This story originally appeared on MarketBeat
In your head, you’ve always known you'll make it to the millionaire club. However, getting to $1 million and beyond has proven more difficult than you thought (despite reading every book related to “The Millionaire Next Door” that ever existed).Wealthy people often say, “My first $1 million was the hardest to earn.”
Culprit 1: You Haven’t Planned Well
You need a plan if you want to have $1 million in your accounts. Just like any major goal, you'll need to plan for it. For example, let’s say you plan to get a degree in college. That involves showing up to classes, making time to study and eventually earning your degree.- How much have I already invested or saved?
- How much will I need to invest per year?
- What rate of return will I need to achieve?
- How long will I need to invest?
Culprit 2: If You Have a Business, Your Expenses Eat up Your Revenue
We can all acknowledge different ways to earn $1 million. You can earn it slowly by investing over time or earn it all over the course of a year.However, if you run a business, you may not keep most of that money due to paying out the nose for your expenses. These expenses can run the gamut, from paying your employees to buying new computer paper for the printers at work.
- Consolidate your purchases. Try to negotiate prices for the purchases you have to make. For example, try to keep all of your office purchases within one vendor. It can save you thousands. In addition, encourage vendors to compete for your business.
- Instill fiscal discipline in your employees. You can make fiscal discipline become a core value of your company. You can even reward your employees for saving the company money.
- Outsource work to independent contractors. Not only can you negotiate a lower rate with consultants, you'll also tap into varied experiences in consultants’ fields of expertise.
- Save on marketing and advertising costs. Consider abandoning regular marketing techniques in favor of inbound marketing. Use SEO techniques on your company website and create YouTube videos instead.
Culprit 3: You Employ a Start-and-Stop Approach to Investing
How consistently do you invest? Maybe you had great intentions of starting your 401(k) at work. You did—and then you left your job. It might seem harder to start up your investments again at a new job. Maybe the paperwork is harder to access. Maybe the HR department never seems to have any availability.Culprit 4: You Don’t Track Your Progress
The best-laid plans… sometimes go awry. You never know what will actually happen with your investments, particularly if you end up with a couple of twists along the way.Maybe your investment choices don’t really jive with growth. Maybe you had great intentions to check you nest egg every six months… and didn’t. You might find yourself dismayed that your accounts haven’t rocketed to $1 million like you assumed.
If you discover that your plan isn’t anywhere near what you'd anticipated, don’t panic. You can still reach your goal—you just might have to ramp up your investments, choose new ones or employ a completely different strategy.
Get someone on board to help you. Many millionaires don’t go it alone. They often hire tax advisors, financial advisors and other professionals to help them manage their earnings.
Culprit 5: You Underestimate the Amount of Time It Takes for Your Money to Compound
This one has to do with the long, hard slog. When you’re starting from $0 (which is where a lot of people start), it requires a huge amount of money to get there. (Obviously.)
For example, at 8 percent annual returns, $10,000 invested annually will become $518,914 after 20.5 years and $15,000 invested annually will become $778,371 over 20.5 years. On the other hand, $20,000 invested annually will become $1,037,828 over 20.5 years.
Stick with It and See Growth
Even highly disciplined individuals may feel exhausted by how hard it can seem to get to that first $1 million. The reality is that even if you save $10,000 or $15,000 a year, it can still take years and years to make it there.In addition, life happens, and that can get in your way as well. However, take advantage of what you can control. Have a plan, cut expenses if you have a business, stay with it and review how well it’s going at regular intervals.