Million would change someone’s life.  Several million everyone’s.

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How to earn $1 million? 1

If you earn a million dollars that will change your life for sure. But how to earn a million? Is that amount enough for some changes?

On some point in life, everyone asks themselves how much money would dramatically change their life.

It can be a tricky question but also a subject of serious consideration.

We all know some story about lottery winners and how much money they got and how fast they spent all. Easy come, easy go, some may say.

Million would change someone’s life.  Several million everyone’s. Remember, everyone’s.

Most people won’t see a small part of that money in their lifetimes. Some of us play the lottery and have a hope that one day the luck will hit us. That a dream and there is nothing bad in having dreams.

But what can we do in reality? How much money would you consider “life-changing”? This question is worthy of economic consideration. 

If you suddenly earn $1 million more economists say not as much as you might think.

You have to pay taxes on it and for sure you have some loans and outstanding debts to pay off. Speaking about me, if I were to win $1 million tomorrow, I’d definitely still keep working at my current job. One million bucks are not enough to change my entire life. Or anyone else’s. Maybe I’d spend a little bit of a vacation, and then I’d put the large amount of it in savings.

Actually, it isn’t so hard to earn millions

But let’s take a look at how much money is needed for a month of decent living.

Most of us are spending as little as possible and saving as much as possible. But this isn’t the point. Point is to set realistic goals and understand your own financial position.

How to earn $1 million?Start with this number. Do you know what your life costs right now? Do you have a mortgage or you pay rent? How much do you spend on essentials, from food to clothes to insurance to annual fees, every month? And don’t forget to account for inflation over the long term.

Then you have to figure out how much it will cost you to get out of debts, from balances carried on personal credit cards to car payments to student loans. The first number figure that would change your life is the amount it would cost you to pay off all debt on depreciating assets. That’s your first number.

But your debt on depreciating assets isn’t an investment. Your car for sure will not get more worthy over time. It will not increase its value. That why this kind of debt is classified as bad debt.

Let’s go further to earn a million

Now, you have to figure what is the amount of money that you would need to pay off all debts on appreciating assets. It’s classified as good debt, because underlying assets like house or land, tend to increase in value over time.

But you’d still probably have to work to maintain your lifestyle. The third number is the amount it will take to produce little more than you need every year without touching the principal of your investment. That’s the third number.

Anyway, you need at least $50,000 a year to maintain your lifestyle. You go out to eat, take a vacation, buy new shoes, and pay your property taxes.

How much capital do you need to invest to generate $50,000 every year after taxes and inflation?

How to earn $1 million? 2Let’s say you don’t want a risky investment, so you rather stay away from stocks. If you put your money in bonds, you might get a more stable return. If you looked for municipal bonds, you probably wouldn’t have to pay federal or state taxes. Suppose you can find a good portfolio of municipal bonds paying a 4% annual return. That’s an acceptable rate and a safe investment and probably even avoids taxes. For that $50,000 you need a principal amount of $1.25 million dollars. 

Let’s say you can save an extra $15,000 per year if you pay off debt on depreciating assets in one leap and $18,000 per year on appreciating assets. And you have no debt for the next 40 years. WOW, you would have $1,320,000.

A million is a lot of money, but it’s also not an unreasonable amount of money.

It’s not lottery jackpot money. If you work hard, save well, and invest well, that amount is within your reach during your lifetime.

To make things clear, it is so fun to have dreams. But this doesn’t have to stay as a dream. 

Creating a million dollars in one shot to do everything may never happen. But what you can do? You can make progress onto all three goals. You are the one that has the power to change your life and your financial future.

But where is dramatic life change? Stop watching movies.

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