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How To Become A Millionaire

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According to a study conducted by The Boston Consulting Group, there are approximately 5.3 million, millionaire households in America as of year-end 2013. The country with the second highest number of millionaire households is Japan with roughly 1.4 million. Another study from Spectrem Group in Chicago highlights roughly 8.2 million millionaire households in America. Whatever the true number is, there are plenty of millionaires among us and the figure continues to grow.

Although being a millionaire isn’t what it once was due to the skyrocketing price of tuition, gasoline, food, and housing, becoming a millionaire is still part of the American dream. With a median retirement balance of only $3,000 among all households, as we’ve noted in our MyRA introductory post, it’s clear achieving millionaire status is not easy.

Today we profile a millionaire named Jeff to gain some insights into how the top 3% of our population beat the odds. Was luck a primary factor? What was their percentage savings rate? What was their big break? How did they invest? Did they marry rich or inherit their money? All these questions and more will be answered in our series.

Without further ado, please take a look at Jeff’s profile and our Q&A below about his journey to millionaire status. If you are interested in sharing your millionaire journey with Personal Capital, please feel free to leave a comment or let your wealth advisor know and we’ll get back to you.

MEET JEFF, A MANAGER AT A LARGE REGIONAL BANK

Name: Jeff

Age: 39

Title: Commercial Bank Lending Manager

Years At Job: 9

Income: $180,000 a year

Estimated Net Worth: $1.3 million

Diversification of Net Worth: 40% property, 35% stocks, 25% in CDs and cash.

Occupation: Lending Manager

Industry: Finance

Location: Southern California

Education: BA in Economics from UC Berkeley

Sex: Male

Single Or Married: Married

Average Savings Rate: 35% of after tax income

Lucky Breaks: Bought $15,000 of Google 10 years ago that is now worth about $130,000. Found a job right out of college and managed to find another job for a 50% raise two years later. Bought first property in 2000 and another in 2003.

Big Mistakes: Buying a new Mustang with a loan at the age of 26 for $28,000 that could have been invested it in the market and grown to $65,000. Not negotiating as aggressively as he should have for a raise and promotion during his second job resulting in around $80,000 in lost income over three years.

Investment Strategy: Dumbbell approach. Very aggressive for 25% of his investments, conservative for the other 25% and balanced for the remaining 50%.

QUESTIONS & ANSWERS

Daily Capital: Did you ever think you’d be a millionaire, or be a millionaire so quickly?

Jeff: Ever since I was in middle school, I always thought I would be rich one day because of all the people I met traveling around the world thanks to my dad’s job at The World Bank. That said, I never thought I would achieve millionaire status before age 40. Property is what really accelerated my net worth along with a consistent 35% savings rate. 

Daily Capital: What do you think about the trend towards job hopping? Why and how were you able to stay at your one firm for nine years?

Jeff: When I first graduated from school, I didn’t know what I wanted to do with my economics degree. I tried working for a research organization for a year, and then I joined a small boutique investment bank. After several years of working 80 hours a week I got tired and downshifted to a commercial regional bank where I’ve been ever since. I don’t make as much, but I’m happy because my day ends by 6pm. There’s never a need to work weekends, and I’m helping good people get loans to fund their dreams.

I’m a proponent of jumping around until you find something you really love to do. Life would be so sad if you had to go through the motions every day just for a paycheck and health care. Work isn’t perfect, but it pays enough and provides a good amount of mental enrichment and purpose. Once you find a place that consists of good people, try and stay there for as long as possible until you no longer recognize the organization due to a shift in strategies or management. The 401(k) matching, company stock, and goodwill you build over time becomes very valuable. 

Daily Capital: Do you think it’s better to include your primary residence as part of your net worth or not?

Jeff: It’s more conservative not to include your primary residence as part of your net worth, but I do because it’s an asset I saved up for which can be sold. If the government was to tax me on my net worth, I would obviously exclude my primary residence and argue that it’s an illiquid asset because I’ve got to live somewhere. The solution is to have two net worth calculations. 

Daily Capital: Please tell us more about how your net worth is divided?

Jeff: After taking my wallops during the financial crisis, I’ve become more careful in how I invest my money. Roughly 40% of my net worth ($520,000) is in real estate, which consists of one rental property and my primary residence. Another 35% ($455,000) consists of a diversified portfolio in equities. I’m a big believer in keeping investment costs as low as possible. Finally, another 25% ($325,000) of my net worth is in CDs yielding roughly 2.5% or $9,375 a year. The CDs are not a great return, but I sleep well knowing that I’ll have at least $325,000 if the stock markets and property markets implode.

Daily Capital: What does your wife currently do?

Jeff: She is CEO of our household and two young children. She gave up a career in finance after our second child was born. Without my wife, we wouldn’t have been able to achieve the net worth we have today. Her work is easily worth $80,000 – $100,000 a year. 

Daily Capital: What’s your advice on how to become a millionaire?

Jeff: It really takes a focused desire to make money. How many times have you taken out some money at an ATM and wondered where all the cash went just a couple days later? This is why it’s important to keep track of your finances with tools such as Personal Capital’s dashboard

When you have a desire to make money then you’ll naturally study subjects that help you understand strategies to make money. You’ll also enter professions that tend to pay more as well. I think everybody would like to make more money, but I don’t think everybody is doing everything possible to try and make more money. Being a teacher is wonderful. Unfortunately, it’s very difficult to earn an outsized income as a teacher. There are clearly professions that pay handsomely such as medicine, engineering, banking, law, management consulting, and high tech. Look for a profession that best suits your interests.

Being disciplined in your savings and investing process is also a must. You can make a million dollars, but if you spend a million and one dollars a year you’ll go broke. I encourage everybody to save at least 20% of their after tax income come rain or shine. The more you make, the more you should try to save. 

Sooner or later your savings and investment returns will compound to larger figures. Be on the right side of inflation by investing in assets that will help you build wealth. 

Daily Capital: What do you think of the mantra, “Follow your passions and the money will follow?”

Jeff: Unfortunately, I think it’s a lot of bunk said by people who are already rich and successful such as Steve Job’s during his commencement speech. The better advice is to go work in fields where you are most needed and most wanted. In your spare time, work on your passions. Many people have moonlighted while working to pay the bills and have gone on to do great things. 

Daily Capital: Do you think it’s harder or easier to become a millionaire today?

Jeff: The way I look at it is that there’s more people than ever to sell something to or serve. As a result, it should theoretically be easier to become a millionaire today with a US population of 313 million vs. a US population of 250 million in 1990 and just 200 million in 1970.  

On the flip side, globalization really hurts wages as we’ve seen the median household income decline from $57,000 ten years ago to just $51,000 today. Employees are getting squeezed, but employers are becoming wealthy. Hence, the solution is to figure out how to become an asset owner.

The internet is clearly one of the best ways to meet growing demand. The tricky part is coming up with an idea that sticks. Money is as cheap as its ever been with the 10-year yield at 2.7%. My advice is to leverage cheap money to buy assets that are proven to inflate over time e.g. property, public companies, and corporate bonds. 

THE EVENTUAL MILLIONAIRE

Deloitte Consulting and Oxford Economics projects there will be roughly 20.6 million millionaires by the year 2020. That’s roughly 5.5% of the entire estimated US population. Thanks to inflation, free financial tools by the likes of Personal Capital, and increased education on wealth management, chances have never been better for Americans to reach millionaire status. Hope you will be one of them!

Number Of Future Millionaires Chart

If you want to get a better grasp on your finances simply:

1) Sign up with Personal Capital to access our free financial planning tools.

2) Aggregate all your financial accounts in one place so you can develop a holistic view of your finances. It’s important to understand how your net worth is divided in order to properly asset allocate.

3) Run your 401k or retirement portfolio(s) through our Portfolio Fee Analyzer to see how much fees are robbing you of your retirement. I ran my 401k through Personal Capital’s 401k Fee Analyzer and discovered $1,700 a year in fees I had no idea I was paying.

4) Run your investment portfolios through our new Investment Checkup feature which analyzes your portfolios for sector exposure, stock concentration, and style to ascertain risk. Over time, your investments will become unbalanced due to gains and losses. Our tool makes it easy to rebalance.

5) Manage your cash flow by keeping track of your income and expenses over time using Personal Capital’s award-winning software.

Photo: One of Larry Ellison’s yachts docked in SF, Sam.

Track your financial assets towards millionaire status with Personal Capital today.

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Financial Samurai

Sam is the former Managing Editor of the Daily Capital blog. He worked in finance from 1999-2012 before deciding to focus full-time on his online endeavors - FinancialSamurai.com and the Yakezie Network. Sam is an avid tennis fan who loves to travel. He received his BA from William & Mary and his MBA from UC Berkeley.

48 comments

  1. Linda

    Great series! My husband and I are 45 and 47 and achieved millionaire status a couple years ago when our combined retirement savings breached $1,000,000. The 2013 bull market helped a lot.

    The key is to keep saving through thick and thin and not let lifestyle inflation get in the way!

    Reply
    • Financial Samurai

      Well done! It really is about sticking with the program and not letting lifestyle inflation get in the way. It’s VERY easy to spend more once you make more or have a larger nut.

      Temptations are everywhere!

      Reply
  2. Untemplater

    What a fun post! Thanks for sharing this interview. Looking forward to more in this series. I’m always fascinated by the different ways people make money. Thanks!

    Reply
  3. [email protected]

    I think Jeff’s point about following your passion is spot on. People often wait to find their “passion” or the perfect moment to start. The best thing is to get moving. You’ll find out what you’re passionate about along the way and can move in that direction. This series sounds really interesting. Looking forward to reading more!

    Reply
    • Financial Samurai

      Glad you like the series Michael. Maybe I can interview you one day too?

      “Finding your passion” seems so overplayed nowadays. I sometimes wonder if it’s strategic propaganda to get people to fail in order to keep competition at bay. When you have no experience and no authority, do whatever it takes to get your foot in the door and learn. Nobody is going to give us anything. We have to go out there and earn it!

      Reply
  4. Michael

    I am excited to read more of these articles. Great series!

    The one thing I hope you add to future articles in the upfront bio is the location of the millionaire. A million goes a lot further in Little Rock or Cleveland than it does in New York or Los Angeles. That would be helpful context to have.

    Reply
    • Financial Samurai

      Great suggestion and point. Will do! Jeff is located in Southern California.

      Reply
  5. Mark Ferguson

    This is a great idea! I love the interviews and focus on what made people millionaires!

    I am 35 and I was lucky enough to reach a net worth of 1 million last year. Real estate was a huge reason for that.

    Reply
    • Financial Samurai

      Real estate is my favorite asset class partly because there are no daily tickers telling me what it’s worth. Thanks to inflation, the asset class normally inflates over the long term and the debt gets paid off with inflated dollars.

      If folks can buy and hold on long enough, I do believe RE is the way to go for many. The “forced savings” aspect is very helpful too.

      Reply
  6. Joe

    Thanks for sharing your investment strategy. It’s always interesting to see what finance professionals do with their money.
    Do you think it’s the right time to be more conservative right after a crash? Wouldn’t it be better to be more conservative at the top of the market?

    Reply
  7. a terrible husband...

    I love hearing stories of success like this. A nice simple strategy, consistent savings, and a little bit of luck. But even without Google he’s a millionaire. Never made half a mil a year. And 180k in SoCal is not as much as it seems. Way to go.

    Reply
  8. Fatchance

    I remember when I thought a million was so much money you never had to work another day in your life once you hit that target. Now it seems like a rewarding milepost on a continuing journey to FI. Thanks for this inspiring article FS. It is nice to know hard work and sensible investing can make such a huge difference.

    Reply
    • Financial Samurai

      Thanks for reading! I think $3 million is the new $1 million unfortunately. I plan to pen such a post here or on FS one day. Fight on!

      Reply
  9. Rob

    Great article, I like the emphasis his emphasis on savings. i assume that also didn’t graduate with a ton of school debt.

    Rob

    Reply
  10. 1WineDude

    Great series idea. I’m in the club, so to speak, and have been trying to figure out if/how to tell my story of getting there. On the one hand, I’m not sure of it would come off sorrow as boastful, bit on the other hand, add a full time semi-retired wine writer, I’m constantly asked how I make any money at it, and I just as often wonder if that story of FI wouldn’t be helpful to a good many people (potentially, I super it would). This series seems a great outlet for those types of potentially inspiring stories.

    Reply
    • Financial Samurai

      If you’d like to share your story, let’s talk! I’m always looking for new angles with the main purpose of helping others. You won’t come across as boastful as a result.

      Shoot me an e-mail or I’ll shoot you one in a week if I don’t hear back from you.

      Reply
  11. Jojo

    A great series. Unfortunately a million dollar is not worth as much as it used to be. Inflation is bad.

    Reply
    • Financial Samurai

      Agreed. $3 million is the new $1 million.

      Reply
  12. Kim

    Great interview! I especially like Jeff’s philosophy, “work in fields where you are most needed and most wanted.” You can follow your dream after financial security.

    Reply
  13. Bill V

    Sam,
    My path is a little different. I worked for my dad at his distribution business from the time I was 19. When I turned 28 he had a heart attack, got a divorce, and decided he no longer wanted to run the company. He told me buy the company, or he would close it. The business at the time was losing money, heading in the wrong direction. He offered to carry the contract, I said yes.

    14 Years, countless hours, 20lbs heavier, I now own a company worth mid 7 figures.

    It is not my passion, far from it. However, I’m good with numbers, and good at sales. I’m more of an example of do what your good at, not what your passionate at.

    I love to hear about people making money. Looking forward to upcoming articles!

    Thanks, Bill

    Reply
    • Financial Samurai

      Hi Bill,

      Thanks for sharing your million dollar story! Given it is not your passion and you’ve spent 14 years on it, any chance of selling some or all of your stake to a close relative, friend, or someone else who does find the industry their passion? This way, you’ll capitalize and can pursue whatever it is that you really desire!

      Best,

      Sam

      Reply
  14. Nichole

    This is a great article and really inspirational. It is nice to read how other folks did it and then compare to see if you’re tracking that way. I’m really looking forward to seeing more articles like this. 🙂

    We started a company as a side gig and have seen it grow some each month…hoping it will contribute to a wealthier retirement status.

    Thank you,

    Nichole

    Reply
  15. Paul

    This article is an insult to my intelligence. Someone making $180K annually became a millionaire by the age of 40? How is that news? I think a far more interesting article would be: “People earning over $180K per year who AREN’T millionaires.” Or better yet, “People earning under $50K per year who became millionaires.” But if you’ve been making over $100K per year for almost 20 years, then you’d have to be an incompetent moron NOT to be a millionaire.

    Reply
    • Financial Samurai

      Paul,

      After taxes, $180,000 is about $120,000 based on a 30% effective tax rate all in. Jeff has been working for 15 years, not 20 years due to business school. 15 X $120,000 = $1,800,000. But of course Jeff has to eat, live, provide for his family and so forth.

      You’ll be surprised to know plenty of people who make decent sums of money are living paycheck to paycheck because they don’t save and can’t restrain spending.

      Stay tuned for more profiles of people who achieved a million bucks with average incomes.

      Regards,

      Sam

      Reply
  16. Rippy

    Great article. So informative in its simplicity and motivational, even the comments are valuable. I look forward to reading 5.3-8.2 million more of these!

    Reply
  17. Mike

    Nice article Sam! I’m looking forward to more!

    Reply
  18. Christophe Delsol

    Congrats Jeff!

    Becoming a millionaire today is nearly a requirement to avoid being a salve to the daily economic grind. $3 million at 4% yields $10k/month (pre-tax money!). So most need to have many millions by the time they retire. Like the author pointed out (median retirement balance of $3k) the next 20 years should be interesting.

    For me real-estate was a looser as I purchased in 2004 and sold for nearly the same price in 2012. I’m considering getting back in the real estate market but the prices of homes are obviously too high, something will have to give sooner or later.

    Good day!

    Reply
  19. D Brown

    Fine article, but you may also want to consider an article highlighting the cost of the basket of goods and services that millionaires face so people understand the costs of their lifestyle and plan accordingly. For example, with two young children, Jeff is looking at a in state cost of college education at UC Berkley of $250K per child assuming 4% tuition inflation (double that if he wants his children to attend private college). If he wants private school for middle and high school add a similar amount per child. By my reckoning, all of his current savings will go to provide for his family. Jeff seems like he is a smart prudent person, but 9 – 6 banking jobs are will be under competitive pressure in the next ten years; its pretty repetitive work that a computer will eventually be able to do. My advice would be to not get lulled into complacency that you are needed or wanted by a bank. There a only a few powerful people in any bank that capture the lion share of compensation.

    Reply
    • Financial Samurai

      Good call D. Cost of living is a big one, and varies by state and individual. I’ll definitely have this line item for future interviews.

      Reply
  20. Paul

    Good to hear of someone that has a savings rate much higher than the average American. My income is less than Jeff’s but I was able to save a million around the same age as Jeff. Once I reached this milestone and continued to invest aggressively this amount was able to grow and is now to the point where it has exceeded my w-2 income. Now if I had enough guts to quit my job!

    Reply
    • Financial Samurai

      I had the same fear as you. I call it “the one more year syndrome” on my site. It took me a good 1.5 years of planning to finally leave my Wall St. job. The catalyst? Negotiating a severance package after 11 years of loyal service.

      Reply
  21. Jamal Ferrell

    I’m in college pursuing Supply Chain Management hoping to one day become a consultant. Thanks for all the knowledge and I look forward to gaining more through future articles. My goal is to be a millionaire by 42.

    Reply
    • Financial Samurai

      No problem and good luck! I assume your goal is to be a millionaire by 42 because that would be 20 years post college? Definitely track your money and create a pro forma plan. It all starts with savings.

      Reply
  22. Eric Richards

    I have a question. You never clarified how much debt Jeff owes on his primary residence and the rental property! This just seems like the gross value of his real estate, not his net equity in the properties. Net worth means net of debt. I find it hard to believe that on $180,000 a year gross income he is saving 20% after taxes and had no debt on his property. If he doesn’t have the debt, how did he acquire this much real estate? Was in inherited? Let’s get real.

    Reply
    • Financial Samurai

      Net worth is assets – liabilities, so his net worth includes his mortgage debt. We’ll talk more about leveraging debt in the future. Plenty of examples of people who have built massive fortunes in real estate on debt.

      Reply
  23. Will

    Interesting read. The question I have after reading the article and the comments is does Jeff have debt? I am a millionaire in my mid 30’s but have no debt. My wife and I own our home and have retirement investments. One of the best way to take control of your life is to be debt free. Just interested in seeing if this applied to Jeff or the other commenters.

    Reply
  24. Michael Gerard

    Nice article and some really good comments! We were at 1.99M on Jan 3rd….hoping that we have crossed 2 when I check again at the end of May.

    Slow and steady here. Good job but started late due to school and no tesla’s or google’s. Just put money in every year and didn’t pay attention to the investing trends that year.

    Reply
    • Financial Samurai

      Michael – Give reward yourself! I hereby allow you to round up your net worth to $2 million!

      Reply
  25. Tricia

    A good friend with a strong financial background believes that you don’t really have to subtract mortgage debt from your net worth because it is secured debt. I still prefer to be a conservative harda$$ when I calculate my net worth; I subtract the mortgage debt I carry on my rental property.

    I do include my equity in the property in my net worth, based on original purchase price…despite the fact that, going by the comps, the property has appreciated by ~30% since I bought it two years ago. Best investment I’ve ever made, and the cash flow is totally positive.

    Had I *not* been subtracting that mortgage debt, I would have “joined the club” a few months back. Now, however, while continuing my harda$$ ways, I’m proud to say that I at last became a full-fledged member just this month.

    As great a milestone as that is, though, I do believe that “$3 million is the new $1 million.” So back to work I go…

    Reply
    • Financial Samurai

      Nice job buying two years ago! That is a home run, especially in the Bay Area!

      One absolutely should subtract mortgage debt from one’s net worth.

      Reply
  26. IHATEDEBT

    Sorry, but Jeff seems to have less focus on spending and debt than most millionaires. Sure, he recognizes that he shouldn’t have bought a Mustang GT, but then he confuses making and spending money when he says “Jeff: It really takes a focused desire to make money. How many times have you taken out some money at an ATM and wondered where all the cash went just a couple days later? This is why it’s important to keep track of your finances with tools such as Personal Capital’s dashboard.”

    IMHO, the most effective way to achieve and retain millionaire status is to concentrate on the spending and debt side of the equation. Controlling spending and staying as debt free as possible pushes virtually all of your earnings (big and small) right to the bottom line of your net worth. Poor spending habits are not cured by outsized earnings but rather magnified.

    Reply
  27. Ron Howard

    Good article!! The statements made are on the mark in terms of discipline, determination, good paying jobs etc. However, investments are another matter. Without a through understanding of market price fluctuations one is almost doomed to loose. Hence the housing bubble, dot com bubble, and now the problem of government debt and inflation are all factors that can wipe out millionaire nest eggs.

    I made my first millions at the age of 35 after speculating in the Silver and Gold markets of the 1970’s. I was fortunate to exit the market before the metals went bust in 1980. One can still make a million trading the markets however, one must study price movement to determine when to enter and exit the market.

    Reply
  28. AmericanFool

    My wife and I hit the mark just this year in our late 40’s (& mortgage debt is part of the equation…it’s not NET worth if you don’t back out your debt), but with 10-15 yrs to go until retirement, we’re aiming for about $3.5M ($2.5M plus $1M for health care, just to be safe. We’ve been doing it on my salary while the kids were young, not quite 3 figures.

    Reply
  29. Jim Jacobson

    My wife and i are millionaires thanks to real estate, stocks, and farmland. Few people own farmland and of all investments over a period of 35 years, farmland was the best investment vehicle. Our 1500 acres will provide future income to our children and grandchildren for years to come. Why buy an annuity when you have a hedge for rent appreciation. My children will be millionaires when they start receiving income from trust at age 40. My advice is persistence and discipline in following your path to financial independence. Together our incomes were less than 100,000 per year so it is possible to attain millionaire status without having a large salary.

    Reply
  30. Michael Anthony

    I enjoyed the inspiring and positive narrative of the article, although as I reflect upon my life as a young teen with a driven spirit, entrepreneurial mind and achieving financial goals by my late 20’s, married with 3 young children with a financial foundation started for their future education, a conservative mortgage, a diverse portfolio, etc. indeed the vision (-ie ” power of positive thinking”~ “universal law of attraction”) or just plain (“things wont materialize unless you work for them”), however one compliments the other along with other great attributes. The inspirational article along with the great comments are great to read and give the reader a since of inspiration. I am curious to find out the careers of the men and women that commented on their millionaire status and if they are single, married or divorced.

    When it truly is looked upon in our life, success comes as the by-product of a life lived from the inside out. The key to living a successful life is grasping the awareness that you are enough. Once you understand you are enough, you create the space within your consciousness that allows you to realign harmoniously with your essential self or highest good.

    If we allow ourselves to be moved by the world of effects, our attention is pulled away from the true callings of our soul. And as the saying goes: “Where attention goes, energy flows.”

    Most of us are products of a society that defines success in terms of material supply. Yet true success is demonstrated by wholeness, which is only experienced by walking in alignment with the needs of your soul. A whole person is happy, healthy, peaceful, creative, loved, appreciated, giving, fulfilled, desired and compassionate. To only view success as a demonstration of a certain level of material or financial status gained through ambition is to only grasp a small portion of your soul’s potential.

    Reply
  31. Steve

    I,

    Unlike some others do not have a father in the banking industry. What is your advise for someone who came from nothing to carve his or her own nitch.

    Reply
  32. Mark

    I came from nothing as well, still don’t have much but I’m currently slowly working towards a millionaire net worth. I don’t get any advice from anyone but from the articles I read like this. With that, My plans are to pay off all debts, drive my paid off vehicle for a long time, continue to work hard, continue to rent rooms in my house to live rent free. Once I’ve accumulated enough savings I will purchase my first rental property (triplex) along with my girlfriend to get her own rental property (we marry after we used our FHA loans ;)). While continuing to save 33%, invest 33% (401k,mutual funds, peer2peerlending,and maybe more later) and pay down property loans as fast as possible to avoid interest. We will never own an expensive home or cars and we will continue to keep our cost of living as low as possible. If later residual income can pay for the nicer things in life then they will pay for that as long as the profit is there, no financing.

    Reply
  33. Henry Jacob

    A very informative article . You have certainly mentioned some very important points. Nice job. Keep Up.

    Reply

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