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!
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!