There is no secret to making a million dollars. The only problem is that it is boring, and it takes quite a bit of self-discipline.

There is no secret to being able to make a million dollars the low-risk way. The only problem is that it is boring, and it takes some discipline to get started because it means going without something you may otherwise covet. A million dollars isn’t as much as it used to be but it’s still a LOT of money, and a genuine target for a lot of people aspiring to get ahead in life.

Make a million dollars – the slow way

Before setting out what’s required to make you a millionaire*, here’s a little story about my early working days as the manager of a customer service center in a life insurance company…

Once upon a time, long, long ago – before the time of smartphones, when computers didn’t have hard drives, and “cc” really did mean “carbon copy”… the department i was managing had the job of contacting people when their savings policies matured.

These policies did not earn a lot of money or a high interest rate. They were conservatively invested, and you never really knew just how much they were worth, as they were predominantly for life insurance in the early years. They had some tax benefits but no-one who owned them would have been able to tell you what they were, and the final tax rate wasn’t too much different from what people paid in their own names anyway.

Most of these policies had been around for 20 years or more, and often for 40 – so for many policy-holders, the actual reason for taking them out was long forgotten. In fact, for a lot of people, they didn’t even know that they were paying a premium as it was being deducted from their bank accounts and was usually so small as to be assumed to be some sort of fee. The premium had often not changed over that entire period – and sometimes the original policy documents were denominated in pounds, shillings or pence – predating Australia’s currency conversion of 1966.

The older policies were “collector policies” which referred to the fact that the life insurance agent had originally come around to the family home to collect the premium each week or fortnight. These insurance agents were integrated into the family by some policyholders, and it wasn’t unusual for there to be some sort of agreement for the agent to pop around the back of the house to pick up the premium from the bottom of the washing machine in the outside laundry.

These were small, old insurance policies and there was hardly ever an intent of saving up big dollars.

Yet…

When the people in my department contacted these clients, the money in those accounts was often the biggest pool of money those people had outside of their home!

In today’s world of mandatory superannuation, this seems a little crazy – as most of Australians have by now accumulated a fairly solid lump of money in their superannuation. Yet superannuation has gained traction with people for similar reasons to these old policies – the money being invested isn’t really missed and its absence doesn’t noticeably alter lifestyles. You can’t get hold of the money for a long, long time and in many cases people forget that it’s even there. Meanwhile, someone somewhere is professionally managing that money day in, day out. The end result may not be spectacular but for most people, the size of the accumulated pool is surprising.

That’s my story of making money the slow way.

This experience helped shape my thinking on the value of long term investment – and also became a foundation thought on the purpose of shorter term investing.

Make a million dollars – the fast way

“Red or black” on a roulette table at the casino. Simple as that.

Wander into your local casino, and place a $65 bet on red or black. Win. Repeat 14 times.

My estimate of your chances of doing this successfully comes in at 0.000000000000000000011096%. Of course, making it that far would involve far more than just odds and luck.. Consider this – it would be a brave or foolhardy individual that placed $532,480 from their 13th win, onto the table for another double or nothing…

A few quick and clever share trades…

Over the years i have encountered a few people who were lured by the temptation of the ‘quick win’. The usual way this plays out is that a person takes a ‘punt’ on one or more companies and usually on a hunch or a vague recommendation from someone who has ‘done really well’. Sometimes this works and sometimes it does not but here’s a secret i can share for free…

In all my decades of dealing with people and their money, there were only a handful of times where a ‘punt’ paid off big enough to be life changing. And two of those examples were in the same family, and even though the dollars involved were substantial, the amount of money invested had been larger than the average person would have been able to afford so it’s not really a valid example for the average person.

So how do you make a million dollars?

Good question. Right now, I’m busy working on the cashflows of people who aren’t out to make a million dollars overnight so it’s probably best that i get that job finished before coming back to this question.

But i will. Come back, that is. And we’ll look at this issue of slow versus fast money in quite a bit more detail.

 

As usual, comments, criticism and critique cheerfully accepted.

 

---

 

Disclaimers & Further Reading:

• “make you a millionaire” – truly, i could not resist the temptation to slide into spruiker language on that one. A millionaire status has ceased to have the same street cred that it once had but it remains a vaguely aspirational sound bite. More than 163 of Sydney’s suburbs have a median house price over $1 million, so there are a huge number of people boasting more than one million dollar assets on their balance sheet across Australia.
  • Mind you, the article above is from January 2014. The recent surge in prices in Sydney has this article of May 2015 suggesting the figure had risen to 214 suburbs – adding a whole host of new people to the “millionaire” dance-card. The figure stood at 204 in February 2015 according to this article.
• Australia’s dollar conversion from the Australian pound – a fascinating look back in time. Wikipedia: The pound (symbol £, or A£ when distinguished from other currencies called the pound) was the currency of Australia from 1910 until 14 February 1966, when it was replaced by the Australian dollar. It was subdivided into 20 shillings (symbol s), each of 12 pence (symbol d).

The Great Disclaimer

Nothing in this post or on this site is to be taken to be personal financial advice. It is my musings and thoughts only, and it would be a stretch to even refer to these posts as general advice. Please always remember that financial advice is a bit like the laws of physics – there isn’t any single rule that applies all the time, everywhere. Any advice given generally has equal potential to be useful or harmful so please don’t act on “advice” that you read on the internet without undertaking a lot of personal research or paying someone with the credentials to do the work for you.