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HARD TRUTH: Why The First $1 Million Is the Hardest?!


Existing in the shadowy world between trope and meme is the notion that on the path to wealth, nothing is quite as hard as making the first $1 million. While it may be a phrase repeated in jest by people who think building even $1 million in wealth is unthinkable or impossible, there are actually a lot of interesting reasons that this saying is true.

Moreover, the more people understand about the difficulties that go into building the first $1 million, the better their odds of surmounting these obstacles and achieving that worthy goal.

There are now more than 11 million millionaires in the United States.
Wealthy people often quip that earning their first million was the hardest.

Having money makes it easier to make more money, through investment, ability to take risks, and opportunities that reveal themselves.

Hard to Get Started.

One of the biggest obstacles to having $1 million in the bank is the slow rate at which people save early in life. While some jobs do offer starting salaries in excess of $60,000, they are the exception. More often, new graduates are scraping by to pay the rent, repay student loans, and still put together enough to have some semblance of a life. Even for those highly disciplined few who can save $10,000 or $15,000 a year, that would take over 66 years to build $1 million with no interest or compounding.



The Power of Compounding.
One of the reasons that the first $1 million is so hard is that it is such a large amount of money relative to where most people begin. To go from $500,000 in assets to $1 million requires a 100% return, a level of performance very hard to achieve in less than six years. To go from $1 million to $2 million likewise requires 100% growth, but the next million after that requires only 50% growth and then 33% and so on.

Extra Wealth Means Extra Options.
The rich are different; they have access to investment options that regular people do not. Hedge funds are simply not accessible to most people because they do not meet the minimum income or wealth levels established by regulators
Risk Aversion: Easy to Risk a Lot When You Have a Lot.
Risk aversion is another under-appreciated obstacle to accumulating and building wealth. When many people are first starting to save and invest, they zealously guard that grubstake against risk for fear of losing it all. Although it is understandable, the fact remains that the ties between risk and reward are hard to break.

The Bottom Line.
There is no point in minimizing the fact that it is hard to build that first million dollars of wealth. But just because something is difficult is no reason not to try. Try to save as much money as possible, invest that money with a prudent balance between risk and opportunity, and be on a never-ending hunt for ways to work better, smarter, and harder.

After all, the rewards are there to be won and figuring out how to make the second million dollars is a problem that is certainly worth having.