Interestingly, I always managed to get some kind of liquidity event for each of my projects. This is important IMO. ALWAYS try to get paid. Don't just "shut it down".
Each liquidity event added at least a digit to the price. For example, I sold my first business when I was a teenager for 4 figures. Then sold a side project for 5 figures, then sold a business for 6, and then 7 figures.
I always became more ambitious with my goals and I find that the learnings of each venture helped me move up the ladder to the next one.
So don't get discouraged if you make just $500 or $5000 with your current project. Just use it as a stepping stone to the next one and try to figure out what you could have done differently for a 10x or 100x outcome.
For example, for my 6 figure exit business, one of my biggest mistakes was that I focused on a market that was way too small with little room for growth (product was entirely in French, and it wasn't as easy as translating it to grow the market size). I made sure to never make this mistake again. I made other ones instead :)
When I tell people I was a yacht chef, people often ask if the owners or guests tell me what they want to eat all day. In fact, people never tell me what they want to eat. If it is a charter I will speak with the guests to make sure I satisfy dietary concerns and know about certain preferences like whole milk vs. 2% milk. The people I work for make decisions concerning large amounts of money all day. The last thing in the world they want to think about is what is for dinner. That is why they hired me to make those decisions. Of course, I'm always right because guests and crew on my yacht eat the same thing so the owners and guests always eat what I want to eat for breakfast, lunch, and dinner.
The pattern I see is that truly wealthy people, not New Yorkers spending more than they really have, don't micromanage.
"What do you want for dinner tonight?" Not to have to decide.
The first is not hard to attain. If you buy a house and pay off the mortgage and do a little saving on the side you will probably end up being a millionaire by that standard. But a million net worth isn't what it used to be. A millionaire by that definition is solidly middle-class, but nowhere near being rich.
The second is a little harder to attain, but still doable by plain-old-fashioned hard work and frugality. Save $2.5k/mo for 30 years and you'll get there. Invest that money in index funds and you'll get there faster.
The third is really hard, and it's a whole 'nuther world. Having $1M in income is the equivalent (given today's interests rates) of having a net worth of many tens of millions of dollars. To get there requires a combination of hard work, sacrifice, risk-taking, back-slapping, log-rolling and a big pile of luck.
Not terribly impressive if you make over $100k/yr for 15-20 years, live below your means, pay off all your debts and own where you live. But I guess I've managed not to squander too much of it either. I'd have a bit more if I traveled for pleasure less I guess. But I look at that as an investment in myself while I'm young enough to enjoy it.
I pay off debts as fast as possible as well. I own my house and cars free and clear for example and have zero student debt. So nobody is getting money from me "for free". I paid them off as rapidly as I could so I could have lots of liquid cash to spend or invest as I wish. Some people would rather spend smaller to service their debts and invest the difference -- that's probably fine as well.
Housing is most people's biggest expense and it's really nice not to be burning most of my take home income in a furnace on rent or interest.
I've been a larger millionaire twice in paper options, but the companies didn't work out and the options became worthless. Oh well. I've learned the lesson to never accept lesser pay in exchange for options or RSUs no matter the promise of an upside.
If you have a mortgage on your primary residence on the US, the interest is tax deductible. This can make your effective rate extremely low, and it's not hard to find an investment with better returns.
Not all loans are bad; some are subsidized. It often makes sense to keep those ones.
It's more a matter of personal preference for me, I just prefer to have all the cash liquid instead of obligated somewhere. I usually just stuff it all in the FDIC insured bank account until I decide to invest it somewhere or spend it.
But it does make it much easier to go "you know what, I'm going to go to France next month." and then do it.
On the house front, I'm actually in the middle of a search for a new home so I can start enjoying those sweet tax breaks again and then get somebody to rent my first home so I'll basically get the new home for almost free.
There's no "right" strategy though, since everyone has different situations and priorities. I would have had no problem keeping my low-rate student loans while investing the extra, but I chose to burn them down quickly for the peace of mind of being debt free.
On the flip side I get more liquid cash and more "fuck this, I quit" job flexibility which is basically what I'm buying.
A 1% spread vs a portfolio of 100% equities might mean that the volatility compels you to opt to pay back your loans.
High income plus low spending adds up fast. I "retired" (to work on my own unprofitable projects instead) around age 30 with about $700k invested. It's grown steadily since I stopped working, and very recently hit $1m.
If you're interested in this sort of approach, The Millionaire Next Door, the Mr. Money Mustache blog, and /r/financialindependence are good reads.
(I think that's relevant since HNW definitions exclude the value of their primary residence. [1])
[1]High-net-worth individual (HNWI) is a term used by some segments of the financial services industry to designate persons whose investible assets (such as stocks and bonds) exceed a given amount. Typically, these individuals are defined as holding financial assets (excluding their primary residence) with a value greater than US$1 million.[1][2][3]) https://en.wikipedia.org/wiki/High-net-worth_individual
(1) Better raises that I would have gotten by staying in one place.
(2) Developed lots of skills; exposed myself to lots of industries / bodies of knowledge / ways of thinking and doing.
(3) Allowed me to discover which computing specialty best suited me (amazing how many work in an area they neither enjoy nor are good at just because they don't know any better).
Once things had stabilized a bit, when continuing to job-hop would have become a negative, I got deeper into one particular area and scratched my way up to expert-hood. Turns out to have been a good strategy, though I can't take much credit for having realized it at the time. To a certain extent I just fell into a good pattern by accident.
The "back-loading expenses" part was more deliberate. My wife and I have always been a bit frugal, driving older/cheaper cars and not traveling or eating out constantly. Didn't live in the most expensive part of the country. Didn't buy a house until I was 31. Didn't have a kid until I was 39. By that time, interest was working for me on investments instead of against me on credit. That's the one point you should take away from this: make interest work for you, not against you. Deliberately took a mortgage with no penalty for paying it off early, then did so about half way through the original term, have been 100% debt free ever since. Now the paychecks just roll in and a good chunk goes immediately into earning interest.
Even as a highly productive worker, this combination probably means I've made more money as a (fairly passive) investor than as a worker. Sadly, becoming a rentier or attaching yourself to them is the only way to get ahead in this economy.
TL;DR had extra capital to invest during the recession. Had most properties appreciate 2-3x since then + rental income. We bought most of them cash, but if we could do it over again would probably borrow more for a higher return. But we were new to it and afraid of debt.
As for how I got there, a lot of it (and this is a largely unpopular view in some parts) was rather pre-determined. Born into an upper-class family, went to a private high school that sent nearly 50% to Ivy League schools, and graduated from a top school in '04. I studied computer science, but had little intention to pursue it and went to Wall Street.
Stayed on Wall Street until '09 and was worth slightly under a million when I left. I went from an investment bank to a hedge fund that in the crisis period did well enough, relatively, to still pay good bonuses. I had not invested any of my net worth, partly due to working 80-100 hours a week, and put a great deal in the market at the end of '09, which has obviously done well.
In '09 I was miserable, or rather more miserable than normal, and a friend from college convinced me to come to SV to what is now one of the largest companies in the world (it was reasonably large then too). Did well, working half the hours and ending up making more per year than at the hedge fund, and recently "retired".
Given your question, and your username likely denoting you're 25 or 26 years old, here's the truth: I've been miserable for most of my working life. My happiest days always revolved around my last day at each job. I didn't enjoy finance, but was good at it, and the same is true for the time I spent in SV. I've always been jealous of those that, for whatever reason, wholly engross themselves in a given field and are content with that. Following your passion may well be bad advice, but do not assume that a passion naturally develops out of one's work. Most of the time that "passion" that some, especially in finance, develop is simply a coping mechanism to justify the long hours and unnecessary stress of the job. I saw the same thing in SV, especially among the PMs that became increasingly detached from day-to-day development with seniority.
A million dollars in the bank will not make you happy and doing something you desperately do not enjoy for a million dollars, even if it can come in only 5-10 years, will not evaporate the bitterness you have towards yourself for wasting away years of your life in pursuit of that. Money, above a certain amount, loses it's context beyond being a measuring stick used against your colleagues and friends. I could have stopped working years ago. I wish I did. What you define to be a "certain amount" is an entirely personal decision predicated on a lifestyle that makes you contented.
I sometimes get asked for advice, often from people who are in their early 20s, now that I'm retired. My "advice" is that I wish I had found something that I would enjoy doing well into later life, whether I needed to do so financially or not. Spending your youth focusing on an upward trajectory of wealth, despite disliking your work, is a waste of a life; especially for those who come from privileged backgrounds like my own. However, spending your youth bouncing around a number of different jobs until you find something you actually like (even if it's not a passion, per se) is not a waste. I always end my little advice diatribe by noting that when older-folks say "money doesn't make you happy" it's largely pointless. I didn't believe them years ago, I wouldn't expect others to. It's one of those lessons that is only truly understood when wealth is accumulated; one of those lessons that is only truly understood when it's often too late.
5 years at Google, plus living cheaply (at least as much as possible in Silicon Valley).
Spent it on expensive RE though, so no longer in chequeing account.
In 2010, people were hungry for iOS games, but the supply of quality games was limited. There were few people who were able to write good OpenGL ES2 apps. Now, there is the Unity engine and others.
For several years now, the market has been saturated. Years ago, I already saw a 1000 new games per week in Apple's iOS store. I suspect this number is larger now.
The one-man app-store hit days are over.
Also... Apple no longer gives you free visibility in "new releases." Worse... it makes you bid on the search results (!!!!)
* Frugality: deeply understanding the things that bring you satisfaction and skipping the rest
* Aggressively saving and investing money
* Building a mastery in personal finance
But becoming a millionaire isn't a math problem. Most people on here are capable of doing so many times over without any great career home run.
However, achieving such a milestone will require you to (on an ongoing basis) look deeply inwards, answer fundamental questions about yourself, and change your life.
At the risk of getting too preachy, most people haven't even figured out what they want and so they default to mainstream consumerism. Such people have little chance of becoming a millionaire (which requires sustained, long-term behavior changes) until they first sort themselves out.
Time works in your favor too, even as a spendthrift, shares have accumulated, compensation becomes more generous over time, if you keep growing (even at a reduced pace) then 20+ years down the line your skills and experience become a very valuable asset
Ignoring the obvious issues with compound interest in reverse, the far more consequential problem is that it fucks with your head in ways that normally require CIA-style brainwashing and mind control.
Debt justifies and rewards your worst impulses, encourages poor, short-term decision making, and alters your frame of reference to a degree that even the smartest, most noble people among us think they can outsmart debt only to wind up losing big.
Nonsense. Debt managed carefully is exactly how you join the million dollar club.
Twenty years ago, my grandfather told me that he had never been in debt, ever. He always paid cash. Always. He was strangely proud of this.
My immediate reaction, even though I barely knew anything about finances: "Well, that sounds like a dumb, dogmatic principle to follow".
A few years ago, I bought a car and I carefully played the card of "This car is beyond what I can afford but you, the sales person, are so good that you convinced me to buy it anyway". When we went to discuss the finances part, I was given several options: 1) a loan with no down payment and a crazy interest 2) a loan with some down payment and a reasonable interest and 3) all cash.
I could have bought the car in all cash. The money was there, in my bank account, ready for this. However, the interest for option 2) was 1.5% and I knew of at least one bank that would give me 3% of interests if I deposited at least $30k in this account and maintained it for a year.
So what did I do? I picked option 2 of course. I went in debt. And I didn't just save money doing so: I earned money.
Debt is fine for people who have a reasonable ability at managing it. This is how you get rich, don't listen to people who tell you "never do this" or "always do that": look at the number and make the smart decision.
(Except the part about how debt is "how you get rich")
And yet, I'd wager than 90% of people who attempt to replicate your success story would wind up worse off for having tried it.
The problem is that it comes with a huge risk of screwing with your head. And it's very difficult to detect and correct when this is happening.
I've had my success stories playing games with debt too. Gaming low rates, churning credit cards, and so on. I see people around me do the same things all the time.
The only trouble is, the next day these same people are:
* Allowing debt to influence their purchasing decisions (e.g. buying a larger car, a larger house, and so on)
* Trying more sophisticated "experiments", only to get burned
In other words, they scored a minor victory in an inconsequential battle only to lose big later on.
"Carefully managing debt" can be summed up as one single principle: be aware of deadlines.
It's ok to use a credit card as long as you know the deadline to pay it in full and you do so diligently in order to avoid insane interest rates. If you can pull this off, you can actually earn money with credit and debt (e.g. rolling credit card over new credit card with 0% interest, over and over). Just make sure you don't miss any of the deadlines.
Same goes for my little anecdote above: it works great if you're aware of simple deadlines (how long I needed these $30k to be in the account) and elementary level math to compare 1.5% and 3%.
I used to think everyone should be able to handle this simple math approach but if the US population is any indication, I am dead wrong.
Debt is good. Don't be afraid of it: tame it and you'll start earning easy money.
I have dozens of friends and family who are in the top 5% of the US population in terms of math skills who have all tried to play "smart" games with debt and come out as big losers as they continued to play. I'm talking software engineers, dentists, doctors, pharmacists, tenured math professors, and so on.
The problem is not math skills. The problem is not managing deadlines. The problem is that these people are human and are not immune to the pernicious effects of debt. Even you. Even me.
Here are some things you haven't considered or acknowledged:
* How debt influences the choices we make. Would you have bought such an expensive car if you had to pay cash? Statistically, the answer is no. If forced to use cash, might you have opted to buy a less expensive used car? Are you sure you didn't buy thousands of dollars more car in order to "save" a few hundred bucks?
* How managing debt takes over space in our minds. What could you be if you could free up mental capacity for other things?
* How debt warps our perspective and plays to our human weaknesses and short-term desires. Are you sure you're coming out ahead? How do you know?
You can't run an A/B test on yourself, but you can open your eyes and take a look around. It's not pretty out there.
The average car loan has a 4% interest rate[1], and the average bank gives a paltry 0.06% interest rate[2].
I agree that if you can make a higher return investment than the rate on your debt, that's certainly profitable. I just disagree that it can be done so passively, at least today.
[1] https://www.valuepenguin.com/auto-loans/average-auto-loan-in...
[2] https://www.valuepenguin.com/banking/average-bank-interest-r...
> most people haven't even figured out what they want and so they default to mainstream consumerism
Not everyone defaults to mainstream consumerism. Some of us just don't understand and cannot comprehend why others are such consumers. Keeping up with the Joneses? Why?
For my family at least, we require no deep inward analysis, fundamental questions about ourselves or changing of our lives. To sum up: this is just how we are.
[0] https://www.bogleheads.org/
[1] https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_...
reddit.com/r/financialindependence/ (check out all the links in the sidebar). The advice on this sub is generally much higher quality than r/personalfinance (although less newbie friendly)
See also: Mr. Money Mustache / Dave Ramsey (both seriously tackle the behavior problems that hold us back from success and wealth)
There are universal themes like budgeting, responsible spending, paying yourself before you pay others, etc. Just remember that everyone's situation and priorities are different, so don't get caught up in one specific strategy.
The last is vital, as an investor's emotional composure is at times even more important than the rational side of investing.
edit: that being said, what you said is what I almost always tell friends who have the temptation to augment their income through side projects.