296: 6 Ways To Become A Millionaire In The Next 5 Years With Steve Chou

Podcast: Download (Duration: 19:09 — 22.2MB)

Becoming a millionaire in three to five years comes down to planting as many money seeds as possible, because luck determines which ones grow. This episode covers the six specific methods I have personally used to make over a million dollars across the past 20 years.

This is a solo episode, recorded because listeners kept asking for them. No guest, just the actual paths that worked and the ones I left on the table.

None of this involves pinching pennies or sacrificing your quality of life. Being a cheap ass is not a fulfilling way to live.

Key takeaways

• Your day job salary will almost never produce life-changing money, with the exception of equity-granting startups.
• I stayed 17 years at one startup and walked away with just under $1 million. Following my original plan of rolling three-year stints could have been 8x that.
• Microsoft and Oracle shares bought with childhood allowance money have alone produced over $400,000.
• My wife and I started our ecommerce store with $630 and grew it into a seven-figure business.
• 66% of millionaires are self-employed, according to The Millionaire Next Door.
• MyWifeQuitHerJob.com now makes over seven figures a year, mostly profit, and I was not an expert when I started.
• My real estate gains have been almost entirely luck from living in Silicon Valley.
• Friends convinced me to sell on Amazon, run webinars, and start an event, each worth six figures or more.

Two rules before you start

Your day job salary will never lead to life-changing money. With a handful of professional exceptions, a salary is calibrated to keep you alive and let you get by, with occasional room to splurge.

Getting rich is still impossible unless you spend less than you earn. My personal approach, and I will blame being Asian for this, is to spend freely on the activities that genuinely bring me joy and then ruthlessly cut everything else.

Eliminate spending on non-essential goods and chase the best available deal on every purchase, even when you can comfortably pay full price. Plenty of successful entrepreneurs I know start spending wildly the moment money arrives, and managing your spending as your income grows is what actually compounds into wealth.

The second rule is that this is slow. Becoming a millionaire will not happen overnight, and if you are on a path promising great riches quickly, stop.

Building a foundation for generating money is gradual and requires patience and consistency. There are also no guarantees, because working hard or investing heavily in a project does not make it succeed.

That is why the strategy is planting as many money seeds as possible and hoping a few grow. Luck is always a major factor.

Here are the six methods I have used, in order: take equity at a startup, buy and hold stocks in companies you believe in, start an ecommerce business, build an audience through content, invest in real estate, and surround yourself with other millionaires.

Method 1: Work at a company that gives you equity

Stock options at a startup are the main exception to the rule that a salary will not make you rich. If the company hits a liquidation event like an acquisition or an IPO, those options can become a genuine windfall.

This was my original plan out of Stanford with an electrical engineering degree. Work at as many startups as possible for roughly three years each, accumulate a large portfolio of options across many companies, and roll the dice.

I never followed through. I stayed at the same startup for 17 years because I fell in love with the people and the technology.

I survived two major downturns, in the early 2000s and in 2009, plus multiple rounds of layoffs. The company was acquired in 2013 and I came away with just shy of a million dollars in options and retention bonuses.

What that decision actually cost me

I probably could have made 8x more by following the original strategy, because I received offers from companies that are now worth multiple billions. I nearly left twice for two different startups.

One of those companies’ stock is now over $200 a share. Had I worked at both, my options would be worth high seven figures today.

I do not regret staying, because the relationships I built there are ones I still value. The lesson is structural rather than personal: the larger your option portfolio across more companies, the more chances you have at a real outcome.

Method 2: Buy stocks in companies you love and hold them forever

Microsoft and Oracle shares I bought as a kid have alone produced over $400,000. My parents introduced me to stock investing early, and in the 1980s and 1990s I read Investor’s Business Daily at the dinner table and talked stocks with them constantly.

I could only afford blocks of five to ten shares at first, so my parents loaned me money to buy larger quantities and offset the trading fees. A single trade cost around $50 back then, sometimes more depending on size.

Starting in elementary school, I put all my allowance and hongbao money into Microsoft and Oracle and held for decades. I still own shares of both.

Adding Facebook, Nvidia, and Medtronic to those two positions has produced close to a million dollars combined. Tesla is a current holding that has recently started performing.

Why long-term holding beats day trading

During the dot com bust in 2001 I bought and sold stocks haphazardly. I made a lot initially and then lost nearly all of those gains.

The positions I simply held have all performed extraordinarily well. That contrast is the entire argument.

I invest mostly in tech because that is what I understand, and you should stick to what you know. My friend Billy Murphy put significant money into Apple after Steve Jobs announced the iPhone and largely lives off that today.

Take all of this with a grain of salt. I am not suggesting you put all your money into the market, only that a company you genuinely believe in and hold for a long time can produce enormous gains.

Method 3: Start an ecommerce business

According to The Millionaire Next Door, 66% of millionaires are self-employed, and most of them are entrepreneurs. That is no coincidence, since entrepreneurs are the backbone of the economy.

My first successful business was an online store selling handkerchiefs. We chose ecommerce over a brick-and-mortar business because it required very little capital and because we wanted meaningful money within about a year.

We started with $630 in capital and built it into a seven-figure business. We have been running it for over 10 years.

My wife and I did not start until we were well into our thirties, and we wish we had started much earlier. It took us close to a decade to recognize how little our day jobs paid relative to what we could earn on our own.

Starting an ecommerce business, or any online business, is one of the best available paths to life-changing money.

Method 4: Start a blog, podcast, or YouTube channel

If you can create content that attracts an audience, you can make life-changing money. My mom still does not understand how MyWifeQuitHerJob.com generates income, and that is genuinely all there is to it.

The common misconception is that you must be an expert in your topic. You do not. You only need to know more than the audience you are addressing.

My friend Josh Dorkin built BiggerPockets, the largest real estate podcast and website on the internet, knowing nothing about real estate. He created a forum where he could ask other investors for help.

I started documenting my ecommerce journey in 2009 and was not an expert at selling physical products. I frankly did not know what I was doing, and people responded to the candor and authenticity of the writing.

Today the site makes over seven figures a year and most of that is profit.

Examples of people who built audiences from nothing

Joe Jitsukawa and Bart Kwan started making comedy skits on YouTube and now earn seven figures making funny videos.

Eric Chang, a friend from Stanford, was interested in underwater photography and built a thriving publication called Wet Pixel.

Thanh Pham documented his productivity habits and built a seven-figure business at AsianEfficiency.com.

If your timeframe is three to five years, start publishing now. The medium matters far less than picking one and staying consistent with it.

Method 5: Invest in real estate

Real estate has produced well over a million dollars in appreciation for me, and I want to be direct that this has been almost entirely luck. I live in Silicon Valley, which is one of the most absurd housing markets in the world, so properties I bought over the past two decades multiplied in value.

The real barrier is capital. Real estate requires substantial money up front, so it may be out of reach if you are living paycheck to paycheck.

My interest started with my parents, who put my brother and me through college without major debt using a few strategically placed housing investments. They bought one property for each of us when we were young, held for 15-plus years, and sold them when tuition came due.

Why real estate works structurally

Real estate is an excellent inflation hedge. A 30-year fixed mortgage payment stays constant while inflation erodes the value of a dollar, so what you effectively owe shrinks over time.

If you plan to stay in a house for the foreseeable future, it is also difficult to lose money buying rather than renting.

The friends of mine who have succeeded at real estate on a larger scale buy income-generating properties in volume and consistently trade up to larger properties using the 1031 exchange rule. If you do not know what that is, look it up, because it is central to serious real estate investing.

Like stocks, real estate gains are funny money until you sell. For a real education on the mechanics, BiggerPockets is where I would send you.

Method 6: Surround yourself with other millionaires

This is not a strategy so much as a condition, and it consistently produces results. I am deliberately selective about who I spend time with, because I want to be around people who push me to try new things and who genuinely care about being their best.

Lars Hundley convinced me to start selling on Amazon, which added six figures to my ecommerce profits almost immediately.

Grant Baldwin, who has been on this podcast, introduced me to webinars. My first attempt generated over $60,000 in revenue.

Toni Anderson pushed me to launch my own event, and running the Sellers Summit with her is now one of the most rewarding things I do all year.

Being around other millionaires does not directly produce money. It produces exposure to people who are constantly learning and growing, and that energy transfers.

What this all really comes down to

Every one of these paths reduces to putting yourself out there and giving yourself a chance to succeed. Learning to become a millionaire matters less for the money than for the skills you develop getting there.

If I lost everything today, I am confident I could rebuild it with what I now know. That confidence is the actual asset.

Anyone can become a millionaire with the right mindset, consistency, and some luck. Keep planting money seeds and you will eventually get there.

Frequently asked questions

Can you become a millionaire from a salary?

Almost never. With a few professional exceptions, salaries are calibrated to cover your living expenses with occasional room to splurge, and they do not produce sudden windfalls.

How long does it take to become a millionaire?

Three to five years is realistic for the fastest paths like building an online business, and most methods take considerably longer. Anything promising great wealth in a short timeframe should be treated as a warning sign.

Are startup stock options worth taking?

They are one of the only ways a job produces life-changing money, and the outcome depends heavily on luck. The strategy that maximizes your odds is accumulating options across many companies rather than concentrating everything in one.

Should you buy individual stocks or index funds?

Steve Chou holds long-term positions in individual companies he understands, mostly technology, and explicitly says to take that with a grain of salt. The pattern that worked was buying companies he believed in and holding for decades, while day trading during the dot com bust erased nearly all his gains.

How much money do you need to start an ecommerce business?

Steve and his wife started their online store with $630 in initial capital and grew it into a seven-figure business over 10 years. Low startup cost is a major reason they chose ecommerce over a brick-and-mortar business.

Do you need to be an expert to start a blog or podcast?

No. You only need to know more than the audience you are addressing, and Josh Dorkin built BiggerPockets into the largest real estate site on the internet by creating a forum to ask other investors questions.

Is real estate a good way to build wealth?

It works structurally as an inflation hedge, since a fixed mortgage stays constant while the dollar loses value. The barrier is that it requires significant upfront capital, which puts it out of reach if you are living paycheck to paycheck.

What percentage of millionaires are self-employed?

66%, according to The Millionaire Next Door, and most of them are entrepreneurs rather than professionals.