The Math To Becoming a Millionaire in 10 Years—And Hacks To Do It in Five

Given enough time for investments to compound, anyone can become a millionaire. No, really. Someone earning minimum wage could invest $187 per month and become a millionaire after 40 years of investing at 10% returns. 

Of course, waiting 40 years to join the two-comma club doesn’t sound like much fun. So, what does it take to reach a seven-figure net worth within five to 10 years? 

That’s the kind of question that gets my blood pumping. And while it’s not easy per se, it’s absolutely doable for the average BiggerPockets reader.

Here’s how.

The Math of Becoming a Millionaire

Two factors impact how quickly you can reach a $1 million net worth: the amount you invest and the return you earn on those investments. 

So, I crunched the numbers for monthly investments between $500 and $10,000, at returns between 6% to 14% annually. After 10 years, you’d have this much money at each combination:

These numbers assume you’re starting from scratch with a $0 net worth. You probably have more than $0, so it will probably take you less time or money than outlined here.

I assumed quarterly compounding in these calculations. Annual compounding results in slightly lower numbers, while monthly or weekly compounding results in higher numbers. 

At a 12% average return, it would take a monthly investment of around $4,350 to become a millionaire in 10 years. At a 14% return, it would take around $3,875 per month. 

But are those returns realistic for experienced real estate investors? 

What the Average Investor Earns

Since its inception in 1926, the S&P 500 has averaged a total return of around 10% per year (including dividends, which comprise around 40% of the S&P 500’s total return). If you look at narrower periods, stocks may look slightly better or worse, such as the 11.53% average stock return from 1978-2022. But if you just parked money in the SPY index fund mirroring the S&P 500 and left it there for a few decades, you could probably expect around 10% total returns. 

Sadly, the average investor doesn’t earn anywhere near that. 

In one study by OneDigital Investment Advisors spanning 1996-2015, the average investor earned a measly 2.1% annually. During the same period, the S&P 500 earned 8.2%. 

Another study by DALBAR from 1992-2021 found that the average investor earned 7.13%, compared to the S&P 500’s 10.65%. Lest you scoff at that difference, consider that the average investor would have ended with $800,000 compared to the S&P 500’s $2 million over that period if each invested the same amount.  

Why does the average investor perform so poorly when they could just invest in index funds and earn reasonable returns? Because people are emotional and irrational. They panic sell when they should buy and chase returns after good runs—right around the time the market corrects. 

All this means if you want to become a millionaire within 10 years, you need to invest better than the average Joe.

Boosting Returns With Real Estate

Don’t get me wrong: Stocks make up a critical part of any portfolio. But you need to set them and forget them, ideally with a robo-advisor that just automatically invests part of every paycheck. 

Get that right, and you can potentially earn 8% to 12% on average from your stock investments.

With real estate, you can do even better—if you know what you’re doing. That’s a big “if.”

Experienced rental investors routinely earn 8% to 10% cash flow yields, plus another 2% to 5% on appreciation. Add with leverage, and they may do even better. 

An investor following the BRRRR strategy could theoretically earn infinite returns. They can recycle the same down payment over and over, adding passive income streams with each property. There’s no limit to the returns they can earn, reinvesting the same $50,000 repeatedly. 

I personally no longer buy properties directly. But I can still get similar benefits from passive real estate syndications. Sponsors can refinance just like individual investors and return capital to you. You keep your ownership interest in the property and keep collecting cash flow, even as you get your initial investment back, and can recycle it into the next deal. And the next, and the next.

In SparkRental’s Co-Investing Club, we aim for 15% to 30% annualized returns on all passive real estate investments. We vet deals together as a club, spreading small amounts of money across many different sponsors, deals, regions, and property types. 

Don’t forget the tax benefits that come with real estate investments. Those group real estate deals typically show an on-paper loss on my tax return, even as I collect cash flow in real life. Sure, when the property sells, I’ll get a tax bill on the capital gains—but I can offset that by simply investing in a new syndication deal. Investors call this a “lazy 1031 exchange.” 

Keep doing that, and you can kick your tax bill down the road indefinitely, all while building wealth fast. 

Between my stocks and real estate investments, I expect average returns of around 12% to 14%. 

Hacks to Boost Your Savings Rate

High returns mean nothing if you don’t have money to invest. To become a millionaire quickly, you need to invest a high percentage of your income. 

Start by reducing or eliminating your housing expenses by house hacking. Whether you house hack with a multifamily property, an ADU, with housemates, an Airbnb, or rent-out parking, you find a way to make it work. 

You can also consider moving to an area with a lower cost of living. My family and I spend most of the year in South America, enjoying a high quality of life at a low cost of living. 

Consider getting rid of a car as well. The average cost to own a car for a year is a shocking $9,282, between maintenance, insurance, gas, and, of course, car payments. My wife and I dropped from two cars to one in 2015, then one car to none in 2019. 

I don’t miss driving one bit, and I certainly don’t miss the cost. Yes, it requires getting intentional about where you live. But we all need more intentionality in our lives. 

As you boost your savings rate, strange things start to happen. Savings beget savings. For example, my wife and I aim to live entirely on her salary and benefits and invest all of my income. If one of us were to die or become unable to work, the other could continue covering our family’s living expenses. That means we don’t need to pay for life insurance or long-term disability insurance—which leaves us more money to invest. 

Likewise, because of the savings we’ve built up, I can weather the ups and downs of working for myself. I don’t need to buy work clothes or commute to an office, which saves us even more money. 

Higher savings rates mean more money to invest in tax-advantaged accounts, reducing our tax bill—which saves us even more money. 

Build a strong financial foundation. It’s hard work at first, with few visible results. But as you build momentum, you create a virtuous cycle of saving ever more money and building wealth faster. Try these ideas for even more ways to save money. 

Do You Need $1 Million?

Depending on the lifestyle you want to live in retirement, you might want seven figures of retirement savings. But be careful about throwing around the word “need,” as it’s an instant recipe for anxiety. Even among retirement-age (65-74) Americans, the median net worth is only $224,100. 

Now, forget all about retirement and do a thought experiment with me: Consider that you can start living your ideal lifestyle right now, and you don’t need a million dollars to do it. 

I’m not a millionaire yet. Yet I still get to spend most of the year traveling overseas, visiting multiple countries every year, and doing work I love on my own terms. 

I’ve interviewed dozens of people who retired early with real estate. They all went back to work because, after the initial fun, they got bored sitting on a beach sipping margaritas. 

The difference: They went back to work on their own terms, doing their ideal work.

So the question becomes, “What’s my ideal work?” You can then determine how much it will pay and whether you feel ready to make the switch now. That might mean a new career, a new job in a similar field, or switching to part-time or remote work.  

Even if your ideal work pays significantly less than your current work, you can get intentional about cutting expenses that don’t drastically improve your happiness. Or, if you’re not ready emotionally, you can build a little more passive income first. 

Either way, stop thinking in the traditional terms of retirement. Start rethinking financial freedom and building a life that you’re actually excited about, work and all. Your retirement savings will come together because you have an eye on it. Focus more on living an intentional lifestyle, and the money will follow. 

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.