Sticky post: I’m 22 years old and I want to become a millionaire by 35. How do I do this?

Your mileage may vary, but this is how I recommend you to do (the earlier you start, the better).

A. First: drastically reduce your expenses

  1. Sell all the stuff you do not need (TV, Xbox, PlayStation, etc.).
  2. Quit shopping for the sake of shopping.
  3. Do not smoke, drink alcohol, do drugs, etc.
  4. Remove the Facebook, Instagram, Twitter, Pinterest apps from your iPhone so that you can only access them via your desktop computer (you will automatically reduce your wasted time by at least 90%).
  5. Sleep 8 hours a day, consistently.
  6. Meticulously decide whether you really need new stuff to buy.
  7. Learn how to do your own taxes. Once you understand how taxes work in your Country, you can get an accountant (and be able to check what is he/she doing with your money and tax filings). Be very careful and timely with your tax filings. Keep redundant paper and digital records of your tax payments in case of future issues.
  8. Ditch fake friends, high maintenance girlfriends/boyfriends, and all other people that actively undermine your efforts. A positive, resilient & optimistic attitude from the people you surround yourself with is essential. It is by far better to be alone than being surrounded by negative / envious people. As in many other fields of life, opt for quality rather than quantity. In the relationships with those selected few worth of your time, be patient to the extreme with them and extremely demanding with yourself.
  9. Never shop for food when hungry. Make to-buy lists and buy in bulk. Learn how to cook your own meals (do not eat out often). Do not buy bottled water, limit sugary drinks and other sugar-based stuff that only makes you fat. Limit red meat if possible, and prefer beans and vegetables instead.
  10. If you can, use the public transport or a bike. Accordingly, consider ditching your car. In the rare cases you will need / want to do a road trip, you can easily rent a car for a very reasonable sum without all the hassle deriving from car ownership.
  11. Do not upgrade your smartphone every year.
  12. Always pay your credit card in full at end of every month. Avoid loans and credit (i.e. paying interest to fuel expenses) like the plague. If something is out of the budget, you must mentally come to terms with the fact that you cannot afford it: move on. We do not need 90% of the things for sale out there, anyway.
  13. Get a good health insurance with above-average coverage (the cheapest, lowest-bracket ones are almost useless in most real life times of needs and emergencies). Having a good health insurance will shield you (and your bank account) and allow you to avoid going bankrupt in case of medical emergencies (which occur very easily, even at younger age). Exercise (weight-lifting or anything else at least moderately stressful for your body) regularly: at least twice a week. Your body is like a spring: after appropriate physical stress, it will recover and come back stronger. In a stronger body operates a clearer mind. This is critical since — as impossible as it may seem to you now — you too will age and naturally lose physical (and mental) fitness.
  14. Be curious about the world out there. Try to read many books (mostly non-fiction), especially in sectors out of your normal studies. Innovation comes from the ability to correlate information between different realms of knowledge. Once you spot the correlation, do not sleep on it: act.

B. Second: drastically increase your income

  1. Study Game Theory before looking for a job. After the Wikipedia page on Game Theory, I recommend you to start from The Joy of Game Theory(I have no affiliation with the author and I do not profit from linking this book in any way): you will understand how in a market of naturally conflicting interests, game theory and strategic moves will allow you to think rationally and achieve oftentimes optimal results with much reduced effort. This will be a critical advantage for you down the road.
  2. Have skills: study and understand the business niches where — based on your skills — you can get a better paying job that does not send you to mental hospital (your health always comes first). Once you get a job, look yourself around and focus on acquiring new, useful skills that are not common at your workplace: e.g. coding, learning how to speak a new language proficiently, ability to effectively sell or market products, etc. You do not need a degree for many highly important and well paid skills relevant in today’s job market. Relocate abroad if necessary or if your Country prevents competition, social mobility or innovation at home. Do not be scared. Be available to do risky jobs that your peers are not willing (or are too comfortable) to do.
  3. Learn how to solve problems at work. Find neglected niches at your workplace and fill the productivity gaps. While everybody at work just does barely “enough” (and limit themselves to complain when things do not work), you will quickly become essential as one of the very few who solves problems in your niche. This works even if you are fat, ugly, inexperienced, too old, too young, whatever. Do not wait for your boss to ask you: proactive problem-solvers are golden nuggets in any business environment and rewarded accordingly. It can be a boring, unfashionable, even detested niche of expertise but as long as your employer’s revenues and/or peace of mind depend on it, you will become a critically important employee.
  4. Get what you are worth. Once you become one of the few “essential” employees, you will employ Game Theory to force your employer to give you a better salary, better bonus, better exposure with clients, etc. Do it nicely but effectively. With a smile, you will be able to submit your employer into a so called “dominated game” where the only possible outcome is for you to get a better salary, etc. (please keep in mind that if you are a smart problem solver, you are effectively doing your boss a favor by not changing ship). If you are effective in solving critical problems and still do not climb the ladder, it means that the opportunities at your current workplace are hopelessly limited. If this happens you must realize that this is a “game” that you can only win by not playing it. Do not lose motivation or settle (playing a game you cannot win) like most people around you will do, just find a better job as quickly as possible. “Persist” is the keyword.
  5. Once your salary starts flowing in, immediately set up an emergency fund in cash of approximately 6 months of salary (3-months if you are particularly good at avoiding emergencies). This is cash that must be readily available for emergencies: not to buy you a BMW. Do not stupidly inflate your lifestyle and continue to be cautious with the way you manage and spend your money.
  6. Open a Stock Account with your bank and every month save 20%/30%/40%/50% of your net income and invest it in a low commission S&P500 ETF by Vanguard (like “VOO” or “VIG”: google them). Never touch this investment for at least the next decade. Save mercilessly and invest every month “no matter what”. Google: “dollar cost average” + “compound interest” in order to understand the benefits of this double-pronged strategy (in short: you will beat 90% of all the professional Fund Managers out there). Set up (both mentally and practically) a bare minimum that you must absolutely invest every month and deposit it into your stock account at the beginning of each month so that you will not be able to spend it to buy useless stuff. After a few months, this habit will be totally ingrained in your brain (and the effect will start reflecting on your Stock Account) and it will seem lunatic for you that your peers are not doing it as well. This will also do marvel to your sleep and to your income as long as you will be consistent, patient and NOT touch your investments for a decade or so. As soon as your career will progress and you will earn more, be careful to also proportionally increase the amount of your monthly savings: this strategy will prevent you to fall into the “increased lifestyle” trap (where you spend more money on useless items just to show your status to your peers or because you become lazy). As a rule of thumb: do as you prefer, but you must find a way to erect a mental dam completely nonporous against peer pressure (which is admittedly very powerful in most cultures and social environments), otherwise there is no way to make this plan work. Also: if you get the occasional bonus at work, get a tax refund, inherit any sum from a distant relative, invest it straight away as specified above, in order to prevent spending it for useless “euphoria-triggered” stuff (euphoria will pass after a week or so anyway, while this approach will greatly accelerate the achievement of the final goal). There is no reward in buying yourself useless stuff: the reward is making the money work for you instead, so that you can win this “game”.
  7. Start a side business. Once you have 200k/300k USD invested in a Vanguard ETF like VOO or VIG and they are pumping approximately 30k USD a year as compound interest (on the ETF shares’ historical trend of market appreciation year-over-year) and dividends (which you are NOT touching at any cost, but simply re-investing in the same ETFs, thus further magnifying the compound effect), you are able to focus your attention in order to start a side business to corroborate your income. Most of the people around you will dismiss this (and/or its urgency) but, in the current, extremely volatile, economic environment (where decades old “moats” are eroded precipitously and even long-standing business giants get disrupted by little known companies which did not exist 18 months ago), if you do not start a side business, you are obtaining your whole revenue stream from a single umbilical cord, thus effectively allowing your employer to automatically dominate your whole game (you should think and work very hard for the opposite to occur) and de facto willfully reducing to zero your chances to achieve your final goal.
  8. Keep your current job while you start working on your side-project. Keep the two (mentally and practically) separated: maintain your above-average performance level and do not try to get your coworkers as customers. Work at night, on weekends and holiday to kickstart your side business.
  9. Focus on getting the first 3 customers for your new side business (friends and family do not count). Once you get 3 customers (which is an amazing achievement!), focus on how to make 30. If in 3 months you are not able to reach the 1.000 USD / month threshold, you must focus on finding better cash-flow generating business ideas: do not fight on price, the margin is essential. Learn from your mistakes (you will do many). Take low hanging opportunities that others do not see. Study quirky, even awkward & ridiculed (by your “friends”) market niches, that oftentimes are a goldmine for those able to satisfy them (you).
  10. Once your side business starts making 10k USD / month you can start evaluating if your current salaried job is worth the effort / time / hassle. If not, make the jump to the self-employed world and focus on increasing the income from your side business to 30k USD / month.
  11. Sooner rather than later you will be a millionaire. The first million is by far the absolute hardest.

Thanks for reading my post this far. Let me know in the comments if you need any clarification. Good luck.

Kaizen: I am improving this post regularly in order to integrate further thoughts, comments and suggestions I receive. You may want to reread it from time to time to gain further insight. 

***1st Update***

Thanks for the fantastic comments and suggestions. I am trying to respond to all of them and I have slightly revised a few of the points above to better clarify my thinking. I also added a book recommendation on Game Theory as many asked in the comments for that (no affiliation).

*** 2nd Update***

Many asked about real estate investment. A few suggested to stick to it as “the only asset that always has value”. I am aware that this may be a controversial point but I purposely did not include the real estate investment among the points above. Obviously there may be exceptions, but I would recommend against doing any real estate investment before you have already reached any solid financial independence goal. I am well aware that I may hold a contrarian view on this (we all know that everybody buys a house these days) but I recommend you to check the following factors before purchasing any real estate:

a) purchase price (including fees & commissions);

b) mortgage cost for the whole life of the repayment plan (10–30 years);

c) insurance cost;

d) initial refurbishment & maintenance cost;

e) taxes (when you buy it, while you own it, when you sell it);

f) impact on your financial flexibility (including on your ability to diversify your investment in the future) for the whole mortgage repayment plan and relevant opportunity cost;

g) estimated profitability (ie. potential future asset appreciation);

h) monthly mortgage instalment cost vs. rent;

i) vanity factor / peer pressure: how important is for you to show to your peers that you finally “made it” and bought a house with a 30y mortgage of your life?

I did these calculations myself and, at least in big city centers (in USA, Europe and Asia), never I could find a real estate investment that could match the profitability of the S&P500 with the same degree of flexibility of investment/disinvestment, coupled with the (priceless) mental freedom coming from the fact that if I want to liquidate my whole investment tomorrow, I can do it in a whim (basically suppressing any opportunity cost). Since most of us have normal jobs and are not real estate professionals with asymmetrical knowledge of our local real estate market (i.e. which entails ability to buy real estate at heavily discounted prices), in the long run a real estate investment is normally a huge bloodbath compared to the stock market. I would thus recommend to stick to the investment plan as outlined in the point 6 above and search patiently for a place for rent that is both very cheap and not too far from your workplace.

*** 3rd Update ***

Many in the comments asked how to make this plan work if one gets married. I am aware that a marriage may impact on this plan and, potentially, even disrupt it completely (naturally, this applies (even more so) if you wish to make a baby whom you will be bringing into adulthood under your and your partner’s responsibility). For these reasons, I would advise the following:

  1. Choose your partner wisely: if your partner is unable to share your goals (and/or work ethic) and is only happy living a lavish lifestyle there will never be a salary good enough for the two of you. This is probably the quickest road to financial and emotional misery. Be careful.
  2. Do not marry too early: it is better to be safe than sorry. Be wise, and only marry once you are sure that it is the right thing to do. Postpone if you are not sure. Break-up if your partner is not the right one: being single is an order of magnitude better than being together with the wrong partner for the rest of your days.
  3. When you do get married, do not feel trapped by the idea that you must impress anyone with a wedding ceremony: be aware that 3 days after your wedding, people will plainly forget about it and move on with their lives. I have read that in New York the average wedding cost is above 70k USD: you will agree that this kind of expense for a signing ceremony, some flowers and a fancy dinner is totally nonsense. Invest this money wisely instead so to accelerate the snowball effect to your advantage.
  1. Skip the whole “diamond ring” scam.

If you follow the above, you will be fine.

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