While looking at Moolanomy’s blog the other day, I stumbled on an intriguing post that illustrates why it’s hard to break that P1-million net worth mark.
It’s not just the persistence and focus needed to make your first million. Moolanomy correctly points out that it’s also mathematically challenging.
“If a person invests $15,000 per year starting at age 25 and the investment gains on average 10% a year, he can get to $1 million mark by 45. The first million took 20 years! But if you keep going down the table, it only takes…
6 more years to get to $2 million at 51
4 more years to get to $3 million at 55
3 more years to get to $4 million at 58
2 more years to get to $5 million at 60
2 more years to get to $6 million at 62
2 more years to get to $7 million at 64
1 more years to get to $8 million at 65
This confirms what one of the readers of this blog said in a comment on my post on The Science and Art of Making Your First Million. He said:
“Making your first million is the hardest because you’re starting from scratch. The next million is less hard. The succeeding millions are easier because you have a bigger base. Money begets money.
I made my first million at 25 in real estate during the real estate boom in early ’90s. I had to bet all my savings and borrow money to do that. Now I earn the same amount in interest alone.
Business is the fastest way to make money. It is also the fastest way to lose money if you fail. Don’t worry it’s okay to fail but don’t lose it all.”
Inspiring, right? As I was looking through MoneySmarts’ archives, I realize Pinoy Investor is only in his thirties. Unfortunately, he doesn’t want to be interviewed 
For average Filipinos, making the first million by 25 may not be as easy though. But what if we make some simple assumptions. Say, regular savings of P2,000 a month starting at age 20 when most of us start working? The table looks like this:
It will take 16 years to make your first million!
But it gets easier after that…
6 more years to make the second million
4 more years to make the third million
3 more years to make the fourth
2 more years to make the fifth
2 more years to make the sixth
1 more year to make the seventh
…then you’ll be making one million a year after the eighth.
Consider that this illustration is only for a P2,000 savings per month on a 10% return per annum. Come on guys, we all can do better than that!
September 5th, 2008 at 5:00 am
All you guys with 1 or 2 children, I think it would be very easy for you to reach 1M faster. Me? Got 6 kids, but working real hard to reach that mark. Easier to reach there by going abroad first, then invest. The rest will follow, with discipline, perseverance, cooperation within the family, luck, and God’s blessings. Don’t forget to make the kids do their part.
August 7th, 2008 at 5:43 pm
Hi Salve,
I find your blog very informative and helpful especially for average income workers like me. I’m 25, btw, married with a 4 yr old kid.
My husband and I were thinking of regularly investing the minimum 5000 pesos to the Sunlife balanced Fund in the hopes that it’ll get higher returns over time. I dont know much about stocks but what I do know from reading all those books by Colayco as well as other financial literacy articles is that one can hope for better returns when we hold on to that money in mutual funds (as well as the benefits of peso-cost averaging).
I would just like to get your opinion regarding this matter. We dream of buying our own house in around 10 years time and hopefully set up a retirement plan. We know that we should save and plan as early as now.
Any response would be helpful.
Thanks!
April 9th, 2008 at 11:44 am
gracie, the PDIC coverage is not a good way of giving us false security when investing in a less-stable bank. although the PDIC has a good record of paying out depositors of failed banks, it’s still tough to have to wait days and weeks for your money!
April 9th, 2008 at 11:42 am
robert, you know what’s nice? a few months ago, I received two emails from two readers who said they were able to improve their saving habits since they started reading moneysmarts and hit their first million last year! it sure sounded like a nice pat on the back, but of course the real achievement there were their own determination. so kudos to everyone out there trying to save their first million. we’re cheering you on!
April 9th, 2008 at 7:46 am
some banks do offer 10%PA for 5 year TD, tax free. they even pay-out monthly interest. if you are wary of small banks just place 250T which is the max amount PDIC will cover.
April 9th, 2008 at 3:26 am
i agree the first million is the hardest…. i earned my first million (at least in paper) when i quit Saudi at the age of 27… by investing in real estate. The second , third, fourth…etc of millions ( in peso term) is a lot easier even if you invest it in a modest investment as long as you consistently adhere to your monthly goal of savings. Doubling your money follows this simple formula : N=72/i where N is number of years to double your money and i is the interest rate. So for an interest rate of 10%, your money doubles in 7.2 yrs. Of course, i am talking of compounded interest. Putting your money to work for you is easier IF you have the determination and the will to control yourself from spending unnecessarily. My 2 cents…
February 15th, 2008 at 9:17 am
i agree doc mike. i think we should be more conservative in our rate projection. why not use 5% since it is the average rate for 5 yr tds of big banks.. or maybe GS 91 days…
February 14th, 2008 at 9:06 pm
You are right Anna. The projection of earning 10% per year is very hard to attain. It is simply unrealistic projections. I invested some my money in a Mutual Fund that is performing well before I invested but now the my NAV / share is losing.
December 10th, 2007 at 12:29 am
@ pinyo……. i sincerely think that i am an “average” investor as it is my hobby…. i have a day job and i go to class on sunday…. which leaves me only a few hours at night to do some research…… every month or 2 i might stumble into an issue worth picking up, i dig up information about the company, if i like what the managers are doing… then i invest….. investing need not be complicated
@yxz ……. pwede naman makapagtabi ng 2,000 pesos kada buwan ang pinoy…. kung medyo nasa minimum wage ang sahod…. pwede naman meron sideline pagkatapos ng regular na trabaho…. dami kong nakikita na empleyado, pag uwi meron tindahan sa bahay….. hindi naman talaga pwede iasa sa pamahalaan o sa ibang tao ang sariling kinabukasan
November 26th, 2007 at 2:53 pm
lj, paluwagans do a lot of good when the officials are honest. because there is not much oversight, the risk there is collusion among officers to run with the money. Just be careful with the governance thing
and let the officers know about their accountability and transparency. if its being run well, they should be able to tell you at a few moments notice where the money is, how it is being invested, how much is lent out and how much the entire paluwagans money is earning. Wish you all the luck!
November 24th, 2007 at 11:06 am
just wanna share from an average wage earner. we had this paluwagan in the office. the system is that we pay the designated treasurer the corresponding share (worth 100 per share) every pay day. after the calendar year, all earnings from the interest on loans to members and non-members and penalties for late payment on share shall be distributed to the members. this year we earned at least 14%. though lower than 2 previous years at 17% i cant earn it if i put my money elsewhere. did i mention it has no withholding taxes! im looking forward for my 1st million in a few years time!
November 22nd, 2007 at 1:38 am
@Honey Bunny — from my own experience, but that doesn’t say much.
If you think about “average investors” who have limited experience picking individual stocks, and don’t have the kind of resources that professionals do, what do you think is the odd of them beating the market average?
That said, I believe some people can pick individual stocks and outperform the market on average. I am not in that league yet, and I think that most “average investors” are not either.
Again, I do emphasize “average”.
November 21st, 2007 at 7:20 pm
sa hirap ng buhay mkakapagtabi pb ang isang pinoy ng P2,000?maari sa mga mayayaman…wlang aangat n mahirap dhil s kurakot n pamahalaan…mayayaman lang ang umuunlad at nkakaipon….:)):)):))…
November 21st, 2007 at 1:21 pm
Pinyo: “For average investors, picking stocks is a game of chance at best.”
^ what made you take this position? articles from mutual fund pr groups? john bogle?
November 21st, 2007 at 5:29 am
@Salve - I’d prefer to built my own overall portfolio from a variety of index funds and ETFs, focusing mostly on index. By investing everything in one Globally Diversified Fund, I am banking on that one manager doing the right thing for me — I don’t think this is possible.
As far as inflation, it will affects us no matter what. We just have to learn to deal with it.
@Chris - You can bet on a few stocks too, and if you’re lucky you’ll end up with Microsoft, Google, or Staples. On the other hand, you may ended up with Enron, Worldcomm, and ETrade. For average investors, picking stocks is a game of chance at best.
November 20th, 2007 at 2:43 pm
Salve, I think I’m just plain lucky that everything seems to fall into place according to what I’ve envisioned them. I’m one of those who can’t get their minds over matter eh he he he…:D
But pun aside, pinoy investor is right. You just have to stay focus on your goal, be creative and grab every opportunity that you think will help in achieving it.
I’m also recommending the book “Automatic Wealth - 7 Years to 7 Figures”. It’s full of practical advise that you can execute daily on your way to financial independence in 7 years.
November 20th, 2007 at 11:15 am
How fast is 1M? I buy & sell comics when I was 10. I buy at 1.25, rent it 5 times for 0.25 each to recover my investment, then sell it for 1.50 to schoolmates who can’t go to bookstores. I buy & sell at least 1 comics a week. This gave me a return of 120% a week or 6,000% a year! Way higher than the best mutual funds.
At this high return, if you start with P10,000, you can make 1 million in just 6 weeks. But you have to sell 10,500 comics at P80 per piece cost. You have to do multilevel marketing to sell that much comics. If you’re dealing with real estate, you only need to sell one property worth 20M to earn a 5% commission of 1M.
November 17th, 2007 at 12:05 pm
val, i’m very interested in how you have achieved that. Share naman…
November 17th, 2007 at 11:37 am
hachiko, what a crazy idea :p. on blogging, believe me i’m not doing it for the money. i’m enjoying it too much! hubby has wanted me to quit working for many, many years now. I’m just too hardheaded, i guess.
oh, sorry about the “average” return. Should have been “overall” return.
November 17th, 2007 at 11:35 am
chris, from what I have seen so far in my interviews, stock market investing is not for everyone. but some Filipinos have made good money out of it, some naman have grown rich without putting a single cent in equities. to each his own, i guess.
November 16th, 2007 at 9:09 pm
Wait lang Salve… RE: 10% return?
Fund 1 — 12%, Fund 2 — 5%, Fund 3 — (-7%), Fund 4 — (-2%), Fund 5 — 2%
Average return is 10% / 5 = 2% only!
Your conclusions on diversification still hold, though.
November 16th, 2007 at 7:45 pm
Why would average Joe wait for 20 years to become a millionaire when he can do it in 10 years or better yet in 3 to 5 years? That’s too long to waste your life worrying about your first million.
There are many alternatives out there for the average person especially the younger ones to be a millionaire in about 5 years even if he starts from scratch. Instead of waiting to have his 1 million in 20 years he could have at his 20 million or XXX million by then.
Remember, mind over matter…
November 16th, 2007 at 10:00 am
Salve if only u married this guy and inherited his vast estate before marrying your hubby now then money wud b much easier for ur family nw! hehehe
wc means u also won’t be writing 4 Inquirer anymor n blogging here… rule f 72 
November 16th, 2007 at 3:26 am
why not just invest in equity market? chinabank and piltel stock gives you more than 20% return every year for the past 4 years, by way of stock and cash dividend, and capital appreciaion….. and the best part is that you can invest with as little as 20k pesos, of course the more you put in, the more you earn
November 16th, 2007 at 2:22 am
d3nnis, just keep on going. that’s the spirit. as they say, life is a journey not a destination.
November 16th, 2007 at 2:21 am
chat, starting small is ok. at least, the goal is reachable. but don’t let the 1M figure stop you in any way to get the 5! cheers
November 16th, 2007 at 1:49 am
mikoy, I was once talking to the former undersecretary of Department of Finance who was one of the most honest and most dedicated government official I have ever known. She was the one who was trying to push a version of the CTRP that was best for all. This is called tax planning, she said, not tax evasion. Most people need to be smart about that, or else you end up paying more than you really should. The rich get free advice from the likes of SGV, because they have millions that SGV manage for them. But for Mang Pandoy, we have to figure it out on our own. You gave me a good topic to investigate!
November 16th, 2007 at 1:43 am
hi hachiko, i remember this very witty and very rich and very old family friend that we have, who advised me to buy things with my money that I can sell later on rather than let it rest in a savings account. He would buy land (the favorite investment of our parents, lolos etc), forget about them for awhile, and sell them after a few years. He died very rich and I think I was half in love with him when I was very young hahaha. how I wish I could ask him if he knew about the rule of 72! Interesting the wisdom of the ages, ano?
November 16th, 2007 at 1:27 am
anna, most of us are caught up in our little world here in the Philippines. Global diversification means putting money in different markets, ie Singapore, Hong Kong, Japan, China, US, Europe etc. By putting eggs in different baskets, investors say they improve chances of earning more because those markets move differently in reaction to different domestic developments. This is the reason why American funds have some of their money in US, Europe instruments etc., but also save some for emerging markets. It’s not just theory, there’s a mathematical reason for this.
One expert, Mark Yu (President of the CFA Society in the Philippines), explained this to me this way. Consider dividing your portfolio in five equal parts and placing them in different funds, which give the following returns in one year:
Fund 1 — 12%
Fund 2 — 5%
Fund 3 — (-7%)
Fund 4 — (-2%)
Fund 5 — 2%
Overall return — 10% (hey, i didn’t design for this to be at 10%. i just made it up as i went along)
Compare this with just putting your money in one investment. With luck you could have hit 12% if you put your money in fund one, but statistically, there’s one chance in five for that to happen. There is more likelihood you would have placed your money in the others, which meant you would have earned at most 5%, or worse, got a hit of negative 7% for your entire portfolio.
November 16th, 2007 at 12:49 am
Pinyo, thank you for the very helpful replies. What do you think about just putting money in a globally diversified fund and letting the fund do the asset allocation for you? Most people would find it very difficult to keep track of funds from different markets.
on your reply to mikoy, that makes a lot of sense. reducing expenses can have a bigger impact in the long run. inflation will probably eat into the amount of money saved from expense reduction but inflation is much lower, especially in the case of the Philippines, from taxes.
November 16th, 2007 at 12:10 am
@mikoy - reducing any kind of expenses had tremendous impact on your wealth building. If you compare dollar to dollar — i.e., reducing expenses $10 versus earing $10 more (or P10 in your case) — reducing expenses has greater impact. One simple reason is when you earn more you also have to pay tax on the additional income, so equal amount of saving automatically wins.
@anna - for example, my 401k investment (US) involves diversification based on company size (i.e., large cap, mid cap, and small cap), globally (i.e., US companies versus international companies), by industry (e.g., REIT, technology, etc.), and non-equity (i.e., bond). So you can do something like: X% in Philippine stock fund of various size, X% in emerging market, X% in US and European stocks, etc. I highly recommend keeping the expense as low as possible — i.e., use index funds.
November 14th, 2007 at 6:19 pm
@Pinyo..
“You are right about the fluctuation, but it’s possible to get on average 10% annually if you invest long-term using a globally diversified portfolio and asset allocation strategy.”
- sounds complicated.. what do you mean? I do have very little munny in mutual funds.. im just starting to REALLY save
November 14th, 2007 at 5:35 pm
Next trick you can learn is the Rule of 72: 72 / yield% = # years to double your investment. Given the figures above, bonds could double in 36 yrs in real stuff(i.e. beer and pulutan, not depreciating pesos), while stocks could double in just 6.
November 14th, 2007 at 5:29 pm
Very instructive! RE: Inflation, simply shave off inflation from yield and do your projections. Assume 2% real growth for bonds and 12% for equities.
It’s also instructive how consistent, compounded economic growth changes the fortune of entire nations. Japan grew 10% in real terms 1950-1970 - 6.3x growth made them 2nd wealthiest nation on earth. China is now steaming ahead with 10% a year since 1995, imagine their size ten years from now!
November 14th, 2007 at 4:25 pm
hi salve,
i’ve read that another way to reach that million mark faster is to reduce taxable income, legally of course. it’s one of the ways the rich keep getting richer. only a small portion of their net worth is taxable. i wonder how could it be made applicable in philippine setting? is it just limited to those having a business?
November 14th, 2007 at 10:25 am
One Million Pesos sounds good but these days this money could hardly buy you anything, unfortunately. Maybe we should gun for P5-10 million.
November 13th, 2007 at 10:39 pm
Investing in equity mutual funds could easily give you 10% annual return right? Last year Philequity YTD was around 42% but have lower return this year at 19% due to subprime mess.
November 13th, 2007 at 10:22 pm
@anna - You are right about the fluctuation, but it’s possible to get on average 10% annually if you invest long-term using a globally diversified portfolio and asset allocation strategy.
@Jim - Kiyosaki’s book is good for snap inspiration, but he’s lacking in term of practicality and information accuracy.
@Rene - Here’s a post called introduction to CAGR, which show performance of the S&P500 over 30 years averaging above 12%. It hasn’t done as well recently, but I believe it can be done with globally diversified portfolio.
@Pinoy - Yes, inflation is not included to simplify the illustration. Capital gains tax, inflation, and expenses can all eat into this number.
@Bruin8Clap - I have another illustration that shows the impact of inflation, capital gains tax, and currency on my blog.
November 13th, 2007 at 4:43 pm
The table ignores the effect of inflation, which always has to be considered when evaluating one’s investment performance. For example, according the table, it will take 16 years to reach P1,000,000 assuming a 10% return. However, RP has often had an inflation rate of aroud 4.5%. Thus, at the end of that 16 years, the P1,000,000 would be worth a little less than P500,000 today. One should still save, but hopefully those investments outpace the rate of inflation.
November 13th, 2007 at 4:30 pm
Don’t forget inflation. At 6% inflation per yr, a million in 1995 is worth 2 million today and a million in 2017 is worth only 558 thousand today.
If inflation is higher than interest rate, it might be better to keep your investment in hard assets.
November 13th, 2007 at 4:07 pm
[...] Duplito blogs that the first million is the hardest in Money [...]
November 13th, 2007 at 3:08 pm
it’s an interesting table but i think anna is right, the 10% is not realistic. maybe it will benefit everyone if the article also mention what type of legitimate investment scheme can readily give the 10%. i have 2 children under 20’s and it’s worth looking at.
November 13th, 2007 at 1:32 pm
I made my first million when i was 26 years old…but i lost everything at 30. Now, I am starting again to raise a million out of nothing. it’s a tough work to do since I already had it but lost in an instant, as if I died. It turned out to be a good experience after undergoing all those hardships and adversity from all angles, it made me a better person understanding the life’s journey to “top” and how it feels to be at the “bottom”.
November 13th, 2007 at 12:55 pm
Read the Books of Robert Kiyosaki!!!
November 13th, 2007 at 11:42 am
or maybe starting with P100 in the casino on a winning streak with double or nothing bet. first winning totals P200 then P400 next P800 and so on. after 20 straight wins, much do you accumulate? it’s P105 million for the evening.
November 13th, 2007 at 10:44 am
Wow, seeing it presented in a table like that is really inspiring. I’m starting six years late but what the heck..
We just have to be a little more realistic with the interest rate.. we don’t really get that much (10%) on regular savings, and earnings on mutual funds and stocks fluctuate. Sigh.