This page will guide you through the true and unequivocal paths to get near your first $1m in net worth and how to navigate far beyond that.
First, we need to dispel the rumors and myths about getting rich. Because ‘fake gurus‘ flood the internet with ‘get-rich-quick‘ garbage that is meant to take money out of their readers’ pockets.
Unless you are born with money, there is NO fast route to get rich. Even the lottery, statistically speaking, boasts terrible odds to get rich. Getting rich requires long, hard, and consistent work over many years.
The one advantage you have from reading this is the ability to think ahead. Think of it like a superpower. You set a goal 5 years out, and you focus every day’s actions on meeting that goal–you will find yourself ahead of your peers in 5 years.
Here is how you need to think about making AND KEEPING almost $1m in 5 years.
Income
Despite the popular misinformation available on youtube and twitter. The most reliable and effective way to get rich/reach nearly $1m net worth is not to start a business. The truth is that your parents were right.
You go to school, get good grades, go to a good college and get an excellent job. There are four primary fields where you can consistently and deliberately become wealthy (omitting medical doctors).
- Enterprise software sales
- Investment Banking
- Consulting
- Corporate Law
Requirements
For each of these, the truth is that you need at least an IQ of 120+ to do the job well. This is not some sort of, “anyone can do it if they work hard enough”, type of post. This is the cold hard truth for people who want to actually reach $1m Net worth in 5 years.
The careers are listed in order of easiest to get into to hardest.
Enterprise Software Sales
Enterprise software salespeople make consistently great money ranging from 200k-400k on average each year, and some consistently make $1m+ each year. For more information on earnings potential, I recommend you read about Brandon Fluharty, who never went to college and became the top seller at Liveperson where he consistently made $1m+ annually.
How to get there:
As you have seen, a college degree is not needed, but it helps. You MUST be uniquely smart, and despite common consensus, you do not need to be extroverted.
You start out in software sales in the entry level position of BDR/SDR. You spend all day, every day cold calling executives to set meetings for your team. This is it. Once you excel in the role, you can get promoted to smb AE within a year. From there, you must get promoted to a mid-market role.
And finally, you earn a promotion to enterprise account executive where you sell into the IBMs, Apples, and Facebooks of the world. You can do all of this within 4 years, making good money along the way.
Typical salaries for each role:
SDR: 60k Base & 40k in Commission (100k Total)
SMB AE: 70k base & 70k Commission (140k Total)
Mid-Market AE: 80k Base & 80k Commission (160k Total)
Enterprise AE: 100k-160k Base & 100k+ in Commission (200k+ Total)
Timeline
Year 1 – You make 100k total, live frugally, and save almost all your money. Max out your 401k. Assets: 40k.
Year 2- You make 140k. That’s 40k more than the year before. Because of taxes you do not save an extra 40k. Depending on your location, you save around 30k More. Assets: 40k+70k=110k
Year 3- You make 160k. Same deal here. That’s 20k more than last year, 60k more than the year before. Assets: 110k + 85k = $195k
Year 4- This is where you make up all of the gaps in your path to $1m. As an enterprise seller, your income potential is nearly unlimited. Let’s conservatively say that you make 300k in Year 4. This allows you to save 130k that year. Bringing your Assets to: $195K + $130k = $325k
Year 5- Year 2 as an enterprise seller is where you start bringing in the majority of your rain maker deals. Typical commission ranges from 15% to 30% on software deals. If you manage to sell one deal worth $1 million then you can bring home $300k in one commission check. This is NORMAL for enterprise sellers. So, let’s say you make 400k in Year 2 as an enterprise seller.
That leaves you with 200k in savings. Bringing your assets to: 325k + 200k = $525k. Nice! But it’s not $1m is it? That’s because we have not gone into how you can effectively invest your cash AND use real estate tax loopholes to avoid paying so much in taxes.
Investing
Every paycheck, you should be investing into your 401k, roth ira, and saving the leftover for a downpayment on an investment property. You can expect average annual gains of 6-9% on your stock investments.
You will be able to purchase a small duplex at the end of year 2. This is when you really start setting yourself up for the rest of your life. Additionally, you begin to utilize an important concept in building your net worth: Leverage.
Living in this duplex arounds you to save $1000 each month as you no longer need to pay rent and can now rent out the other unit in the duplex to cover the mortgage. Additionally, each mortgage payment goes towards increasing your equity in the home, which increases your net worth!
For in depth real estate investing information, I recommend you check out BiggerPockets.com.
Let’s redo the numbers with the above in mind.
Assets or Net Worth for each year
Year 1: $40k (that stays the same)
Year 2: 40,000 * 9% interest makes you a gain of $3,600 without doing anything. Additional savings of $70k =$113,600
30 Year Mortgage: average duplex payment on a 200k property is $1,300 less interest. Add this to your net worth. $15,600 annually.
Tax Breaks: On an investment property, you are allowed to deduct depreciation expense from your taxes–which is great because your house’s value actually appreciates. So it’s a 2x net worth boost.
Depreciation deduction on 200k is around $7,000.
Other Deductions:
- Property taxes
- Property insurance
- Mortgage interest
- Property management fees
- Cost to maintain and repair the building
But did you know that you can also write off much more when you create an LLC for your property? Qualified business expenses may include:
- Advertising
- Office space
- Business equipment (e.g., computer, stationery, business cards, etc.)
- Legal and accounting fees
- Travel
All of these deductions lessen your taxable income, which could save you money when you pay taxes. Let’s say your rental income is $30,000, and your related, qualified expenses come to $10,000. That means the taxable income from your real estate business is $20,000.
For an in depth look at tax write offs, check out this article by rocket mortgage.
Appreciation: Average home appreciation is 2.4%, which is a gain of $4,800 on the $200k duplex.
So far this year, you have already made an additional $4,800 + $3,600 + $15,600 + $7,000 = $31,000.
Total Net Worth in year 2 = $141,000
Year 3:
You still save $85k from your primary job. That gives you $226,000 without doing anything else.
Now, let’s add on the additional income from investing and real estate.
You have more money this year to invest, so naturally the stock market returns are greater. You should have around $100k in stocks. $60k in your 401k, $15k in your roth IRA, and $25k in a brokerage. This yields you $9,000 in gains.
Now, let’s add the gains from real estate of $29,000. The same as last year plus increased appreciation.
Now you have $264,000. This is where things get fun!
Year 4:
In Year 4, you save $130k from your job. This allows you to place a down payment on a second investment property in the $200k range. This more than double your net worth gains from investment properties.
Why?
Because you have more income to deduct from on your taxes, and you have value stored in property to appreciate over time.
This year, you walk away with a whopping ~$460,000 net worth.
Year 5:
In the fifth year, you save $200k from your job bringing your net worth to $660k. You gain $20k from your investment portfolio. You are able to purchase another property this year. And your real estate investments net you another 150k.
You are now worth $830,000.
The Following 5 years
The next 5 years after this will be your highest earning ever. And it’s miraculously to see what compounding takes place when you put in consistent work each and every day. I highly recommend you read the compound effect, which you can get on amazon.
You can likely reach a $5m net worth in the 5 years after due to the exponential nature of wealth accumulation. As you have seen, the key is to use your net worth to increase your earnings.
