How did you save one million dollars?

I was talking with the grounds keeper at a golf course who said he knew he lacked the social skills to be a good manager (and climb the corporate ladder). I said that he had at least named the problem correctly in that he didn't call it social intelligence or social talent (both of which don't exist) but social skills and the word skills implies simply that they are things we are taught and solely based on the quality of our teachers (mentors, coaches, etc). And yes, kids show signs of good teachers quite early. Some people say standardized tests don't measure anything real but they're real enough to identify which teacher High School students had in Kindergarten (because it makes a difference just as good parents make a difference). There are a saving skills we could all benefit from learning.

Now, making a million is much easier than saving a million. I remember the day I called my mom and told her that was specifically the day I had earned my first million. Most everyone does it ($25,000 for 40 years is a million dollars) – many do it more than once. But, few ever save a million. It's not that hard, however. About 80% of America's millionaires are first generation wealthy. Moreover, more than half of those have never received even $1 in inheritance. Here are a few guiding points that can help you (adapted from Drs. Stanley and Danko's Millionaire Next Door, 1998):

1) Spend less than you make - in fact, always save 20%

It is well documented that money in America has a strong preference for certain ethnicities. For example, over one in five Scotch Americans become millionaires likely as they are the least free with their money (well, being scotch - please excuse that non-PC joke). Any K-12 teacher saving 20% and investing wisely could have over $2 million in savings when retiring. It is always more important to learn to spend less than to learn to make more -- without this, earning more won't help. Bankrupt movie stars, athletes, and business executives have become but a sad cliché. Most advice gets this backwards. One common way Americans fail is by buying too big of a home (while Warren Buffett still lives in his first middle-class home). Stanley reported (1996) the typical millionaire paid less than $400 for his most expensive suit (dressing for success being a myth) and less than $25,000 for his or her most recent car (likely a Ford)... just $3,000 more than the average American spent. Be honest, we all could be more frugal.

The reason you want to get your kids to start saving as early as possible is not because they need the savings but because they need the skills and good habits. My favorite place for kids to do this is Smartypig. It's about saving for something particular, pays better than any savings account, includes social tools for kids to communicate savings goals to other family members such as emails to grandma (who can use her credit card, say, for a birthday donation towards a game console) and allows withdrawals in gift cards with discounts for extra savings. Unfortunately, businesses are providing fewer benefits as a way to cut costs (when they, like you, should be more focused on better investing - see rule 3) and this includes reduced availability to 401k retirement plans and while the EBRI found more than 70% of those with available workplace plans participate, only 5% fund an IRA when a workplace plan is unavailable. Put another way, lower and middle class workers are 16.4 times more likely to save for retirement when they have access to workplace retirement plan. This means there is currently an increased need for more disciplined saving habits in Millennials.

2) Give less than you make - abandon uneven relationships

About one in five Russian and Hungarian Americans become millionaires perhaps due (besides their strong entrepreneurial spirit) to not being so overly free with their affections. Another common way Americans fail is by throwing good money after bad on a family member (about a third of those ages 25-30 today still live at home) or friend. We are often excessive givers, whether due to some ill conceived prosperity doctrine or just not being able to say no. Many of us work at jobs where we're underappreciated. Most people believe Jesus said to love all our neighbors, but He didn't. The Good Samaritan parable answered who exactly is our "neighbor." Christ stated it's not the "Priest" (or those who are the most pious; He later said to throw out any hypocritical or tasteless "salt of the Earth") and it's not the "Levite" (past heroes who may receive and understand mercy) as it is only those, even a rejected for sinning "Samaritan," who are able to show mercy today, when it matters, whom we should love. Similarly, 154 million "de-churched" Americans no longer waste their time at modern churches too often out of touch and irrelevant to their lives. And finally, 60% to 80% of divorces are initiated by women (and an amazing 90% for college graduates - or ten times the rate for college educated men) likely due to there being so much money in it (with over 90% of child support dollars going to women). So, choose carefully or skip having a family altogether (a depressing reality these days for guys in America as per Dr. Helen Smith's Men on Strike: Why Men Are Boycotting Marriage, Fatherhood, and the American Dream - and Why It Matters, 2013).

I believe one of the core problems here is that children are not raised to think for themselves or to know who they are (and those aiming for nothing tend to hit it). To be "true" to oneself, one needs admirable goals, a clear understanding of where one will and can stand, a process of honest and objective review, and a day-to-day plan for how to get things done and paid for. In business, these ideas are formalized in a Mission statement of what you plan to do (an unidentified soldier in WWII who could not clearly state his mission was automatically shot), a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), a Marketing Plan (updating it at least quarterly), an Implementation Plan (with good time and resource performance metrics), and a Financial Plan (with a Working Capital Policy). Children should spend time on such efforts. But, these concepts can carry a real punch only when they are based on a strong and legitimate vision ("where there is no vision, the people perish" Proverbs 24:18). Every primitive society insisted on some sort of Vision Quest before one could be considered a truly valuable member. We need to get back to the basics.

A vision is a brief statement of one's to-be bucket list (who to be before kicking the bucket) for a continuing focus on quality, relationships, heart, and principles. It's backwards (just like learning to make money before learning to save money) to ask kids what they want to do when they grow up before asking them (and helping them know) who they want to be. Dr. Senge showed change can only come from personal mastery (especially of math and the scientific method too often lacking in our failing education system) mixed with reflective conversations (using say mirroring or a 6-Sigma team charter for accountability), a strong and honest vision, as well as a systems based worldview. Dr. Senge said, "That's when presence occurs. We shift from repeating past patterns and mistakes to transforming an emerging future." This starts, as Daniel Gilbert points out in Stumbling on Happiness, with always being unhappy with the world and thus striving to change it (also see What Makes You Brain Happy and Why You Should Do the Opposite by David DiSalvo). In business, a Value Statement is about the things more important than making money. For the individual, it's what more important than living. We must raise our kids never to sacrifice or negotiate their values (and not your values but their values - which means they need to know themselves). Warren Buffet has said while others look at the changes needed in the world and ask "Is that possible?" - he only looks and asks "Do I care?" Marva Collins had her 2nd Grade class (who were all working at a 6th - 7th Grade level by the end of the year) start by reading Emerson, Shakespeare, and Plato (here are my notes: Conscience And Self Reliance). Accelerated living is easier after discovering principles.

Times when we are decatergorized (feeling we've lost our feeling of belonging - zebras have obnoxious stripes to become invisible in a herd - such as I'm an engineer, rebel, Christian, and information maven), derealized (feeling we've lost our ability to test for truth - lacking sufficient critical thinking skills), and depersonalized (losing our persistent belief in moral love or "faith") are when anyone would feel socially phobic. These three metrics define a balanced identity based on personal answers to questions from "How do I fit in?" to "How am I unique?" Estimates vary, but up to 3 out of 4 say they understand what being depersonalized feels like (no longer feeling unique). Over half of combat troops return home with a distorted sense of self such that he or she no longer feels like themselves. Every Seventh Grader should be able to answer these three questions as well as, for example, explain their look (or clothes), their favorite music, and their best friends - but most importantly, their heroes (for me, it was Mary Poppins and Serpico for the ability to turn any job into a game and willing to sacrifice everything and everyone for morals... that personal values must always come first).

3) Your best investment is yourself

Education truly is a "silver bullet" for all that ails you. A college degree is called the Million Dollar Gift as it typically provides one more than a million dollars ($1.2 million on average) in additional lifetime income (of course, it should be a degree in something that's marketable). The real disparity in American is the respect available for education (see The pivotal role of education in the association between ability and social class attainment: A look across three generations). I have degrees from both an Ivy school and one that is clearly not. The alumni of the Ivy school likes to pretend their success comes from being smarter and the alumni of the lower quality school likes to pretend that where you get your education doesn't matter. So, did you know many top "for-profit" schools (Harvard, Yale, Stanford, MIT, etc.) provide free tuition for those from families making less than $60-$75,000? Did you know a minority of students are accepted into college just on grades (good thing for me)? And, did you know there's about $16 billion in financial aid and that little of it is merit based? Such support includes financial aid based on lottery (or dumb luck), being left-handed, as well as for unpopular professions (like being a Physician Assistant in the Midwest).

Then, it is said the "rich" plan for three generations while the "poor" only plan for the weekend. Good advice from (the otherwise useless) Rich Dad Poor Dad is to build a financial plan (with a professional planner) and then do it again. A personal Financial Plan (ideally started before entering High School) should not be about "getting rich" but to primarily just help identify what's important to you. In addition, it's difficult to improve what you don't track. I asked my youngest once if he wanted to save for college and he looked at me like I had asked him to watch grass grow, "Yea, sure." Then, I asked him if he would like to pick the investments. His eyes lit up and he exclaimed "Can I do that!?!" After that, he preferred Morningstar reports to playing the XBOX with his friends. Make an appointment with a professional financial adviser and open an empty Educational Savings 529 Plan. Then, make appointments for just your child and each time give him or her say $500 to invest. Note most 529s accept "third-party" contributions. I think advisers / banks should have 529 classes where only kids are allowed (but unfortunately, no one does this as far as I know). I personally missed a formal education in sales and negotiation. Everything is always negotiable... and, life is in no way about getting what one deserves but only what one can negotiate. Paul failed at an apostle until after 20 years selling carpet. Every child IMHO should have experience in sales (including simply selling stuff on e-bay).

Assuming the wealthy teach these three important lessons to their children, who are only financially successful in about one in five (less than all Scots, Russians, and Hungarians in America), then perhaps becoming a millionaire comes from but these lessons and is not dependent on any special privileges or advantages. Did you know immigrants are 3-4 times more likely to become millionaires than native-born Americans? How about that immigrants comprise 41% of the student population of Ivy League schools, yet only comprise 11% of the population in the U.S? Moreover, 55% of PhDs awarded in American colleges go to foreign born (Dr. Wulf, President, National Academy of Engineering, 2005) and 60% of the top science students and 65% of the top math students in the U.S. are children of immigrants (Wikipedia). If the average immigrant has fewer connections, less inheritance, less understanding of our culture, and may not even speak the language, but can take the opportunities provided in this country and go from nothing to millions at four times the rate for any native citizen, what is their advantage? Might this be due to the fact that immigrants are twice as likely to be Catholic (and better educated)? The lesson from this may simply be participating in a supportive community (like Catholicism) really helps.

It seems like there are as many definitions of financial planning as there are advisers. A complete financial plan starts with a full listing of your goals and values, identifies your priorities, reviews your current expenditures, reviews alternatives, develops appropriate strategies and solutions, takes the needed actions, and maintains a constant review of everything. But, that is beyond the scope here. Now, before Warren Buffett was a top earner, he learned how to be an Olympic class saver, saving the equivalent of $70,000 in today's money while paying the tuition and expenses of college. So, let's talk about the most basic aspect of a financial plan... a home budget.

Most people have a single checking account for all of their Bills and Spending. This could be called "traditional BS money management" (ha ha). In such a system, if you don't spend all of your cash, the "extra" money might get saved into a simple savings account. This is problematic in a variety of ways:

1) Does not formally plan for periodic expenses or an emergency reserve

2) Balancing out $$ and in $$ can drive you to spend everything you make

3) You feel constantly unsure about where your money's going

4) Your priorities end up backwards -> Spend first, save second

When you normally think of saving, you focus on not spending $$ on what you want. You think of yourself as on a financial diet where you're only working to deny yourself things. This is never fun. So, let's try something different.

First, I would start by suggesting you open two checking accounts and two savings accounts. This didn't use to be possible in the U.S. (with a single SSN) but now most banks allow it. I would have your paychecks deposited into your first savings account. Then, automatic transfers can put set amounts into your second savings account, which we will call your Opportunity Account (for your 20% savings) as well as into your two checking accounts. One checking account is for periodic expenses such as your mortgage, debt payments, etc. (automatically paid). This is you Bill Account. The other checking account is for discretionary expenses (ones that vary) such as gas, food, and entertainment. This is your Fun Account. Your monthly goal is to spend every dollar in your Fun Account. You can do this knowing your bills and savings are taken care of. If an unexpected bill appears, take the money from your Opportunity Account. You'll just unbalance your budget if you take it from anywhere else.

The problem with traditional debt management within traditional BS money management is that unexpected expenses make it harder to ever dig yourself out from under your bills. It likely feels like you can never get ahead... because you don't. Therefore, you must save even if at the expense of not paying down your debt faster. If you have debt, you should create a budget that sets aside a monthly amount for that debt after saving (negotiated with whom you own money - I dislike debt counselors, like CareOne Debt Relief Services®, as their advice is not always in your best interest, but they serve an important service, if you don't, say, add your cheap debt into their consolidation loan). Then, that savings can be your most valuable resource to avoid falling back into more debt. If you still can't seem to stay within your budget, setup your Fun Account in cash. Studies show people have less resistance to using credit cards and checks as to spending cash. Finally, write down everything you buy (at the very least just to spend more time and thought on each and every purchase) and then review your current expenses for surprises as well as areas you know you can cut back (to detail how much). Common hot spots include TV and cell phone contracts as well as eating out. The lifetime expense of a medium sized dog is $16,000 - what message are you sending when effectively taking that money from your children's college fund?

Example Expense and Income Worksheet:

Housing Monthly Annual

Mortgage / Rent

Extra payment on principal

Homeowners Insurance

Property Taxes

Homeowners Association

Equity loan / Line of credit


Natural Gas



Cable / Satellite TV


Cell Phone(s)

Internet Service

Home Improvements / Maint

Appliances / Computer

House / Carpet Cleaning

Gardening Service


Gardening Projects

Pool Maintenance

Pest Control

Pet care


Total Housing

Child Care Monthly Annual


Diapers / Food


Activities / Sports / Hobbies

School Expenses

School Clothing

Child Support

Allowances / Other

Total Child Care

Transportation Monthly Annual

Car payment 1

Car payment 2


Maintenance (oil, brakes)



Parking / Tolls

Detailing / Car Washing

Inspection / Tags

Toll Roads

Train / Subway / Bus Fare


Total Transportation

Food and Beverage Monthly Annual



Snacks, etc

Dining out

Total Food and Beverage

Clothing Monthly Annual

New clothes

Dry cleaning



Children's clothes

Accessories Jewelry

Total Clothing

Furnishings Monthly Annual

New Furnishings

Cleaning/ repair


Total Furnishings

Personal Care / Cash Monthly Annual


Manicures / Pedicures


Pocket money / ATM

Hair care products

Total Personal care

Medical / Dental Monthly Annual

Health Insurance

Co pays


Non-covered expenses


Total Medical/Dental

Education / Self Improvement Monthly Annual


Licensing / Credentials



Coaching / counseling

Total Education/self improvement

Debt / Installment Payments Monthly Annual

Credit cards

Store charge cards

Personal Loans

Student Loans

Other debt

Total debt/ installments

Entertainment Monthly Annual

Alcohol / Cigarettes

Gambling / Lottery

Movies / Video Rentals

Theatre / Concerts

Social Groups / Club Dues

Hunting / Fishing / Camping

Magazines / Newspapers

Sports / Golf / Hobbies

Total entertainment

Vacations/ Holidays Monthly Annual

Vacation Travel

Holiday Travel

Outdoor Activities

Weekend Get-aways


Birthdays / Other gifts

Total vacations/ holidays

Charitable Contributions Monthly Annual

Place of worship


Other Non-profits

Total charitable

Additional Expenses Monthly Annual

Life Accident Disability Ins

Long Term Care Insurance

Care for family members

Education for grown children


Bank Savings / HSAs

Retirement Plans / IRAs

Total additional expenses

Grand Totals

Annual Expenses =>

Family Income

Client A Gross Salary

Client B Gross Salary


Social Security

Defined Benefit

Alimony / child support

Rental Property

Other Income

Lump Sum

Total income

For one final lesson, do you know who in 1923 was:

1. President of the largest steel company?

2. President of the largest gas company?

3. President of the New York Stock Exchange?

4. Greatest wheat speculator?

5. President of the Bank of International Settlement?

6. Great Bear of Wall Street?

7. The Secretary of Interior in President Harding's cabinet?

8. President of the company whose stock was one of the most widely held?

9. President of Thomas Edison's General Electric?

These were some of the world's wealthiest men. Do you know what became of them?

1. The President of the largest steel company, Charles Schwab, who worked his way up from an entry-level job in an Andrew Carnegie steel mill at age 17 to become president of Carnegie Steel at 35, lived his last years on borrowed money.

2. The President of the largest gas company, Edward Hopson, was a New York utility regulator who later turned AGECO in one of the country's largest utility holding companies, largely through fraud, served time in jail, lost his fortune, and died institutionalized at 67.

3. The four-term President of the N.Y.S.E., Richard Whitney, was a poor manager of his financial affairs, fell into great debt, and in turning to embezzling, well only served 3-years in jail (in law, like everything else, you get what you pay for).

4. The greatest wheat speculator, Arthur Cutten, left home at the tender age of 18 to find work as an entry bookkeeper but saved enough to buy a seat on the Chicago Board of Trade and eventually became one of American's richest, whose dealings may have been one of the key causes of the great depression, died at 67 without ever standing trial (in law, like everything else, you get what you pay for).

5. The President of the Bank of International Settlement, admitted to the bar despite not ever holding a legal degree, was awarded the Distinguished Service Cross for his volunteer war service, shot himself to death (many studies have connected insanity with success – how come no one recommends that path?!?). Alas, 120 GWII veterans kill themselves every week. Other ways soldiers self-destruct include depression, isolation, and chronic anger.

6. The Great Bear of Wall Street, Cosabee Rivermore, also died of suicide (see above note).

7. Secretary of the interior in Harding's Cabinet and personally very wealthy Albert Fall was first a senator from New Mexico was implicated in the Teapot Dome oil fields scandal and charged with defrauding the government, jury tampering, and taking a bribe. The $100,000 fine was never paid and his jail sentence never served (in law... well, you know).

8. Ivar Kreuger, the "Match King," was a Swedish businessman who built his company on completely fabricated assets ($250 million) and ended up shooting himself (although rumors persist that his death was a case of murder).

9. Samuel Insull served as Edison's private secretary and ended up running the company but due to poor investments lost $3 billion in utility holdings and later died abroad after facing charges of mail fraud and embezzlement in a Paris subway with only twenty cents in his pocket.

We should never obscure the idea that misery, greed, and bad deeds (just like good things) are well within the capacities of us all, not merely a few "bad apples" (but only those with incompetent attorneys typically need pay for them, ha ha). Thus, we need more formal systems of accountability. For one thing, we could really use an agency for testing ideas (like the FDA tests food). We have such a thing in education in the US. It's called The What Works Clearinghouse. But, we completely ignore it's findings as well as the law that requires us not to. Evidently, we lack the love and morals necessary to do the right thing. Morals, though, are again just another name for skills. Those who know what the "right" thing is are naturally more likely to do it.

50 years later, when all the above men had failed, every top golfer from 1923 was still playing and enjoying life. Being rich is MORE than just having money. But, we're failing such a lesson. For example, America, the richest country on earth, has shorter life spans, more mental illness, more obesity, and more of its citizens in prison. "Spiritual inequality is now as great a problem as material inequality, perhaps even greater" (Fogel, Nobel Prize winner in Economics, 2002). When my parents got married, they made a shared decision about exactly how much money their preferred lifestyle would take and what such a choice would likely require. Such a conversation should be a standard for pre-marital counseling AFTER every teenager has made such decisions on their own. Everything can be converted to $$ as a basis for comparison... such as would you have sex with a stranger for a million dollars? Every child should be raised to recognize such questions and to know there are usually better ways to raise cash. Poor choices are typically made when feeling trapped and without options. No society should ever allow any of its members to feel that way (no moral society would). In more equal societies, people more likely trust each other (Eric Uslaner and Mitchell Brown, 2002), demonstrate greater tolerance (Andersen and Fetner, 2008), exhibit better health (Richard G. Wilkinson, J. Lynch, and G.A. Kaplan), with measures of greater social capital suggesting greater community involvement (Putnam, Leonardi, and Nanetti 1993, Putnam 2000), and homicide rates are consistently lower (Daly et al., 2001). See "The Spirit Level." It's not that just the poor end up worse off, but economic (in other words, spiritual) disparity always leads to worsened conditions for the entire population.

Too often, people just don't know about existing programs for free education, homes, and finding employment, or better employment. Then, there's foolish pride (lacking lessons on the value of failing well). I've heard single mothers successfully argue a school's science fair to death based solely on their embarrassment of having to face their child asking for help. Giving them a web site and phone number for a free tutor to come to their home or school didn't matter... IMHO they just didn't love their children enough. It's also the only reason we yell at our kids for poor grades despite it being well documented (over 50 years ago) that they have no input to their grades at all (Google Pygmalion Effect). There are more than enough mismanaged resources, personally and globally, for all of us to be rich. We just all obviously still have some work to do. The final lesson is: LIFE PHILOSOPHY AND BEER.

By *not* spending it.

If you multiply your salary times 40, you will probably find that you're going to be paid more than $1,000,000 in your lifetime. You can *not* spend $1,000,000 and still have money left over.

Of course, that's not the easiest way to get to $1,000,000 in savings -- compound growth means that a dollar you invest today might be worth 7 dollars or so at some point in the future.  I'm 44 and my investments just about equal the total sum of every paycheck I've ever earned.  Think about that.  How is that possible?  I invested young (and middle-aged, ugh) and it grew through stocks and bonds.

But it didn't happen automatically -- I had to make a point of living on less than I earned.  Short of winning the lottery or an inheritance, it's the only way.

It's hard to "save" one million dollars.  Easier to EARN one million dollars.  And you do that by earning a good salary, not spending more than you earn, investing well and not living beyond your means.  It takes time.  No one earns wealth over night unless you win the lottery or marry well.  Manage your money well and you can achieve that level of wealth.  Just don't expect it over night.

Easy.  Save $1 the first day, $2 the second day.... :)

It can be VERY VERY hard.  The more money you have saved, the greater the urge to spend it.  It takes a LOT of self-discipline to save $1,000,000 and NOT buy a Tesla.  Therefore, my solution is to get an assist in self-discipline:

Max out your 401k.  Withdrawing money from 401k means paying extra taxes.  That is akin to being rapped on the knuckles.  Also save by paying down your mortgage.  Makes it harder to access the savings...

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