The Second Million Is Easier

[Bryan Hancock]

I read this article today on Investopedia:

Why The First $1 Million Is The Hardest

A couple of points in the article stood out to me and I figured some folks on BP may have some opinions about them:

1.  Extra Wealth Means Extra Options - In other words if you're an accredited investor you can literally invest in things other people can't.  Even with Title IV I don't see this going away any time soon because most promoters will still continue to use other exemptions

2.  Risk Aversion - Those with more chips to play don't have to worry as much about losing some of them.  Since risk and reward are positively correlated and linked the risk aversion at the low end of the wealth spectrum is an impediment to the growth needed to make the first million

Other points in the article abound in other places like it is literally easier mathematically to make the second million because of the power of compounding and the fact that the percentage change for each subsequent million is lower.  

Any thoughts on the items above?  Agree?  Disagree?  Does this same reasoning apply to folks on BP who may generally understand you can take MORE risk when you are worth less because you have less to lose and longer to correct mistakes if you're young.  

[Steven G.]

Yep, that is very accurate. I have been there / done that myself.

I think the hardest part of making your first million...is when you have a standard, 40-hour a week, middle class job and you have a wife and/or kids a home. In that situation, you have to work around your job's hours on the weekends and evenings building passive income...say with real estate or a small business...to build yourself up enough cashflow to replace your monthly (job) income. That can be hard! Most folks don't realize you'll need to work 60+ hour weeks for a while, sometimes years, and have a very supportive family to get where you need to go. 

Once you detach from that job, and you are financially free...aka you are living off the income from your assets AND you can set your own schedule each day...that's when things get moving faster. By having a full 40+ hours a week to focus on your business, real estate, etc...you begin making a lot more earned income, to in turn put into passive investments which generates more passive income, and before you know it you're a millionaire. 

And then bam, you do it a 2nd time - but a lot faster than the first time.
 

That's the basic reason why the rich get richer, despite the fact the economy is good or bad, simply because they have lots of assets that consistently generate income...and they live on way less than they earn. They cannot get layed off, fired, etc from their job - as they own their own job. And when you live off just say 10% of what you make...damn...you cannot do anything but get richer, irregardless of economic ups & downs (with exception to maybe the great depression).