|What's the best way to make a million dollars - by disciplined savings or following your heart and guts?|
I love all the advice on the internet on how to become a millionaire. After sorting through the scores of online articles and blogs, you'll discover that they fall into two basic categories, the Disciplined Savings Approach and the Follow your Heart and Guts Approach. Of course, you can go straight to Go by marrying into wealth, but be mindful of the Scottish proverb, "Don't marry for money, you can borrow it cheaper."
The Disciplined Savings method is illustrated by the blogs about the "miracle" or "magic" of compound interest. First, start with the foolish premise that your money can earn 10% a year, as do many of the articles on this subject. (The annualized return for U.S. large-company stocks (as represented by the Standard & Poor's 500-stock index) for the past 80 years has been about 10%, not including taxes). So, naturally, say your goal is to build a nest egg of $1 million by the time you are 55. If you start at age, 24 and invest $5,000 a year at an annualized return of 10%, you'll reach your goal. Of course!
Or, similarly, take 5 bucks a day, and put the money in a stock mutual fund that gives you 10% interest on average. Easier said that done, of course, but guess what? In 42 years, you'll have a million dollars!
They say that Albert Einstein (allegedly) called compound interest the eighth wonder of the world. I'm glad he was a theoretical physicist and not a financial adviser. The problem with this approach is that the tedium is sure to kill you before you reach your goal. Only an automaton could execute a plan like this.
The other approach is about following your dream, pursuing your passion - ideally in the form of a business. (You can start with a virtual office at the Executive Office Center to save money). This approach sounds dangerously naive, and it has probably gotten more than one fool into a lot of trouble. The reality is that the dream has to be combined with a good deal of zealotry and fortitude. A lofty vision is a good start. But you have to follow up on the vision with obsessive devotion to the cause. You have to close your ears to the naysayers, and forge ahead. Working like a dog is very helpful. Postponing immediate gratification is essential. Some people are held back from achievement by negative thought processes, so pop psychologists have some cliched suggestions for you like Get out of your own way and Give yourself permission to succeed.
One thing for certain is you are not going to become a millionaire merely be reading this blog. Knowledge may be power - but the energy in knowledge is latent, like the power inherent in an atom. To release the power in the atom, you have to split it. To release the money-making power in an idea, you have to execute it. Good luck.
To read a more comprehensive and wonderful blog on this sujbect, try Michael Brain's How to Make Million Dollars.