FOOL'S EYE VIEW
Make A Million!

By Cliff D'Arcy
April 20, 2005

I know that I'll be a millionaire one day and, what's more, my wife will probably be a millionaire before me.

That may sound like a big deal to many people, but it's just something that I'll take in my stride on my journey to financial security. Until the Eighties, being a millionaire was a pretty impressive achievement, enjoyed by just a few tens of thousands. However, these days, the UK is home to around 425,000 millionaires, so roughly one in a hundred adults is a member of this once-exclusive club.

And, of course, thanks to inflation (rising prices), a million sure ain't what it used to be, and will be worth even less in the future! However, if you'd like to join the "M" Club at some point in your life, here are ten paths to choose from:

1. The National Lottery

FAT chance! Since the Lotto was launched in 1994, it has created over 1,600 millionaires. However, almost everyone over sixteen has played it, which comes to about fifty million people. With the Lotto turning just 0.003% of adults into millionaires, the odds are stacked against you. Meanwhile, Camelot has raked in around £50 billion in ticket sales, yet only returned less than £25 billion in prizes. Hence, collectively, players have lost over £25 billion. Actually, it costs me nothing anymore, because I stopped playing it years ago!

2. The EuroMillions Lottery

This game is strictly for mugs! With the odds of scooping the Jackpot an astronomical 76.3 million to one, you're more likely to survive, say, a fall from 35,000 feet without a parachute, landing smack in the middle of an enormous forest fire, hee hee! Forget it and move on, because it's £1.50 down the drain.

3. Premium Bonds

With Premium Bonds, you don't earn interest on your capital. Instead, you are entered into a prize draw, with each £1 Bond having an equal chance of winning a prize. The prize pot equates to a tax-free annual return of 3.2% so, with average luck and a decent-sized holding, your money should grow slightly over time. That's more than you can say for the Lottery!

ERNIE, the computer that picks the random numbers for National Savings and Investments, creates a millionaire every month. However, there are £26 billion Premium Bonds in circulation, shared between 23 million Bondholders, so a £100 Bond would give you a 1 in 260 million chance of winning the big one. However, around 200,000 people have invested the maximum £30,000 into Bonds, and these big hitters have a roughly 867,000-1 chance of winning the top prize. So, for all but the big players, Premium Bonds are strictly a bit of fun, plus an outside chance of a big win.

4. "Who Wants To Be A Millionaire?"

I sat in the hot seat in front of Chris Tarrant in December 2001, and I can tell you that WWTBAM is a lot harder than it looks! Questions that would be a breeze at home become inexplicably difficult when you're sitting under blazing lights in a studio, with hundreds of people staring at you, shuffling and coughing. It costs £1 to enter the WWTBAM draw, which rakes in an annual profit of millions of pounds for production company Celador. Although millions of people have called the WWTBAM hotline, only four people have won the million in the UK, so it's a tough challenge.

5. Inheritance

According to the Sunday Times Rich List 2005, His Grace the sixth Duke of Westminster, Gerald Cavendish Grosvenor, is Britain's third-richest individual, with assets worth £5.6 billion. The list also includes Her Majesty The Queen, eight more Dukes, five Marquesses, thirteen Earls, five Viscounts, twenty-three Lords, seven Baronets, fifty-four Knights, two Dames and six Ladies. Sadly, having an aristocratic or wealthy background isn't an option for most of us, since Fate chooses our parents for us. For all but the fortunate few, inheriting a million or more isn't an option!

6. Cash

You can make a guaranteed million by saving in cash, but the light is at the end of a very long tunnel. Let's assume that you earn 5% in your tax-free cash mini-ISA and save the maximum £250 a month (£3,000 a year) into one. After a slog lasting 59 years, your nest egg is worth £1,034,462. So, start saving at sixteen and you'll be a millionaire when you reach 75. That takes all the fun out of saving, doesn't it?

Find a great tax-free savings account in our Cash Mini-ISA centre.

7. Property

I've never been a big property investor, nor have I ever owned more than one property at a time. However, I do know several people who've amassed a fortune by investing in bricks and mortar, through property development, or by becoming a landlord.

Indeed, with a £150,000 deposit, you could buy properties worth, say, £1 million, with the other 85% of the cost covered by buy-to-let mortgages. Let's then assume that the value of your properties increases by, call it, 8% a year. After eight years, your properties would be worth £1.85 million, so your equity after deducting your debt of £850,000 is a cool million.

However, becoming a property millionaire is unlikely to be such plain sailing, especially following the boom of the last nine years, as this article demonstrates. 1996 to 2004 was a great eight-year period to be a property investor; I don't expect 2005 to 2013 to offer such an easy ride!

Landlords: find a better mortgage in our Buy-to-let centre.

8. Go into business

Setting up and managing your own business isn't a sure-fire way of getting rich, but it's worked for thousands of people. Eight of the UK's ten richest folk made their fortune by going into business, according to the Sunday Times Rich List 2005. These include Lakshmi Mittal (steel), Hans Rausing and family (food packaging) and Philip and Christina Green (retailing).

However, around a thousand small firms fail every day, so the odds are against you. Then again, with a good idea, a good grasp of planning, financial management and marketing, and many hours of hard work and dedication, your efforts could pay off. Oh, and you'll need plenty of luck and determination, too!

Learn more - and get a better business cheque or deposit account - in our Business centre.

9. Pension

At the moment, I'm investing £7,428 a year into my company stakeholder pension, at a net cost to me of just £2,769. The remainder comes from the Fool contribution (increased this month to 7.5% of my salary) plus tax relief from the Inland Revenue. In other words, I'm gaining £4,659 a year, thanks to donations from the government and my employer, or 168% of my contribution. I can't find another investment to match this!

To make the sums easy, let's assume that I save a little more - £641 a month – in future. Growing at 9% a year in my index-tracking fund, my pot will be worth a million plus £785 after 29 years. However, I don't want to work until that late in life, so I'll increase my contributions by, say, £50 each year to get me there faster. Of course, there are strict rules governing what ultimately I can do with my pension pot, so I won't be able to draw it out and splurge the lot. However, as my pot grows over the years, it'll be a great comfort to me as what's left of my hair turns grey or falls out!

Check out the deals in our Pensions centre.

10. Shares

Anyone who has read any of my Fool articles will know that I'm a big fan of investing in shares. In fact, from now on, I'm going to invest the maximum £7,000 per tax year into a shares maxi-ISA, which is a wrapper to protect my share income and gains from the taxman.

Although the chancellor has only promised to keep maxi-ISAs going until April 2010, let's assume that they continue in roughly the same form for many years to come. So, saving £583.33 a month into my ISA pot, which then grows at, say, 9% a year, I'd have fifty quid plus a million after thirty years. However, my wife and I have been investing in shares since the early Nineties, so we're already a long way down the line towards financial comfort and early retirement. Thank goodness for that!

Invest in a cheap, simple, index-tracking ISA in our ISA centre.

More: Visit our centres: Cash mini-ISA | Buy-to-let | Business | Pensions | ISAs.