You’re here because you’re looking for the secret code for how to become a millionaire from nothing.
There’s no shortage of articles written by people writing about how to become a millionaire, retire rich by 30, and spend your days sipping margaritas on the beach.
The problem with most of those articles isn’t that they’re poorly written, the problem is that they’re mostly written by people who aren’t millionaires themselves.
Well, this article is different.
I started my business straight out of college at the age of 22. I hit millionaire status by 30 and sold my business for 8-figures by the time I was 49. I’m now 51, semi-retired, and spend my days helping other entrepreneurs grow their business, and managing my real estate portfolio.
I bought my first apartment building during the depths of the economic recession in 2008. I bought my second in 2009, third in 2010, and fourth in 2011. I now own a total of almost 50-apartments, and I expect to be mortgage clear by 2021.
So, now that I’ve established some credibility, I’m going to share with you the secrets of millionaire investors, how the millionaire mind thinks, and then ultimately, for how to become a millionaire from nothing.
This article will take you through three distinct steps:
- The secret of millionaire investors – it starts with understanding money
- How you’re going to get started – it starts with entrepreneurship
- Understanding Investing and ultimately, how to be a self-made millionaire
The Secrets of Millionaire Investors And Secrets of Self Made Millionaires
Step One Starts With Understanding Money
I want to clear something up before I dive into how to become a millionaire from nothing, and it pertains specifically to millionaire investors.
Millionaires understand money.
Let me explain.
I don’t work with an investment advisor, and I need to explain this because it’s an important part of who I am and how you, also, will achieve your riches.
I now manage my assets, and portfolio myself.
For those who have been reading my posts long enough, and especially those who have read my book, The Kickass Entrepreneur’s Guide to Investing, (you can get a free copy by following that link) you will know that I’m not a big fan of an entrepreneur working with an investment advisor.
Why don’t I work with an investment advisor?
My bias against investment advisors is based on my negative experience of having spoken and worked with quite a few advisors over the years. I fired my financial advisor last year and chose to manage my portfolio myself.
I fired my advisor because I just didn’t feel she was asking the right questions (it was a fairly short-lived relationship anyway).
In the last 40 years of investing, I’ve worked with maybe four advisors, one of whom I am still working with, so it’s not like I have a long list of advisors that I’ve thrown to the curb, BUT over the last twenty or so years, I’ve had dozens and dozens of conversations with different advisors who have cold-called me to discuss their philosophy and to pursue me as a potential client.
The conversation invariably starts with me asking how their investment philosophy is any different from all of the other advisors out there.
For the most part, all of the advisors have a similar philosophy. They each have their unique blend of stocks and bonds that they recommend, but rarely, if ever, do they really understand wealth creation.
The holy grail of building wealth is understanding money. Yes, that’s one of the secrets of self-made millionaires.
It’s about building your own ultimate asset allocation. It’s about creating a strategy of uncorrelated assets that have been optimized for tax, across multiple currencies, that can produce a steady stream of annuity income, with enough cash set aside for the wealth creator so they can take advantage of opportunities as they arise.
When I mention this to an advisor, they look at me like I’m from another planet.
I’m explaining this because this will, as you will see later in this article, forms an important part of how to become a millionaire from nothing.
Advisors make money on assets they invest in.
It isn’t in an advisor’s interest to look at your portfolio holistically, including any existing real estate—or your business for that matter—and suggest that maybe you should hold extra cash because you have too much invested in equities already. And yes, your business, the one you’re going to open, should be included as part of your overall mix.
I also suggest that if you live below your means (think of the book The Millionaire Next Door), maximize your business’s growth and profits, reinvest those profits back into your business and your own investment real estate portfolio, it is very possible to grow your wealth into the millions, and even tens of millions, of dollars.
How to Become Rich Without Money in 6 Steps
By the way, all of the 6 steps on how to become rich without money are discussed below and addressed further in this article
- Start a small business (and yes, it’s possible to do without money)
- Build your business’s revenue into north of $2 million in revenue a year – you’re now on the path to becoming rich, but, not quite there yet
- Maximize your profit margins and profits
- Invest your profits and money strategically in real estate, and build your own ultimate asset allocation portfolio – I share some of my secrets here, and wealth-building secrets here
- Save as much as you can as early and young as you can
- Invest strategically and build multiple streams of passive income
Then, if you have loftier ambitions that reach into the multiple millions, or tens of millions (to become a decamillionaire), then you have two levers that you can adjust.
- Invest more
- Produce a better return
Your Path to Riches Will Be Acquired Through Entrepreneurship
As an entrepreneur, you can grow your wealth as you grow your business’s profits and improve your returns, but there’s also an extra lever you have at your disposal … the value of the business itself. This will ultimately lead you on your mission to become a wealthy entrepreneur.
As an employee, no matter how well you do at your job, unless your company offers some sort of equity arrangement, you might improve your salary and position in the business, but you’re not building wealth that can be sold, and that’s not how to be a self-made millionaire.
An entrepreneur not only has the advantage of growing profits and leveraging additional team members to expand the business, but the business itself has value. In some cases, the business has tremendous value that can make the entrepreneur an instant multi-millionaire.
You’re now learning some of the secrets of self-made millionaires.
Let’s say you start an elevator repair business a few years after college. You start with $30,000, and you manage to grow the business from a fledgling start-up with one employee, you, to a 20-person operation doing $5 million in revenues and $500,000 in profits by year 20. (That’s no small feat, by the way, so congratulations if you’ve managed to get there.)
The average service business that has a large percentage of recurring revenues will have a valuation anywhere from 4 to 6 × EBITDA (earnings before interest, taxes, depreciation, and amortization), so the $500,000 in profits will value the business anywhere from $2 to $3 million. Let’s round this number at $2,500,000. For more info, you can read this post: How to Expand Your Business Through Acquisition and Make a Killing
Enter Asset Allocation and Diversification (The Trick to Become a Wealthy Entrepreneur), and now I’m starting to come full circle from what I was speaking about earlier).
The Secrets of Millionaire Investors – The Ultimate Asset Allocation
My recommended asset allocation portfolio looks something like this:
- 1/3 real estate
- 1/3 equity (business value)
- 1/3 cash (fixed income, bonds)
The above is from my book, which you can download for free from this link: The Kickass Entrepreneur’s Guide to Investing.
In the above example, since the entrepreneur has so much equity in the business, I’m going to suggest that they shouldn’t invest additional dollars into the stock market. Any extra cash should be invested:
- Back into the business to grow the business
- In investment real estate
- As cash on hand (fixed-income investments, bonds)
How You Can Become a Multi-Millionaire Real Estate Investor
If this entrepreneur managed to put aside $300,000 as a 30% down payment toward a $1 million apartment building, it is possible that after 10 years, the building can be worth $2 million. I’m not going to explain in great detail in this blog post how you can turn $1 million of real estate into $2 million, but I do explain that in my book.
After 10 years, the building’s $700,000 mortgage will now be approximately $400,000, so the initial $300,000 investment will now be worth $1,600,000 ($2 million − $400,000 mortgage = $1,600,000).
Assuming the entrepreneur has been diligent with putting cash aside into the third bucket, it is possible that by the 20th year, the entrepreneur is able to live off the salary provided from the business and invest the bulk of the business’s $500,000 profits into the cash bucket.
Keep in mind, I did explain that the business grew to $500,000 in profits by the 20th year, so economic fluctuations aside, the business would have conceivably produced $480,000 in profits in year 19, perhaps $470,000 in year 18, $450,000 in year 17, and so on.
Again, if the entrepreneur manages to live off the salary provided by the business and manages to invest the business’s profits into 1. real estate, 2. the business itself (for growth and acquisitions), and 3. cash, then it is very possible that by the 20th year, this business owner has a wealth formula that looks something like this:
- Business Value = $2,500,000
- Real Estate = $1,600,000
- Cash = $2,500,000 (conservative assuming the profits as discussed above)
This business owner started the business with $30,000. By year 20, the entrepreneur has $6,600,000 in assets (net worth), not including their primary residence and other assets. This equates to a 31% compounded year-on-year return. This business owner managed to turn $30,000 into $6,600,000 in 20 years.
The Three Secrets of Self-Made Millionaires
- Building a business isn’t easy.
- Building a profitable business is even more difficult.
- Being disciplined, living below your means, despite all of the temptations to buy all the fancy toys that come with large profits, is most challenging.
If you want to build wealth, and then become a wealthy entrepreneur, you need to focus first on point 3. LIVE BELOW YOUR MEANS. This one is the most challenging because it requires consistent discipline.
Then, focus on point 2 and build profitability into your business. It isn’t acceptable to forgo profits, year after year. Your business should make at least 10% profit (as a percentage of revenue).
Then, last, focus on growing your business’s revenue.
Building wealth isn’t easy, but this is how to become a wealthy entrepreneur, and how to become a millionaire from nothing. By the way, if you liked this blog post, you can subscribe to receive more like this here.
In this post, I mentioned a book, which happens to be one of my favorite business books of all time, The Millionaire Next Door. You can get more info on that book here.
If you found this post interesting, you might like this one I wrote a few months ago: My Response to an 18-Year-Old Who Wants to Become a Millionaire by the Time He’s 30
Good luck with your wealth-creating journey.
If you enjoyed this post, you might also enjoy this one: How Much Money Do You Need To Never Have To Work Again? Let’s Do The Math.
You should also consider subscribing to my blog. I publish one article a week on small business and wealth creation. You can subscribe here.
Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.