Finance

I Just Became A Millionaire At Age 37: Here’s My Basic Philosophy And Investment Strategy

Here’s a brief overview of how I got to the million bucks mark.

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money-g06a80ce9f_1280The stock market has been doing well recently (even though it has not yet regained its all-time high). That being the case, I wasn’t altogether surprised when I logged into my investment account earlier this month to see something I’d never seen before: a seven-figure balance.

I suppose if I sat down and really seriously calculated my net worth, I probably could have considered myself a millionaire a while ago. I have a house with a bit of equity and a car and assorted other tangible assets. But I also have some unrealized investment gains in nonretirement accounts on which I will someday owe capital gains tax, and a life, so I wasn’t going to waste time parsing things down to the nickel. Seeing that big number on my little phone screen was a close enough approximation, not to mention a bit of a special psychological boost.

So, how’d I do it? Someday I intend to write a book called “Millionaire by 40“ and really dig into it. For now, here’s a brief overview of how I got to the million bucks mark that hopefully distinguishes itself somewhat from the multitudinous “how to get to a million in savings” articles in the content slop-fest out there.

First, recognize, and internalize, the fact that more and/or “better” tangible crap won’t make you happier. If you want to get rich relatively early in life, it is the most important thing you can do. It is very hard.

Modern capitalism is designed to make you think that your life will be better if you buy stuff. Hundreds of billions of dollars are spent every year to make you believe that you need and want things that you don’t really need or want. Most people are fully “Inception”-ed into believing it is their idea that a new outfit, a bigger house, and a nicer car is the way to go.

Most of your time at home is spent flopped on a couch that takes up a few square feet watching a screen (or reading, in my case). Having a bunch of extra empty bedrooms that you have to heat and cool and pay homeowner’s insurance on won’t make you happy.

There’s something to having a few quality clothing items, but guess what? People die leaving behind fabulous wardrobes all the time. Go snatch them up at Goodwill.

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Nobody who matters likes you more because you drive an expensive sports car. That money could be better spent developing a personality.

Your kids won’t have any better of a life if they have many expensive toys. Kids for whom a stick is a sword grow up to have excellent senses of humor.

Look, this isn’t about being excessively cheap. It’s about spending mainly on things that are actually important. For instance, I’ve traveled to seven countries on three continents (and paid for female companions to accompany me throughout three of those countries). Yet, when you concentrate the frivolous portion of your budget only on comparatively meaningful things rather than spending on counterproductive status symbols, you’re going to save a ton.

If you can accomplish the first thing, the second falls right into place: don’t rack up debt. “Well, easy for you to say, you’re a rich lawyer,” surely some of you lament.

Yes, I have a pretty good income now, but I started my first real grownup job in 2011 at an annual salary of just $50K. That goes a long way when you stop spending too much on crap you don’t need.

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Home mortgage debt is OK to have if you got a reasonably sized house. An auto loan is OK to have if you didn’t purchase that aforementioned sports car. Student loan debt is OK to have if it’s not excessive, if you hustled to minimize it like I did, and if you majored in something that will actually make you money. Other than that, if you don’t have the cash on hand to buy something, well, don’t get it.

Finally, start investing in low-cost passively managed index funds as soon as you start working, invest in a broad index fund like a total stock market index fund or one that tracks the S&P 500, set up an automatic investment, and ignore the ups and downs of the market. Keep increasing the amounts you’re investing until you’ve maxed out your (preferably Roth) retirement accounts. Then open a regular brokerage account and start pumping money into that.

That’s the gist. And what’s all that money for, if the first step to getting it was rejecting the appeal of the stuff most people are out there chasing? Power, security, freedom, and, of course, the future. See you all there.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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