“Millionaire Teacher” is almost an oxymoron. Like jumbo shrimp or civil war, it combines two seemingly contradictory terms. After all, teachers aren’t typically paid well, so millionaire teachers must represent game show winners, lucky stock pickers or early Bitcoin buyers. But that wasn’t the case with me, and I want to show what works.
Unfortunately, our wealth-building schema often pictures a single play. Zuckerberg got rich with Facebook. Gates built Microsoft; Musk had Tesla; Bezos built Amazon. Reams of lesser-known multi-millionaires made quick fortunes selling apps or brilliant software packages. None of these people’s wealth, however, was even remotely guaranteed. For every Bill Gates, for example, there are thousands of equally smart (maybe smarter) tech geniuses that failed to make money with their ideas.
We romanticize quick money. We often think that if we can find a hot stock, a hot new business venture or a hot cryptocurrency we can kiss goodbye to our 9 to 5. But for every winner, there are thousands of equally smart people who crashed and burned. Lady Luck is random.
Fortunately, you can build wealth without luck. In fact, the strategy I propose is (comparatively speaking) a surefire winner. It won’t grace the cover of Fortune magazine or make headlines on CNBC. But it has much higher odds of succeeding.
Pay Off High-Interest Debt
This first step doesn’t sound sexy, but it’s important. Prioritize paying off debts charging 6 percent or more in annual interest. Dave Ramsey’s snowball approach is psychologically powerful. He recommends you tackle the smallest debt first while making minimum payments on your larger debts. After crushing your smallest debt, you’ll feel like a weight has been lifted, like a small victory. Then tackle the next smallest debt. When focusing on a single debt, write down what you owe on paper and stick it where you can see it. Track your progress, crossing out the outstanding balance to chop that bush down. Don’t invest money until you’ve paid off all high-interest debt unless someone offers free money.
Say Yes To Free Money
If your employer offers to match a portion of what you contribute to your company’s 401(k), make sure you do it. This is free money. No matter how much debt you might have, try to invest the minimum required to receive your matching contribution. After all, if your employer gives you $100 for every $100 you invest (up to a percentage of your income) that’s a 100 percent return for at least that year.
When High-Interest Debts Are Cleared, Invest The Maximum Allowed In An IRA
If you’re below fifty years of age, you can invest $6000 a year in an IRA, or $7000 a year for those over the age of fifty. Contributions made to a Traditional IRA are tax-deductible, and the money can grow (tax-deferred) until it’s withdrawn.
If you’re worried about the downside, check this out:
There were sixty-six rolling 30-year periods between 1927 and 2021. The first period was from 1927-1956. The second was from 1928-1957. The third was from 1929-1958 and the sixty-sixth was from 1992-2021. The worst performing 30-year period for US stocks was from 1929-1958.
For now, I won’t tell you what the worst rate of return was but assume you earned the worst return. If you were 30 years old, and you invested $6000 a year into your IRA for 35 years, you would have almost $1.2 million by the time you’re sixty-five. This is worth repeating and emphasizing:
If you earned the worst 30-year historical return for US stocks, you would have turned $6000 a year into almost $1.2 million after 35 years.
If you earned a rate of return equal to the second-worst 30-year period (1928-1957) you would have $1.25 million. How about the third worst 30-year period? That was from 1930-1959. If you earned that return, you would have $1.43 million.
When it comes to investing, there is no sure thing. But with time and the power of compound interest, the odds are impressively stacked in your favor. Even the worst historical 30-year return for US stocks would have turned out well for those who were patient.
Three worst 30-Year Returns for US Stocks since 1927
1929-1958: +8.24% per year
1928-1957: +8.50% per year
1930-1959: +9.08% per year
You might be older than 30 years of age. But you’ll never be younger than you are right now. That’s why if you’ve paid off your high-interest debts, start investing now. Build a diversified portfolio of low-cost index funds. Be patient. Avoid investment shortcuts. After all, if we could see the worst-case scenarios for get-rich-quick schemes, they wouldn’t look anything like what you see above.
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas