Can you go from broke to millionaire in five years? Yes. But it’s not easy—if it were, everyone would do it.
It took me seven years to reach a seven-figure net worth after restarting from scratch. But there are plenty of people out there who have done it in five years or less.
Aside from winning the lottery or inheriting money (which you can’t duplicate), there are ultimately just two paths to becoming a millionaire. But each offers endless options and ways to combine the two together.
The Simplest Path: Save and Invest
Save a huge percentage of each paycheck. Invest it well. Repeat every paycheck for years.
It’s not sexy, but it works. Over time, your investments take on a life of their own, generating income that you reinvest for compound returns.
Granted, it takes a lot of money invested every month to reach $1 million in just five years. At a 10% average annual return, it takes around $13,000 a month.
I’m not here to sell a fairy tale. The math is the math. You’ll need to earn a high income and then show the restraint to not spend it, but rather to save and invest the bulk of it. As you earn more, you’ll need to resist lifestyle inflation and just invest most or all of your raises.
Don’t like the idea of living like you’re broke even though you earn a high income? Then do what everyone else does and spend most of what you earn, and don’t build real wealth. You’ll look and feel rich (for a while, anyway), but you won’t actually be rich.
If you get aggressive with saving and investing, however, you’ll make fast progress, even if it takes you a little longer than five years (like it did for me). Here’s a breakdown of how much you’d need to invest each month if you want to hit $1 million in 10 years. It’s much easier, requiring less than $5,000 a month at a 10% average return.
Higher Risk and Reward: Start a Business
Most people who become millionaires within just a few years do so by starting a successful business.
“I’ve been broke twice and rich three times,” shares Oren Sofrin, owner of Eagle Cash Buyers, in a conversation with BiggerPockets. He happened to choose a business model that combines investing, but that isn’t the only business path available. “A friend of mine launched a $9/month Canva template bundle for wedding planners and hit $1.2 million annual revenue in 26 months. Another friend learned Google Ads in three months, started charging e-commerce stores $3,000 a month retainers, and cleared his first million in 22 months.”
Of course, not every business explodes in revenue. In many ways, running and growing a business is much harder than clocking in as a W-2 employee. It takes a certain drive, vision, ambition, and energy that most people just don’t have. And this is why most people don’t do it.
Most people think that all the money in the world is a giant pie, and if they want more of it, that has to come out of someone else’s slice. Entrepreneurs know better. They know that they make their own pie and grow it. And their pie adds to the larger pie of the economy, creating new jobs and value, rather than taking anything away from others.
The Side Business Plan
You don’t have to choose between a W-2 job and starting a business. Work your job, save and invest as much as you can, and build a business on the side to boost your odds of success.
Plenty of workers launch real estate side businesses, buying and managing rentals or flipping houses. One path that can prove particularly effective is the BRRRR method, because it lets you recycle the same down payment to add many rental properties.
“The combination of leverage, forced appreciation, and long-term rental income is powerful,” notes Claudia Beiler, owner of The Chris and Claude Co, when speaking with BiggerPockets. “You’re not just relying on the market, you actively create value, and build significant wealth within five years.”
The Path I Took
My wife and I combined many of these strategies to get there in seven years. She works a W2 job and a side hustle. I run a business, and do some freelance financial writing on the side because I enjoy it. Neither of us has a huge income, but we kept our expenses extremely low, living overseas without a car.
On the investment side, every month I invest in both stocks and passive real estate investments. I keep the stocks simple with index funds. For real estate, I invest $5,000 at a time alongside other members of a co-investing club. Every month, we vet a new investment, such as private notes, private partnerships, and syndications, as a form of dollar-cost averaging.
In my co-investing club, we aim for annualized returns in the mid-teens or higher. And those higher returns help us progress faster toward those big, hairy financial goals.
Concentration for Income, Diversification for Wealth
In your career, you should become a niche expert with concentrated expertise and become one of the top 10% of people in your field. It’s how you succeed and earn more income.
You can, of course, invest in the space where you’re an expert. Some employees have stock options in their employer’s company. Active real estate investors inevitably have some investment capital tied up in properties.
But you don’t want too much of your investment portfolio tied to your industry or career. That leaves you overexposed to one risk point. If your company falls from grace and all your money is in its stock, you could lose both your job and investment portfolio in one tumble.
Many of my fellow members in the co-investing club are active investors who buy rentals, but they also invest passively to diversify. They don’t want all their money tied up in a few rentals in a single market.
By all means, invest in yourself and in your business, especially when you’re young. But as you build wealth and get to a $100,000 net worth, a $500,000 net worth, to $1 million and beyond, you need more and more diversification. It shelters you from risk and gives you more opportunities for breakout investments.
Finally, it helps you generate additional income streams, making you less dependent on your day job. “Millionaires rarely have one source of income,” adds Sofrin. “Multiple streams provide risk protection and acceleration at the same time.”
That’s the road to financial freedom: stacking up streams of income so that you can do work you love, regardless of what it pays.
