What is the first step of becoming a millionaire?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 253.2 million views in recent years.

In the answers below I focused on the following topics:

  • What is the first step of becoming a millionaire? Great ideas? A good network? Or something else?
  • Would I rather be a billionaire in a place like Myanmar or a poor person in a developed country like Japan? Even though this is only a theoretical question, I look at it from a logical perspective.
  • Is Shanghai still poor compared to Tokyo or Seoul? I speak about reality vs the general opinion which seems to be out there.
  • Does having a high-net-worth make securing business funding more likely? I mention how things have changed in this new business era, where starting your own business is cool, and there is loads of venture capital money out there willing to throw money at some founders.

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What’s the first step of becoming a millionaire?

My first instinct was to say execution. Many people have loads of knowledge and give tips about some of the keys to reaching millionaire status such as:

  • Living below your means and having reasonable spending habits
  • Gaining high skills to help your income
  • Investing rather than saving
  • Starting the investing process from a young age due to compounding. Many middle-aged and middle-income millionaires accredit this fact with their wealth, whereas general society assumes that only high-earners can become millionaires.
  • Not trying to speculate or time the best moment to get into markets
  • Reading more
  • Spending time with the right people and getting rid of toxic ones
  • Not wasting time as time is money
  • Being focused, determined and persistent
  • Taking calculated risks.
  • Having an abundance mindset rather than focusing on scarcity.
  • Being positive and self-motivated
  • Adapting yourself as the world changes. Continual education helps with this.
  • Some people even mention things like tax-efficiency.
  • Using leverage to your advantage. That could mean leveraging money, other people as a business owner or time.
  • Creating value for others 
  • Being a producer rather than a consumer. For example, producing goods, rather than just consuming them, or producing content rather than just consuming it. 
  • Caring about your health as well as your wealth, as a healthy mind and body can result in better material gains as well.

All of these things can be important. Yet nobody started life with specialist knowledge in these areas, so everybody needed to start somewhere.

As schools don’t really teach proper financial education, execution isn’t easy for most people, especially if they don’t know an advisor.

Therefore, the majority either gain knowledge first and then execute, or outsource the process to somebody who has already got the specific knowledge they are looking for.

So, the commonality is taking action. For some, taking action will mean educating yourself, and then taking further action upon gaining that knowledge.

For others, it will mean using an advisor or somebody you know in your friendship circles who can help you.

I guess it is actions vs words and execution vs ideas. If you focus on actions and execution you are going in the right direction:

More importantly still, is taking consistent action over long periods of time.

There are many former millionaires out there for this reason.

Why is the net worth of an entrepreneur important for a potential investor in the business?

It isn’t always important in every single situation. If it were, investors would never give money to start-ups who didn’t have a rich founder.

Zuckerberg and Facebook, for example, would have received zero interest in the early days if 100% of people cared about net worth.

Despite this, if an owner has a decent net worth, it can be a good sign, for the following reasons:

  • Assuming they got the money mainly by starting a previous business, and finding an exit, that means the person is tried and tested. Private investing isn’t like putting money into ETFs. It is high-risk. Even many professional Angel Investors expect to lose on 80% of their picks and make a lot on 1% of the companies. Anything which can reduce that risk is valued.
  • The founder might not need loads of funding. A young 19-year-old founder might need money for the product AND their cost of living. An experienced founder might need less.
  • A founder who has done it before is less likely to have delusional ideas about “my idea”, “my dreams” etc. They are more likely to have a sensible business plan backed up by numbers. If they have given previous investors their money back/an exit, they might be able to produce a compelling plan about how they will do the same this time.
  • The biggest indication of success in many industries is if a founder has experience in the area. So, for example, if you have a new business idea in real estate, which is being pushed by a millionaire who made their money in real estate, that has more credibility than a random rich person from another industry or a newbie…..if all things are equal of course.
  • It is human nature to assume the past will repeat itself even though the evidence suggests otherwise.
  • In some cases, a founder can fund their own start-up, but come looking for investors who can bring some value-added. You see that in programs like Dragons Den and Shark Tank. Occasionally you see some very rich founders like this guy below who sold his businesses for tens of millions:

In this case, the risks are lower. You have a founder who has the money, but wants the free publicity of the TV show + access to the investors network.

In some cases as well, a more established founder might be able to share the risk.

In other words, in exchange for your money and contacts I will give you X, Y and Z.

In some other situations, the private investors are taking 100% of the risk, in return for huge potential.

As a final point, I do think in the era we are living in, this has become more important for investors.

in the 1980s or 1990s, when starting your own business wasn’t cool, and interest rates were higher, there was properly less delusional founders.

These days, interest rates have been below inflation for over 12 years in most developed countries.

That means capital is searching for a yield in the stock markets, but yes, also in private investments.

Starting a business is now cool and many founders are living it up on venture capital money.

Finding a credible founder, who has made their own money before, is therefore only a positive thing.

That doesn’t mean only invest in rich founders, but be sceptical of somebody who has never delivered/executed themselves, and they want to fund their business on other people’s money.

Far better for somebody young to start small and organic, hustle, make their own calls/emails and so on, and then seek a funder once credibility has been established.

Would you rather be a billionaire in Myanmar or a poor man in Japan?

Rationally speaking, I would want to be a billionaire in Myanmar/Burma for a simple reason – I could change my residency in a few months.

Yes, it has become more difficult due to Covid-19, but some countries are still open.

The anti-money laundering (AML) requirements are strict when it comes to Myanmar for obvious reasons, so it could take longer.

Despite all of that, it would be possible to use a small amount of the wealth to change my residency and indeed citizenship.

Even if the process gets delayed, I could keep my head down and use the money to stay safe.

I have been to Myanmar and know people living there. It isn’t dangerous in the capital city for the most part.

It still attracts in expats, capital and returnee Burmese who have voluntarily come home despite the issues.

Sure, it is harder to keep away from politics if you happen to be a billionaire as you could get dragged into it, but the basic point still holds – it doesn’t need to be one of the most dangerous countries in the world. It isn’t a war zone. At least not yet.

If second residency and citizenships were banned, it would be a more interesting question.

A self-made billionaire would be confident that they could start from zero again in Japan and at least make a few million.

An inherited wealthy person would probably be more insecure about starting again from zero.

This is especially the case in a brand-new country with an unfamiliar language and custom to the one you came from.

GDP per capita of Shanghai, number one business city in China, is significantly lower (USD 22,700 in nominal and USD 37,000 in ppp) than that of Tokyo Japan and Seoul South Korea. Aren’t Chinese shouting that Chinese are RICH?

Yes, you are right. The GDP per capita even in Shanghai, Beijing or Shenzhen, is still much below developed country standards, including South Korea and Japan.

Historically, people have been very modest concerning speaking/boasting about wealth and income as Cui and Jingcheng have said below.

This has started to change slightly, due to the rise of nationalism, economic development and indeed the appearance of big cities.

If you go to Shanghai it looks like this in some parts – despite other areas looking poor

The train from the airport is one of the best in the world:

Therefore, many people mistake developed infrastructure for development in terms of income.

In comparison, some of the countries with the highest GDP capita in the world look like this in some of the richest parts of Europe:

I remember speaking to one Japanese person of Chinese descent who said her parents emigrated to Tokyo “when China was poor but now Shanghai is as rich as Tokyo”.

When I pointed out that the GDP per capita in Tokyo is much higher, at first she denied it!

This isn’t a China-only issue though, as many people also get over-excited about places like Thailand and Malaysia, just because the infrastructure is new.

Of course newly middle-income countries will have better infrastructure than places which developed 50–100 years ago!

It also makes sense, next time somebody is in Shanghai, to go to a place which looks more like this:

That isn’t to mention a big point – the rising cost of living. Twenty years ago, people living in China (expats and locals alike) could benefit from lower costs.

That is still somewhat the case when it comes to very basic services like the subway, water etc.

Yet the price of buying a house in Shanghai is now higher than Tokyo, as are international school fees, imported products and many other things.

So, it is possible to live more cheaply, still, in China than Japan, but quality costs about the same.

That means the GDP per capita (PPP) numbers are probably overly optimistic for a place like Shanghai, as they assume that it is cheaper than it really is, just because a few products pull down the average.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 253.2 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the answer below, taken from my online Quora.com answers, I spoke about the following issues and topics:

  •  As a British expat in my mid 20’s what tips can you give to retire in your 40’s?
  • Why can US expats overseas invest more (sometimes) than they can when they live in America?
  • What changes can we expect expats in the Middle East to face in the next few years or decade?
  • How can stock markets go up during a pandemic?

To read more click on the link below.

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