Monthly Finance Message:

Eight Steps to Seven Figures

August 2014

Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension

Although Power Ball lottery winners and the Who Wants to Be a Millionaire? game show get lots of media attention, most wealthy Americans accumulate their assets slowly over time. In a book called Eight Steps to Seven Figures, author Charles Carlson describes common traits of 170 millionaire investors and includes profiles of, and quotes from, many of them. Like other “millionaire” books such as The Millionaire Next Door and The Millionaie Mind, these keys to success boil down to delayed gratification, patience and discipline. Below is a brief summary of the eight steps:

  1. Start Investing Now - Time is an investor’s greatest ally. Many of the millionaires that were profiled by Carlson started investing in their twenties or thirties. The longer a person waits to get started, the more they need to invest to accumulate $1 million by age 65. For example, a 30-year old would need to invest $202 per month while a 40-year old would need to set aside $629 monthly. Many millionaires “started small” and increased what they saved over time. Payroll deduction plans, such as 401(k)s and stock dividend reinvestment plans (DRIPs) are a good way to save small dollar amounts. “Found” money, such as tax refunds, is another good source of capital.
  2. Establish a Goal - Carlson notes that, without clearly identified goals, maintaining a regular investing program is like maintaining a regular exercise program- difficult to sustain. Goals provide motivation and direction. Specific financial goals with a time deadline and a targeted savings amount increase commitment and allow investors to dissect a goal into a series of “mini goals” that increase one’s sense of accomplishment. View a helpful goal-setting worksheet.
  3. Buy Stocks and Stock Mutual Funds - Stocks provide the best chance for growing money over time. To find out how long it takes for a sum of money to double, choose a rate of return and divide it into 72. Since 1926, the average annual return on stocks has been around 10%. Using the Rule of 72, this means stock returns, on average, double every 7.2years (72 divided by 10). Bonds and cash assets, on the other hand, take much longer.
  4. Swing for Singles - Many millionaires are not great stock or mutual fund pickers. Instead of trying to pick “hot” investments, they pick quality investments and hold them long term. They also stay away from investments they don’t understand and purchase no-load mutual funds and low-cost stock index funds to reduce investment expenses. Get more information about index funds.
  5. Invest Every Month -Well over half of the millionaires that were studied invested at least once a month. This enables investors to take advantage of “time diversification.” In other words, by spreading investments over time, you limit the risk of buying at peak prices and lower the average cost of shares. A good strategy to follow is dollar-cost averaging. This means investing a regular dollar amount at a regular time interval (e.g., monthly).
  6. Buy and Hold - Three-quarters of the surveyed millionaires held stocks for more than five years. Infrequent trading reduces taxes, transaction costs, and “reinvestment risk” (the risk associated with putting money somewhere else). Many people try to be “market timers” and pull their money out of stocks when the market drops. They run the risk of not owning shares when prices go up. The millionaires that Carlson surveyed were “buy and hold” investors.
  7. Take What Uncle Sam Gives You - Millionaire investors take full advantage of tax breaks such as the lower tax rate on long-term capital gains and investments in Roth IRAs and tax-deferred 401(k) plans.
  8. Limit Shocks to Your Finances - “Shocks” are events that tend to decrease wealth and include frequent job hopping, moving and investment trading, widowhood, and divorce. According to Carlson, many millionaires tend to have stable lifestyles. Carlson says that their wealth increases because “interruptions kill investment programs.” They rob a portfolio of time and compounding.


  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences