You guys!

I did it! I broke Microsoft Excel. 

See, I set out to answer a simple question:

What does it take to become a millionaire with a reasonable degree of certainty? 

What should someone actually do if they want to crack a seven-figure net worth over the next 10 years without taking crazy risks?

So… I began doing something I love: Building a model. 

But then I realized, oh crap, no one’s path to wealth is going to look similar. 

So I started adding variables. And adding probability.

And adding more variables. 

And now, after two days of building and testing and drinking a gallon of FocusAid… 

I have an Excel spreadsheet that freezes and/or takes 2 to 5 minutes to process any new calculation, because it runs thousands of simulations to make predictions about what the stock market is going to do over the next 10 years. 

Which, of course, should make you scratch your head. 

How the heck did I end up here?

Well buckle up, buckeroo. Because yer about to learn yourself the following:

1) What it actually takes to make a million bucks

2) Why you probably won’t make a million smackers by just investing in stocks alone

3) Why saving and investing is NOT ENOUGH to make a million big ones

4) What we should realistically expect from stocks over the next 10 years

But to not totally kill your vibes, I promise I’ll end on a high note. There is something you can do to amass a fortune in a relatively short time frame. You just have to do it consistently.

Millionaire Math: Or “Wow This Actually Seems Impossible, I’m Going to Be Poor Forever”

$8,333.

That’s how much you need to save, per month, to make $1 million in 10 years. 

Not earn, mind you, but actually put aside in some form or fashion so that it adds to your affluence value (which is like your net worth, but not stupid and useless). 

If you obey the typical personal finance dictum of “save 20% of your gross income”...

That means you would need to be earning $500,000 per year in order to hit this goal. 

Of course, this all becomes much more manageable if you expand your time horizon. 

You need to sock away $4,166 per month if you want a million in 20 years…

$2,777 per month if you want a million in 30 years. (You need to earn $166,620 per year and save 20% of your gross income every month to hit this target.)

But, uh, the problem with that is that, once you start getting into these greater-than-a-generation time frames, some bad things happen. 

For one, if you’re reading this, I have doubts that you’re putting aside at least $2,777 per month, every month, already. 

For second, if you’re reading this, you’re probably smart enough to know that life happens, and it’s often impossible to stay consistent with something every month for 30 years. 

For third, if you’re reading this, you might have already read my article about why it is basically mathematically impossible to “save” enough money to retirement, because you have to take inflation into account, as well as the incredible uncertainty involved in predicting when you’ll die (that is, how long your retirement will last, which is probably longer than you think).

Long story short…

You cannot hope to get wealthy if you’re just accumulating cash alone. 

But… does that mean you have to risk your money by investing it?

Yes, You Should Invest… But That Will Not Make You Rich, Either

Let’s say you have an average American job earning an average American salary of $55,000.

Let’s say you have a generous boss, and you get a 2% raise every year. 

Let’s also say that you’re the coolest person in the world and you’re actually able to put aside 20% of your pay into your “investable assets.”

Let’s then say you also have a side gig, where you make an extra $1,000 per month, half of which goes to your investable assets. 

(Are you starting to see what I meant earlier by “adding variables”?)

Let’s also also say that you put 50% of that amount into cash savings until you have a safety net of about half your yearly salary (as you should)...

And you put the other 50% into investments that earn you 10% compound returns each year (which is more difficult than you expect).

Let’s also also also say that, once you have enough saved and invested to buy an average house (20% down on $375,000), you drain your savings and investment portfolio to do so. 

Let’s also also also also say that, once you have a house, you’re putting enough toward your mortgage that your home equity (the value you own of your house) grows by $1,000 every month AND your house appreciates in value at 0.2% every month. 

Phew. 

Ok. Let’s say you do ALL of that. Consistently. For 10 years. 

You’ll end up with a net worth of $228,567. 

And if you don’t plan to sell that house or rent it, you’ll only have an affluence value of $71,000.

In fact, if all of the above hold true… 

And you do everything you’re SUPPOSED to do, in exactly the way I described it…

You’ll have a million dollars to your name in 25 years. 

And that’s… not bad! That’s doable, if difficult.

But in all likelihood, this whole spiel got a big eyeroll from most of the people reading it. 

Nobody wants to wait for 25 years to hit seven figures. They’d rather take more risk and lose the possibility of ever getting there rather than arrive there slowly and with reasonable certainty. That’s just… the way most humans work.

Now, there IS one thing you can do to juice this and actually hit that “million dollars in 7 to 10 years” goal… (I’ll reveal this at the end.)

More importantly, there’s one thing you probably SHOULDN’T do…

But you won’t understand WHY you shouldn’t do this until you understand something else very important first…

The Faustian Bargain for Every Investor: Risk & Uncertainty

There’s one thing that I don’t think personal finance gurus or books communicate very well…

Every investment and every moneymaking activity you undertake has a sliding scale of risk, uncertainty, or both. 

Risk determines how much you stand to make or lose. Uncertainty determines the breadth of all the possible outcomes, good or bad. 

This is true for trading digital art, it’s true of a stock index fund like the S&P 500, it’s true of your job, it’s true of the house you buy.

Something that has a high degree of risk and uncertainty? It’s a speculation. Most crypto/blockchain projects fall into this camp, as do most types of trading.

Something that has a high degree of risk but a reasonable degree of certainty? This is a smart speculation. Most tech stocks, growth stocks, and the Nasdaq fall in this camp.

Something that has lower risk but some serious uncertainty? This is an investment. You can never know what the future holds, but the risk-to-reward ratio looks good. This can be a home purchase, or buying blue chip stocks (my favorite), or buying bonds, or even investing into index funds.

Finally, something that has low risk and low uncertainty? That’s a job. 

Now, here’s another thing 99% of investors don’t know or understand…

Risk and uncertainty are not vague notions based on gut feelings. 

Risk is calculable.

And if something is calculable, it can be modeled and simulated. 

So that’s what I ended up doing. I built a simulator that factors in risk and uncertainty into what might happen in the future. 

See, if you want to know the likelihood of something happening, you look at what has happened before. 

You can then calculate the distribution of what happened to create probabilities. 

You can run one simulation with these probabilities to guess at what happens next… 

And then you can simulate over and over again to see both the risk and uncertainty you should expect. 

This is called a Monte Carlo simulator, and it helped me produce these 12,000 simulations of the S&P 500 ($SPY) over the next 10 years:

And since I have those simulations… I can tell you with reasonable certainty that, over the next 10 years, the S&P 500 is going to return around 4.4% to 8.2% per year… (For context, the average annualized return since the index’s inception in 1957 through Dec. 31, 2021, is 10.67%.)

After 10 years, there’s a 4.4% to 13% chance that you will lose money.

And you have a 9% to 32% chance of making more than 10% gains per year. 

This… should not make the S&P 500 look attractive. (I’ve been saying to avoid major indices for a while and this only confirms my bias.)

But it’d be a mistake to think that the only answer, if you want to make $1 million, is to take on much more risk in order to get a higher ROI.

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Gunning For High ROI Is a Recipe for Total Disaster (Around 50% of the Time)

Now that you understand the above… here’s a question to determine what kind of investor you are:

Say you were in Magic Vegas, which is like Las Vegas but magical. 

In Magic Vegas, there’s a game:

To play, you have to put up $500 per month every month for 10 years. A $60,000 total bet.

Now, BEFORE you put down the money, you have to select a set of dice. The dice determine your odds of winning and losing, and to what degree.

No changing halfway—once you’ve picked your dice, you’re locked into this $500 per month. If you lose everything halfway? You still have to keep hemorrhaging your money. For the full 10 years. 

Ok. So. Here are the details about these dice. 

Dice Set 1: You have a 98% chance of profiting and a 2% chance of losing money. The maximum you might lose is about half (-50%) of what you bet. The chance of you making more than $1,000,000 is 0%. But the average payout at the end is an 86.7% gain and you have a 50% chance that you’ll make more than 8% per year.

Dice Set 2: You have an 84% chance of winning and a 16% chance of losing money. The maximum you might lose is about -70% of what you bet. The chance of you making more than $1,000,000 is still 0%. But the average payout at the end is a 162% gain and you have a 50% chance that you’ll make more than 7% per year.

Dice Set 3: You have a 54% chance of winning and a 46% chance of losing money. The maximum you might lose is about -93% of what you bet. The chance of you making more than $1,000,000 is 12%. But the average payout at the end is a 756% gain (because the outliers are so extreme) and you have a 50% chance that you’ll make more than 1.1% per year.

Each of these three Dice Sets are based on a model of the potential future returns of an actual asset or strategy. 

Now… which would you choose?

Think about it carefully… because this thought experiment can really reveal something about what you should be doing with your money.

Now, if you wouldn’t play this game… Congrats. You’re not an investor. Do not listen to anyone who ever tries to tell you to put money in the market. 

If you chose Dice Set 1, you’ve fully embraced the Will Rogers mantra: “Better to be concerned about return OF capital than return ON capital.” Buy and hold and continually add to $SPHD or Legacy Stocks, which each hold high dividend paying, low volatility stocks that cut you a regular check. Don’t spend a moment caring about whether your returns “beat the market.”

If you chose Dice Set 2, you’re a little bit more of an intelligent risk taker… You’re a little less “you have to risk it for the biscuit” and more “it’s good to take strategic risks when opportunities present themselves.” Avoid trading unless you can devote 10 hours a day to it, but otherwise make some smart speculations and consider trading based on value, like what I recommend in the Finance Daddy Dollar Trader. 

If you chose Dice Set 3, you’re a maniac and you’re not going to get much out of the content we publish at DIYwealth.com. Unsubscribe, go blow your money on “monkecoin,” and apologize to your mom for being such a degenerate.

Or don’t. You do you.

“So What’s the Answer? How Do I Actually Make My $Milly?”

In the beginning of this piece, I set out to answer a simple question:

What does it take to become a millionaire with a reasonable degree of certainty? 

You could take the long approach, as I described before: consistently save and invest for 25-40 years. 

You could take the short approach: get insanely lucky, which no one can teach or learn in any sort of replicable way.

Or you can take the only approach I’ve found that offers a clear and relatively certain path to $1 million over 7 to 10 years:

Find any way possible to consistently increase your income and put aside more of that income each month.

In every single model I built, THIS was the secret sauce that unlocked wealth.

Every attempt to increase ROI from investing led to the vast majority of simulated portfolios blowing up and failing to build wealth without massive risk or uncertainty.

If you increase your income, you increase the money you have available to save and invest. 

This is why I’m constantly badgering you about working more hours or finding ways to make more money per hour.

It doesn’t matter if it’s at your job and you work hard to get promoted…

It doesn’t matter if you spin up a side hustle or launch your own business…

It doesn’t matter if you successfully invest in rental properties or even rent out one of your rooms via AirBnb…

If you’re starting with an average salary of $55,000 or less…

You need to find any possible way to increase your income each year, if making a million in 10 years is your goal. (And don’t forget: The objective here isn’t just to make more, but to keep more of it, too. Avoid the trap of lifestyle bloat.)

Unfortunately, I don’t have any shortcuts or reassuring messages here…

The only way to really accomplish that is to work harder and do more. 

Not for a boss, necessarily…

But a good boss can actually help you achieve this goal more quickly than if you were to do it alone. And there are so many ways to work harder and do more while having even more fun. It doesn’t have to be stressful or take a toll on your lifestyle.