Becoming a millionaire without inheritance, is it really possible?
Here is a question that we have probably all asked ourselves one day: can you become rich from scratch? Of course, without starting inheritance and unless you win the lottery, it doesn’t happen overnight.
Nevertheless, it is possible to become a millionaire, provided you are careful, patient and hardworking. Because it is indeed a painstaking job that awaits you to fulfill your goal of one million euros.
We don’t have a ready-to-use recipe, but several ways to give you to enrich yourself day after day and build up your assets…
Why is the notion of millionaire synonymous with wealth?
For the French, having a million euros means being rich and no longer worrying about everyday life. However, we must not confuse the notion of income, what we earn through work, with the notion of heritage, what is available.
Indeed, a high-ranking executive with 8,000 euros in monthly income is considered rich. However, if he loses his job overnight without having put aside, without having invested, he will have no more resources after his unemployment rights expire.
And during this period, he will have had difficulty paying his 3,500 euros mortgage for his triplex in Paris, the bills for his sports car and his bills of all kinds. His lifestyle will have diminished, and his savings will be drastically reduced.
Admittedly, this painting is a bit caricatural, but it is not far from reality. Income does not make wealth unless it is passive and automatically generated. To be rich, you have to put aside.
And if we are talking about this famous million, it is simply because it is the threshold that we have in mind for the former ISF Impôt Sur la Fortune, now replaced by the IFI Impôt sur la Real Estate Fortune.
Be that as it may, the notion of wealth is defined in relation to wealth, and 1% of the richest French people have wealth of more than two million euros. Wealth, on the other hand, is defined by financial assets and real estate owned.
The 3 essential rules to become a millionaire
There is no secret, and as we have seen in the previous paragraph, becoming rich is not without effort. Three essential rules must be followed to the letter to achieve this
1 – Save
Whatever your income, to become rich, it will be imperative for you to put aside, by saving each month a part of what you earn. Of course, the more money you earn, the more you will save.
It should be noted that the savings effort must be regular, one-off payments being insufficient to make your capital grow healthily. For this, it is recommended to be satisfied with the essentials and to avoid superfluous expenses.
2 – Invest in financial assets
Savings should not be invested in simple bank books, but in financial assets with a significant leverage effect, such as the stock market, via savings products such as the PEA Plan d’Epargne en Actions, the PER Plan Retirement savings or even life insurance. These allow you, in addition to the prospect of earnings, to benefit from a particularly attractive tax system.
A regular down payment with a diversification of your asset portfolio allows, in the context of a long-term investment, to significantly increase its initial capital, even if temporary downward fluctuations can be observed from time to time. .
3 – Invest in real estate
The adage is clear, you should not put all your eggs in one basket. So, if the savings capacity is necessary to invest in financial assets, we must not neglect another leverage effect, namely bank credit. This allows you to invest in real estate thanks to your debt capacity, without harming your savings.
We therefore focus on rental investment without contribution, taking advantage of a mortgage financing the operation at 100%. In this context, it is of course necessary to maintain an acceptable debt ratio. The LMNP Renter in Non-Professional Furnished or Pinel schemes are ideal for getting started, as are “paper stone” schemes such as the SCPI Sociétés Civiles de Placement Immobilier, which allow you to benefit from attractive returns without being subject to the constraints of ownership.
Ways to achieve the millionaire goal
In order to be able to save and to be able to borrow without difficulty, it is necessary to opt for a reasonable lifestyle, the cicada side should therefore not take over the ant side.
Increase your income
In addition, to increase your income, it is necessary to make coherent choices, either by pursuing a career in the most remunerative professions, or by creating your own business. Note that the second solution is more uncertain, but may prove to be judicious in an area of expertise that you master.
To get an idea of the most profitable careers, here are some studies and training that you could follow to be an executive or create your business model:
- New technologies
- The liberal professions
This list is not intended to be exhaustive, and depends on economic conditions, supply and demand. In other words, your wealth will closely depend on your professional career and your degree of risk-taking.
Choose your investments wisely
If you can try to get rich quickly thanks to financial assets with high leverage, you also take the risk of losing everything and seeing your capital reduced to a trickle. Thus, we bet on the long term with placements and investments over several decades, and we forget too speculative products such as
- Raw materials
These are “eldorados” that enrich some investors, but impoverish many. It is better to limit these products within your portfolio to 10%, or even 20% maximum of your assets.
In general, we therefore prefer:
- Equities with great diversity across companies and territories, one can opt for trackers or ETFs replicating the main global stock markets
- Real estate with investments in the most attractive metropolises and cities that continue to attract tenants by their geographical position, their employment pool, their student center, etc.
Historically, the stock and real estate markets have always had the best performance over time. Thanks to compound interest, one can reasonably expect an annual return of 6% per year after a dozen years. The key to the path to a million is long, but it exists. You will need work, composure, and discipline to optimize your investments.