Is There An Easy Way To Becoming A Millionaire?

A long time ago a friend of my Dad's used to joke, "The easy way to make a million is to start with two."  Obviously my Dad and his friend were never truly "wealthy".  They spent everything they made and a little more.

Growing up we moved about every four years.  My Dad would have spent so much money on non perfuming assets (sometimes called liabilities or just wasted money) that he would need to sell the house and use the cash to pay the bills.  Back then you could keep cashing out and maintain a relatively nice looking lifestyle.  It eventually caught up with him and my parents divorced.

With money management lessons from my Dad, I entered into the same downward spiral of spending.  I did however gain a very healthy respect for the real estate market.  That is why I am an investor and a Realtor today among my other pursuits in life.

When I first entered the work world, it felt like people all around me were living better making the same money or less than I was and I couldn't figure it out.  I just kept spending trying to keep up.  The irony here is that spending was only helping me to fall further behind.  

I was one of those "Rich Idiots" that Robert Shemin talks about in his book.  Or as they say in Texas, I was "All hat, no cattle."

Eventually, I got lucky and was introduced to better method while going to school at San Jose State.  My marketing professor wrote a formula on the board, and said "If anyone wants to be a millionaire, stay after class and I'll explain this formula."

After class Dr. Laurie spent an hour with the 10 of us that bothered to stay.  He explained Warren Buffet's genius in simple terms.  Basically his formula was to invest $200 a month into a high yield dividend stock through a Dividend Reinvestment Program or DRiP.  This way you avoided the brokerage fees that ate your profits.  The dividends would buy more stock.  After 20 years at $200 per month, he said we would be millionaires.

His favorites at the time were Budweiser, Coca-Cola and Johnston and Johston.  I still have stock in all three.

The bad news is, this lesson didn't sink in for another three or four years.  Don't wait, when it comes to investing, time truly is money.

Once I did start investing, I also subscribed to the Stansberry Investment Newsletter.  This past year I cancelled my subscription because I hadn't needed to make any changes to my portfolio in nearly 4 years.  Last week a friend handed me one of Porter Stansberry's "Special Reports".  These are usually pretty spot on.

When I opened it up I laughed out loud.  It was exactly the information that Dr. Laurie had passed on to us 25 years ago.  Stansbury used Coca-Cola (Which I do invest in using their DRiP plan).  Coke has raised the dividend an average of 9% each year for the past 20 years.  And the stock has continued to grow in value along the way.  Just $6700 invested one time 20 years ago in a DRP would be worth over $45,000 and it would be adding $1700 in stock this year all by itself.  

In contrast, if you invested in a high yield CD of 5% at the time, you would have about $23,000.  

The lesson I missed from my friends was simple.  They started buying income producing assets early on, so even though it looked like we made the same money at the same job, they had sacrificed a little bit that I didn't notice and it grew.  They would spend some and re-invest some.  It didn't take long before they were making way more money than I was even though we worked at the same place in the same jobs and at the same pay.

These days, my two favorite investments are real estate and dividend stocks.  I only buy winners, and don't speculate on anything.  Well ok, once when Netflix took it's big nosedive, but that was a freebie.  I only review everything once a quarter.  No watching the market getting ulcers every time some bobble head talks on TV.

So is there an easy way to becoming a millionaire?  I would have to say the answer is yes.  There are a handful of stocks that you can buy through a DRiP plan and invest just a few hundred dollars each month and have a million dollars or more in 20 years.  

The later you start or the faster you want to get there, the more you need to invest now.  The laws of compounding interest work over time.  If you give your money time to work for you, it will show you the easy way to becoming a millionaire.