates you'd have to contribute a total of 19% of your salary to hit that million doll goal in 20 years that's a lot but let me just show you how the breakdown would look 12% 401K contributions that's $12,000 a year 5% company match that's $5,000 a year and 7% Roth IRA contributions that's after tax $7,000 a year now I'm overly simplifying this but you can see the math like I said before this does not factoring any changes to your income and these numbers can change dramatically depending on when you start investing and how much you invest I can tell you this looking at these numbers it's a little intimidating like is it realistic that you watching this video right now are going to start suddenly investing 20% of your income probably not it's like somebody going from sitting on the couch 7 days a week to being like I'm going to run a marathon every single day that's unlikely however what's the key lesson the key lesson is if I want to run a marathon AKA have a million Before 40 then I need to start investing aggressively today and the key is consistency don't try to do it every month automate your Investments so you don't even have to think about it and then every single year every December increase your Investments by 1% to get to your goal even faster step three focus on increasing your income now listen let's be realistic if you're making 50 60 $75,000 a year it's going to be very hard to invest your way to to $1 million by the age of 40 that is why increasing your income has to be a priority if your goal is to be a millionaire early on here's how I would do it negotiate your salary most people leave thousands of dollars on the table because they do not negotiate it is critical that you research your market value and you learn the skill of confidently asking for what you are worth let me give you an example say you currently make $100,000 but you were able to negotiate a $10 raise stop right there I know what you oh raid Coastal elite doesn't know everyone doesn't just have $10,000 floating from the sky listen before you start telling me all the reasons it won't work I routinely help people negotiate 10,000 15,000 $20,000 raises so if your first inclination is to say that won't work guess what you're right it won't however if your inclination is to say hm if it worked for all those people why can't it work for me maybe I can't get $10,000 but I can get $4,000 more and that's a lot getting a raise also means that your employer will be matching more in your 401k why because 5% of $110,000 is $5,500 if you took the entire amount of your raise every year that full $10,000 and you invested it in your 401k you'd hit your million doll goal in only 16 years that onetime $10,000 raise knocked off 4 years of reaching your goal that's amazing here's the breakdown 20% of 401k contributions that's $22,000 a year 5% company match that's $5,500 a year and $7,000 a year to a Roth IRA contribution amazing next start a side business use your skills to create an additional income stream you can look into freelancing Consulting even digital programs whatever aligns with your strengths please remember I'm not telling everybody to go negotiate your salary start a side business switch jobs I'm telling you if you are watching this video because you yourself set a goal of having a million dollar by 40 then you probably need to take extraordinary action extraordinary results means you need to take extraordinary actions that is why I am giving you all these additional ways of increasing your income and investing aggressively this isn't for everybody but most people are not going to have a million at 440 either another option switch jobs sometimes the fastest way to earn more is to move to a different company especially if you find that in your current company there's limited room for growth you could choose a different company in your industry or you might actually switch Industries entirely but you have options before I get to the next step I want to speak to the parents out there if you have kids as you increase your income you want to 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at meetfabric docomo or click the link in the description below again meetfabric docomo now on to the next step for becoming a millionaire by 40 step number four cut costs on housing and cars listen up you seven seat having Range Rover driving accident causing SUV drivers what the is wrong with you ooh I just had a baby I know what we need to do spend $97,000 on an SUV why it's for the kids what the there's two areas that people overspend on and they do it all the time first housing and second cars I see it every single day people are perplexed REM you're telling me I shouldn't spend $90,000 on a car when my income is $85,000 yes who is to judge me rid Sati is the one to judge I'm about to tell you right now you're spending too much on housing and you're spending too much on cars now if I were serious about becoming a millionaire by 40 I would carefully examine these areas housing as a guideline your total housing costs should be no more than 28% of your gross income when I say total I mean total I'm saying this because every time I say total housing cost people go raid does that include the sprinklers does that include utilities what does the word total mean it means all all of it Phantom costs like interest Insurance taxes maintenance utilities the roof repair that's going to happen 11 years from now even your gas to Home Depot the worst place on Earth all of it now in High Cost of Living cities like New York La San Francisco in fact even in a lot of cities right now it is very difficult to find housing that is less than 28% of gross income so listen let's be realistic you can stretch that 29 32 even 33 but the higher you go above 33% you start to incur a lot of risk that means you have less money to save less money to invest and less money to spend and that means it's harder for you to hit your $1 million goal so in the example of making $100,000 ideally you should be paying no more than $2300 a month for all of your housing that's not very realistic we both know that but what that really shows you is number one how expensive housing really is right now and number two how careful you have to be about your spending remember that number includes everything mortgage or rent utilities taxes fees all of it this is one of those reasons that I strongly encourage you to carefully evaluate whether buying makes sense or whether renting makes sense now to reduce your housing cost there are some options you have you can downsize get a roommate skip unnecessary Renovations which is about 98% of all Americans who do these dumb Renovations thinking they're going to make money from it you will not most Renovations do not make money they're just a luxury they're not an investment whatever I'm not talking about that today or moving to a lower cost of living area basically it's really tough and if we want to get into a discussion of why housing is so expensive then you can open up the stage for REM to rant about nimes but we're not not doing that today now let's look at the next biggest expense which is cars now I know you and your best friend chat the car salesman think that the only way to buy a car is to walk into the dealership and ask them how much you want to pay for this car every month we don't buy things on monthly payments okay that's for people who don't know anything about money for many Americans their car payment is the second biggest expense they have after their housing in fact listen to this the average car payment in the US today for new cars is $737 a month for an average of 68 months I know you don't know what that means but to me that's fing crazy okay that is huge let's not forget by the way Phantom costs like insurance registration gas maintenance which can take your monthly car payment over $1,000 easily now please remember when I used to have a $350 car payment for a V6 Honda Accord four-door my friends the total monthly expense for me was over ,000 and remember $737 is the average car payment that means there are a lot more people paying more than that for example I spoke to a couple on my podcast who had a total monthly car payment of $2,500 if you're paying that much for cars the question is what does it actually costing you probably means you can't travel as much probably means you can't eat as much and you definitely are not going to have a lot of money for retirement the problem is the majority of people buy cars based on monthly payments they don't look at the total cost of ownership or TCO and then after the loan finishes you know what they do instead of keeping it for as long as they can which is that golden period where you don't have a car payment they literally go ooh my car dashboard has a scratch time to get a new car guys what the hell is wrong with you it doesn't make sense to pay interest on this depreciating asset and then keep replacing your car every 4 years if instead you invested that $737 monthly car payment for 20 years remember I'm not even factoring in Insurance gas Etc you'd have an extra 376 $6,000 I don't mind nice cars I don't however I do mind that the vast majority of Americans don't even know if they can afford it so here's how you figure out how much car you can afford use my conscious spending plan template which I will link for you in the description below it's free fill in your numbers for everything in the fixed cost section except for the car we're going to use an example of $100,000 salary let's say your take-home pay each month is around $5,700 after adding in your fixed cost like housing groceries bills Etc you've already allocated 50% of your paycheck for this category to keep your fixed cost at 60% or lower which is what I recommend that means you can spend no more than $550 total on your car that includes gas maintenance DMV registration everything that means your car payment has probably got to be way less than 550 probably like 20000 bucks as you can see most people don't know any of this they just go out and buy a nice car o I like the paints get the car why am I getting so mad about cars because I see people throwing away their future for a freaking car and when I ask them what is your rich life they almost never say cars they go I like travel I like family I like freedom freedom you're chained down to four tires spending 78% of take-home pay on fixed costs we you know what we're going to take a bet in the comments at what age am I going to have my first heart attack I'm 42 years old right now is it going to be 43 because I saw somebody making $56,000 a year driving a $187,000 for to F450 or is it going to be 50 which one is it place your bets my friends to reduce your car costs here are some options I would consider number one drive a reliable used car no one's going to listen to me what the fck am I even doing on this video take public transportation I know you hate it you think it's scary o New York Subway is so scary oh my God sell your car get a rental that's never going to happen or keep your paid off car for as long as possible you know what I need to find a silver lining in this completely meaningless piece of advice that I'm giving you which is awesome advice that nobody's going to follow let me just say this okay hold on remit how are you actually helping people right now and not wasting your time I'll tell you how if even one of you decides that once our car is paid off we're going to keep it for one additional year just one I will consider this a success that's how low the bar is for the car brain culture in America now listen up for the three people who are still watching this video I want to Circle back to housing but before I get to that make sure you hit subscribe and turn on notifications so that I can get three new subscribers on my YouTube channel step number five consider renting and investing the difference another piece of advice that no one is going to listen to I love this video now this is the most controversial step and I also happen to be completely right but nobody in America agrees with me that's okay I've gotten used to being right and having tons of right-wing trolls get mad at me every single day online this is my rich life now now listen if your goal is to become a millionaire by age 40 I would seriously recommend you carefully think about what your definition of the American dream is and if your goal is to become a millionaire by 40 I will challenge you that owning a home might not fit into it especially not before 40 why because in a lot of American cities right now it is far cheaper to rent than to own I'll give you an example in this very apartment that I'm sitting in right now if I were to buy this apartment it would cost me more than 2.5 times more than what I'm paying for rent just as an example let's say that I'm paying $11,000 a month in rent it would cost over $2,500 per month to own this place once I factor in Insurance taxes maintenance fees and on and on and on now please don't use the ew please don't just say to me Equity that's not an argument a word is not an argument I'm not getting into that and guess what I'm doing with the money I'm not throwing away on interest and maintenance I'm investing it investing in index funds that give me an average 7% annual return now this is what people miss about renting versus buying you don't compare home ownership to just renting and then blowing all the rest of the money on freaking cars no you compare it to investing the difference or at least part of it which I know most people do not do here's what I'm saying to you before you go out and make the biggest purchase of your life care carefully run the numbers I want you to know the difference between buying and renting you should run a buy versus rent calculation that is the simplest thing you need to do is table Stakes next you need to look at an amortization chart you need to know that if you buy a house right now you're going to be paying more towards interest than the principal for 20 years none of you knew that most people do not run a simple amortization calculation and I want you to understand how this affects your own goal of having a millon ion Dollar by the age of 40 for example on a national level it costs about $1,000 more for a mortgage payment than rent and I know real estate is local but I'm just giving you an average number here this doesn't even factor in the Phantom cost of ownership If instead you invested that ,000 difference over 20 years into simple lowcost index funds you'd have $510,000 that's already half your $1 million goal that is why I want you to understand these numbers renting and investing can be an incredibly smart decision for so many people but it takes really rethinking your concept of the American dream so if I wanted to become a millionaire by age 40 here's what I would do I would run the numbers I would compare the total cost of home ownership mortgage taxes Insurance maintenance utilities to renting which makes more financial sense to quickly run the numbers and see what makes sense for you you can use the New York Times rent versus buy calculator and this factors in lots of variables like rent increases and taxes and all kinds of fees makes it real really easy to see if renting or buying is better for you if renting is better for you you have to invest the difference you can't just rent and then spend all the rest of your money if you do that you're doomed but if you are careful with the biggest purchase of your life whether it is renting or buying you can end up ahead step number six ask yourself why here's a very important question why do you want to be a millionaire by age 40 is it just an arbitrary number are you trying to show off to somebody what are you actually going to do with that money what does a million dollars mean if you want to set such an aggressive goal of having a million dollar by 40 you better have a very compelling reason why some people really live on rice and beans to hit this huge goal but then what one day age 40 they get there they look at their bank account it says a million dollar5 and the clouds don't open up nobody holds Simba up to the sun oh congratulations they don't do that nobody cares you're sitting in your dark basement you're eating Uncle Ben's rice beans from three days ago and you're going I made it $1 million you go to sleep and wake up the next morning and there you are what kind of rich life is it to Simply Orient yourself for a number My Philosophy is a little different it's to live a rich life today and a richer life tomorrow that means you have to decide what truly matters to you travel Family Fitness get crystal clear on it and make sure your financial goals align with that Vision so for for the one person who made it to the end of this depressing video you might actually realize that setting a goal of $1 million at age 40 isn't actually the purpose of living a rich life now becoming a millionaire Before 40 is possible it's not just about numbers it's about having a plan staying disciplined and knowing why you're doing it to start investing today and to learn everything you need to know about investing check out my complete investing guide Playbook right here w