How Long / Hard To Become a Millionaire on Under $100k Income

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bigtex
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How Long / Hard To Become a Millionaire on Under $100k Income

Post by bigtex » Thu Nov 15, 2018 4:03 pm

Hello,

I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?

barnaclebob
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by barnaclebob » Thu Nov 15, 2018 4:10 pm

If you live in a city on the west or east coast, it will be a long road. Live in Wichita? then you are sitting pretty. So few people make it because most people don't make much more than what their expenses cover even if they don't spend extravagantly. Its always easy to blame others' lack of savings on buying new trucks, big houses, and eating out, but that's not always what happens.

As far as i know the only indicator if someone will be wealthy is how wealthy the family they are born into is. You can definitely move up and down in class but its much easier to stay in the winners ring than to break into it.
Last edited by barnaclebob on Thu Nov 15, 2018 4:13 pm, edited 1 time in total.

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Smorgasbord
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Smorgasbord » Thu Nov 15, 2018 4:11 pm

Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.

bigtex
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by bigtex » Thu Nov 15, 2018 4:21 pm

Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.

fulltilt
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by fulltilt » Thu Nov 15, 2018 4:26 pm

bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
Not sure what is harder, saving the $60 a day or getting 8% return...

MRMN
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by MRMN » Thu Nov 15, 2018 4:27 pm

barnaclebob wrote:
Thu Nov 15, 2018 4:10 pm
If you live in a city on the west or east coast, it will be a long road. Live in Wichita? then you are sitting pretty. So few people make it because most people don't make much more than what their expenses cover even if they don't spend extravagantly. Its always easy to blame others' lack of savings on buying new trucks, big houses, and eating out, but that's not always what happens.

As far as i know the only indicator if someone will be wealthy is how wealthy the family they are born into is. You can definitely move up and down in class but its much easier to stay in the winners ring than to break into it.
-1

Seems to be the antithesis of this entire blog!

My dad’s business failed leading up and thru the Great Recession, and he didn’t start saving for retirement until 2018. I earned more money my senior year of high school working part time as a cashier then working as a concrete laborer than my mother did that same year. That last fact got me some decent financial aid (yes, nothing is free from the government) and paid my own way thru private college with minimal loans because I paid a lot in cash by working on campus, seasonally during the winter, and every waking minute in the summers. I wasn’t born into wealth.

I’m now mid-30’s, net worth north of 300k between my house, 401k, and savings. I live simply, pay for 2 kids in daycare, on pace for millionaire status, all because I worked hard and didn’t care what I was “born into.”

goblue100
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by goblue100 » Thu Nov 15, 2018 4:30 pm

bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
That is not that tough. Live below your means, save the rest, invest in low cost etfs or mutual funds, and you will be a millionaire. Now, by the time you get there a million won't be what it used to be, but once you have one million it's fairly easy to get to two.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

sailaway
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sailaway » Thu Nov 15, 2018 4:34 pm

It depends on how much of your money you save.

How hard it is to save depends in your own wants and priorities.

Snowjob
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Snowjob » Thu Nov 15, 2018 4:38 pm

2 basic factors

Cost matter (100k for a single person in a small apartment is different than a family with a mortgage. San Fran is different than South Dakota)
Timing matters (the last 10 years the vanguard total stock market returned 14.5% annualized -- 260k 10 years ago is 1M now with no added savings).

Ben Mathew
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Ben Mathew » Thu Nov 15, 2018 4:43 pm

It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.

bigtex
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by bigtex » Thu Nov 15, 2018 4:47 pm

Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.

N10sive
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by N10sive » Thu Nov 15, 2018 4:49 pm

MRMN wrote:
Thu Nov 15, 2018 4:27 pm
barnaclebob wrote:
Thu Nov 15, 2018 4:10 pm
If you live in a city on the west or east coast, it will be a long road. Live in Wichita? then you are sitting pretty. So few people make it because most people don't make much more than what their expenses cover even if they don't spend extravagantly. Its always easy to blame others' lack of savings on buying new trucks, big houses, and eating out, but that's not always what happens.

As far as i know the only indicator if someone will be wealthy is how wealthy the family they are born into is. You can definitely move up and down in class but its much easier to stay in the winners ring than to break into it.
-1

Seems to be the antithesis of this entire blog!

My dad’s business failed leading up and thru the Great Recession, and he didn’t start saving for retirement until 2018. I earned more money my senior year of high school working part time as a cashier then working as a concrete laborer than my mother did that same year. That last fact got me some decent financial aid (yes, nothing is free from the government) and paid my own way thru private college with minimal loans because I paid a lot in cash by working on campus, seasonally during the winter, and every waking minute in the summers. I wasn’t born into wealth.

I’m now mid-30’s, net worth north of 300k between my house, 401k, and savings. I live simply, pay for 2 kids in daycare, on pace for millionaire status, all because I worked hard and didn’t care what I was “born into.”
Being born into wealth does play somewhat of a role along with location you live. I wasn't born into wealth. Have paid for everything since I was 16. Paid college through working a job, that at the time made more than my mother. Have roughly 50k saved so far(Ill have around 300k by my mid 30's if I keep it up). Just started making six figures though, but a lot of that is still sent helping my parents and living in a VHCOL area. I live pretty simply but am not a complete penny pincher. I have plenty of time to save though but seeing my slow progress is disheartening.

I see my friends buying houses, going on trips etc and wondering where they are getting the down payment etc. Later to learn they got an inheritance or early gift from their grandparents or a loan from their parents etc. That combined with rising market rates for the housing market leads to say a 50% profit. It just speeds up the rate at which they can become a millionare or allows you to start saving sooner(get a boost from the parents). Its defintely harder when you start from nothing and have to pick and choose things to get to where you want to be.
Last edited by N10sive on Thu Nov 15, 2018 4:55 pm, edited 2 times in total.

LiterallyIronic
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by LiterallyIronic » Thu Nov 15, 2018 4:49 pm

fulltilt wrote:
Thu Nov 15, 2018 4:26 pm
bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
Not sure what is harder, saving the $60 a day or getting 8% return...
Or starting at 21...
bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
You're my kind of guy.
Last edited by LiterallyIronic on Thu Nov 15, 2018 4:50 pm, edited 1 time in total.

Texanbybirth
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Texanbybirth » Thu Nov 15, 2018 4:50 pm

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
You're doing great. Consider that either you'll find you don't need a million dollars (because you have smaller expenses), or you'll look at your statement one day when you're old (45) and see you're closer than you thought you'd be.

These are tough times to stay the course, no doubt, so don't get too distracted or distraught. Keep up the good work.

(ETA: I do not see how I [we] will be millionaires either, but oh well.)

GAAP
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by GAAP » Thu Nov 15, 2018 4:52 pm

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
In the early years it is slow, with most of the gain coming from new investments -- not investment returns. That changes over time, but can be discouraging at first. The important thing is to continue saving.

averagedude
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by averagedude » Thu Nov 15, 2018 4:59 pm

Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
It is achievable, and this shows that if you make 100k, then all you need is a 20% savings rate. Keep in mind, its the last 10 to 15 years that you really notice it.

inbox788
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by inbox788 » Thu Nov 15, 2018 5:02 pm

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
It's actually not that hard. There are literally millions of millionaires by that definition.
http://movies2.nytimes.com/books/first/ ... naire.html
https://dqydj.com/net-worth-percentile- ... ed-states/

I'd guess one out of two BH are or will be at some point in their life have a net worth of a million. And there are a few people with excellent pensions who will get over $100k/year (some over $200k or 300k and they might have had public service jobs), which you couldn't buy for a million dollars, that wouldn't meet the criteria. And there are some house poor who meet the definition, but might struggle to get by without cashing out home.

Couldn't tell you anything about parents and children, but I would assume that there's some correlation as well as reversion to the mean. But because of inflation, the bar is getting lower and lower each year, so I'd expect on average more children on average will attain the title.

Income isn't as important as net savings and investments. If you're in SF or NYC where you may need more than $100k just to get by, the answer is never. If you can buy a home for $100k, your goal is much easier.

The easiest way for average folks is to buy a house and pay it off in 30 or less year and hope it's worth substantially more than when you bought it. The median home price is around $200k and in 30 years, I expect it will be above $400k. If you save $10k/year for 30 years and the investment of $300k doubles to $600k, you've got $1M between home and investments. Just make everything else > 0. Combine that with your 401k and other retirement savings, and it's a very attainable goal. Unfortunately, even those who make it may find it isn't sufficient.
Last edited by inbox788 on Thu Nov 15, 2018 5:04 pm, edited 1 time in total.

Jordan4FI
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Jordan4FI » Thu Nov 15, 2018 5:03 pm

Why do you need $1,000,000???? if you can live off less then that is perfect... that's the point of game.. if you earn 50K and can invest 40% (20K) of that each year, you will have enough to quit with $500K (given the 4% rule of thumb).. How long will 500K take to get, anyone's guess, 25 years if you just put it in the bank, and with the market you are at the whim of the system.

pdavi21
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by pdavi21 » Thu Nov 15, 2018 5:05 pm

TL;DR Very easy and short.

Chart your net worth and project it out (linearly if salary is main driver / exponential or other when asset growth becomes main driver). That is how long it will take YOU to become a millionaire.
For a HEAVY saver making 50-100k, I think you could probably divide 1 million by your base salary and that would be pretty close.
For my family, our increase in net worth almost always exceeds my annual base salary (only I work). I suppose I am somewhat of an INSANE saver though.

EDIT: If you can't save 1,800 a month (assuming you make 50-100k per year), you need to seriously look at your expenses. Biggest thing you can do is buying a cheap house if your job is stable or getting roommates. You may want to look into cooking meals, buying used goods, learning to fix things on your own, reducing travel, etc.
Last edited by pdavi21 on Thu Nov 15, 2018 5:19 pm, edited 1 time in total.

Wricha
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Wricha » Thu Nov 15, 2018 5:08 pm

Depends on how long you want to believe you will never make over a $100k. My business partner was married when he was 17 had 5 kids (same wife) HS diploma (no college) trained as a carpenter. Today he is worth north of $40M. How? He was a risk taker, hard worker and started his own business in real estate. Just a different twist on ones prospective.

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FlyAF
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by FlyAF » Thu Nov 15, 2018 5:12 pm

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
You're doing fine, better than most I'd say. It takes a long time and it's not sexy.

inbox788
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by inbox788 » Thu Nov 15, 2018 5:13 pm

This is an interesting graphic. Roughly 25% of those over 45 don't have mortgage! So if you're in this camp or on the day you pay off your mortgage, how much is in your 401k? Add them together and I'd guess quite a few folks are going to discover they're "millionaires" even though most won't feel very rich (because they really aren't; comfortable -- upper middle class, yes, but not rich).

Image
https://www.quora.com/At-what-age-does- ... r-mortgage

Those that don't own their home need other criteria. Of course if you're still moving around to maximize your job opportunities, buy a home is an unnecessary burden.

fulltilt
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by fulltilt » Thu Nov 15, 2018 5:17 pm

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
Don't give up. Once your portfolio size hits the same level as your salary, you will start to notice your portfolio start to snowball a little. Once you hit 2-2.5x, that is when things start to get rolling. That is what "they" say anyway....

mnnice
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by mnnice » Thu Nov 15, 2018 5:18 pm

Texanbybirth wrote:
Thu Nov 15, 2018 4:50 pm
bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
You're doing great. Consider that either you'll find you don't need a million dollars (because you have smaller expenses), or you'll look at your statement one day when you're old (45) and see you're closer than you thought you'd be.

These are tough times to stay the course, no doubt, so don't get too distracted or distraught. Keep up the good work.

(ETA: I do not see how I [we] will be millionaires either, but oh well.)
DH and I became millionaires at 45. I had never made more than 50k and he had never made more than 80k. No inheritances. We did get a four figure gift from my parents the year one of my brothers married in a lavish ceremony. I think it was a thanks you for paying for our own wedding :wink:

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Abe
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Abe » Thu Nov 15, 2018 5:23 pm

I never made anywhere near $100k. Most of my working life I earned less than $40k, and I'm worth several million today. It's not how much you make, it's how much you keep. "A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford. Pay yourself first". If you read "The Richest Man In Babylon", you will find the secret to wealth. I'm not saying it's easy, but it can be done. :beer
Slow and steady wins the race.

theplayer11
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by theplayer11 » Thu Nov 15, 2018 5:37 pm

GAAP wrote:
Thu Nov 15, 2018 4:52 pm
bigtex wrote:
Thu Nov 15, 2018 4:47 pm
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
In the early years it is slow, with most of the gain coming from new investments -- not investment returns. That changes over time, but can be discouraging at first. The important thing is to continue saving.
so true..looking back, I had $113K saved at the end of 2008 at age 43. Today I'm at $765. After mortgage is paid and college tuition payments are over, retirement saving really ramps up.

averagedude
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by averagedude » Thu Nov 15, 2018 5:47 pm

This is a wacky post but i always look at opportunity costs in my purchases. Any annual expense at an 8% return, is 100 times the expense after 28 years. Its amazing how money compounds over time.Here are 2 examples.
1. Smoking. 50 dollars a week or 2600 dollars a year equals $260000 after 28 years. Ever met a smoker that didnt have the money to buy cigs?
2. Brand new vehicle. 600 dollars a month payment or 7200 dollars a year equals $720000 after 28 years.

goblue100
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by goblue100 » Thu Nov 15, 2018 7:14 pm

averagedude wrote:
Thu Nov 15, 2018 5:47 pm
This is a wacky post but i always look at opportunity costs in my purchases. Any annual expense at an 8% return, is 100 times the expense after 28 years. Its amazing how money compounds over time.Here are 2 examples.
1. Smoking. 50 dollars a week or 2600 dollars a year equals $260000 after 28 years. Ever met a smoker that didnt have the money to buy cigs?
2. Brand new vehicle. 600 dollars a month payment or 7200 dollars a year equals $720000 after 28 years.
One of the writers who was my mentor on my journey was Scott Burns, who coined the phrase the Starbucks solution and the Margarita millionaire plan. Essentially the same idea that you are talking about and still good reads:
https://assetbuilder.com/knowledge-cent ... ons-part-1
https://assetbuilder.com/knowledge-cent ... till-works
Giving up that daily latte can make you a millionaire.

It will, alas, take quite a few years of forgone lattes but you'll still be around to enjoy the money. And it might add to your retirement security.

I came to this conclusion after sitting in a Starbucks and noticing that I was the oldest person there. I was surrounded by relatively young people, most in their twenties and thirties. Some of them were tooling away on their laptops, making Starbucks the de facto "office of the future."
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

heyyou
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by heyyou » Thu Nov 15, 2018 7:31 pm

One hourly job from 1975 to 2005, no promotions, max annual pay ever was $67K, but averaged 50+ hours per week with paid overtime. The first $1000k stock/bond index portfolio value was in 2006 after retiring at age 55 in 2005.

That answers the title's question.

heyyou
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by heyyou » Thu Nov 15, 2018 8:01 pm

David Bach, author of the Automatic Millionaire books, suggests using payroll deductions to fund all of your savings accounts so you do not ever see any extra money in your checking account. That is "paying yourself first." Saving pay raises helped my portfolio grow.

Morgan Housel wrote "Your wealth is the money that you did not spend." I know that I am always wanting to buy something, but whether I buy it or not, soon I will be wanting to buy something else, so I skip purchasing stuff since the satisfaction is ephemeral.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by CyclingDuo » Thu Nov 15, 2018 8:30 pm

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
Hello,

I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
You ask multiple questions and of course, there are multiple answers.

Question #1: I am wondering how hard it is to become a millionaire on an income of less than $100k?

Savings rate is key!

It's not hard if you start early and save consistently over your working career. It all depends on your level of income and how much you can save. One would like to think that an income of $99K has a better chance than an income of $33K in terms of being able to save more, but there are too many factors that go into the equation of how much actually gets saved. In other words, a 20 year old making $33K a year could save 13% of their gross income and make it to $1M by retirement. Somebody making $99K may be so stretched with debt (student loan/mortgage) and family expenses, they can't save enough to hit that number.

This chart shows what a 6% return would do and how much one would have to save per month to reach $1M at retirement. You can see that if one starts very early, the amount needed is not that much compared to starting later.

Image

You did not mention an actual salary, but this chart shows what you would have accumulated if you had maxed out your 401k/403b/457b every year. According to below chart, if one had started 25 years ago in 1993 by maxing out their 401k each year, you would be at the $1M portfolio size after 25 years. We know that not everyone can max out their 401k every year, but as the maximum amount rises every few years, this chart shows the potential if one could indeed max it out...

Image

Questions #2 and #3: Is millionaire status still achievable by 50? by 40?

Depends on the amount of annual salary, expenses, and if you can save more than the amount needed for maxing out a 401k/403b/457b. In theory, you would think that somebody on a salary of $75 - $99K could live very frugally and save more than the max on a 401k to hit your number sooner. However, it doesn't work out that way. It all depends on your expenses and what amount of salary is available for investment.

Question #4: At what point does income have to rise substantially in order to reach early financial independence goals?

Impossible to answer without more information on what you would consider FI and how much is being saved. Does that include the - RE portion of FIRE, or just FI? Are you saving $5K a year, or $50K a year?

Question #5: If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth?

Because they live beyond their means rather than living below their means. Even if one lives below their means, the amount of below their means has to be large enough to consistently invest an amount year after year that would be enough to reach $1M. Somebody only able to save $1,500 a year while living below their means is not going to make it unless the start at age 20 and work until they are 80+. Somebody that is able to save $18.5K per year is. Factor in debt, kids, and living from paycheck to paycheck for many and it is not hard to understand why so few people ever reach a net worth of $1M.

Question #6: Do children usually end up more or less wealthy than their parents?

Too much data to input and interpret for an easy answer...
https://www.brookings.edu/research/econ ... nerations/

Question #7: Or is parent wealth compared to children not related?

See above #6.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

sawhorse
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sawhorse » Thu Nov 15, 2018 8:52 pm

Cost of living in the area is a huge factor. As is student debt. As is whether you have children. As are medical expenses for yourself or family members.

It comes down to savings, and it's harder to save in certain situations.

In terms of being a millionaire, that means a lot more in some places than others. Having $1 million will barely get you an apartment in some places.

The circumstances in which you're raised can place significant barriers to wealth. If you were raised in poverty by abusive/neglectful parents in an area where the schools are so bad that high schoolers are functionally illiterate, it's almost impossible to become wealthy no matter how hard you work.

There are VERY few people who truly climb from poverty to wealth. Some professional athletes perhaps. Almost all people who claim to have grown up poor and became rich through hard work actually didn't grow up poor. They grew up middle class or, more commonly, upper middle class.

This is even more true on an international scale.
Last edited by sawhorse on Thu Nov 15, 2018 8:56 pm, edited 1 time in total.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by StoopieHippo » Thu Nov 15, 2018 8:55 pm

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
I think you're maybe checking too frequently. Also, instead of investing after tax money, maybe look into a 401k if you've got one offered through work? Tax-deferred growth is WAY better than paying capital gains.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by MisterMister » Thu Nov 15, 2018 9:12 pm

fulltilt wrote:
Thu Nov 15, 2018 4:26 pm
bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
Not sure what is harder, saving the $60 a day or getting 8% return...
Getting 8% return is harder.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by JGoneRiding » Thu Nov 15, 2018 9:19 pm

bigtex wrote:
Thu Nov 15, 2018 4:47 pm
Ben Mathew wrote:
Thu Nov 15, 2018 4:43 pm
It's possible if you're young enough, save aggressively enough, and invest aggressively enough.

If you can save $20,000 per year (inflation adjusted) and invest it aggressively enough to get a 4% real return, you'll have $1,976,531 (inflation adjusted) in forty years. Even at 3%, you'll have $1,553,266.
I'm young enough, 28, saving as aggressively as I can with a family to support ($1,000 a month) on $60k income, and I invest 90% low cost equities, 10% bonds, but it still seems hard to see much progress.
Keep that up and you will be totally fine. One day you will look and be like wow! Just don't mess with the plan, don't try to make it happen faster or "easier" that is were people loose it all. And only invest "play" money in the next best thing. One of the most ultra conservative people on here is that way bec he lost half in the telecom bust. Be broad based!

I don't have a great income like so many on here I should save more but I know i save enough that all I need to do is hold steady at this point and I am not quiet getting to 1k a month (I am 37)

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Kenkat » Thu Nov 15, 2018 9:26 pm

I started working and saving the late 80’s. Coming out of college, I got a good job paying around $25,000/yr. I worked hard but probably didn’t hit the $100k income mark until my late 40’s. My wife worked as a secretary until we had kids and then stayed at home with them. We still managed to hit a $1M net worth by around 50 and that included having a nice house, family, etc. The keys to me:

- my wife and I both entered into our marriage with no debt and some money in the bank
- we were both savers; although my wife eventually stayed home with the kids, before kids we both worked and saved
- we started saving and investing early
- we never cashed out 401k or other retirement accounts
- we kept debt to a minimum

So, it is possible if you start saving early, watch your spending and live even just a little below your means.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by averagedude » Thu Nov 15, 2018 9:43 pm

MisterMister wrote:
Thu Nov 15, 2018 9:12 pm
fulltilt wrote:
Thu Nov 15, 2018 4:26 pm
bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
Not sure what is harder, saving the $60 a day or getting 8% return...
Getting 8% return is harder.
I do agree that getting an 8% return in the future could be hard, but it is an unknown. If you look at the past, most 40 year returns have been over 8%.. Also dont forget that when you dollar cost average in the market over a 40 year investment time frame, your returns have almost always been over 8%.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Rainmaker41 » Thu Nov 15, 2018 9:49 pm

This question speaks to me.

We are a married couple (age 28) living in a high cost of living area. We have no kids and rent an economical studio apartment in the city for low commute costs. Our gross income is under $83k for 2018, but our health insurance costs are less than $1k per year due to good benefits packages.

We will save $44k for the year. Much if this is due to thrift (we can't realistically cut any more without undesirable sacrifices), but a chunk is due to Federal and state tax efficiencies from our low AGI (targeted at Saver's Credit cliff of $38k). Phaseouts and cliffs of tax credits, etc. would cause a more costly lifestyle (including a mortgage) or higher income to come with (relatively) high marginal tax rates. We have also come to the conclusion that higher income would be needed to move the needle. Our goal is to grow our incomes enough to fill up $50k in retirement accounts (2019 limits for 401(k)'s and IRAs for married couple) per year, but that will take some hard work and time. Getting to $100k instead of $83k would make a difference, that's for sure, but not quite as much as you'd think because of tax credit losses.

Assuming 2% return above inflation, I project $1 million portfolio by age 46 and $2 million by age 60, which is our target retirement date. If returns are better, we'll have options. If returns are worse, we'll still be better off than most people.
My username is not about money, but is my old online gaming username. I can't say that I make a great deal of money; I just hate spending it. Married the most loving woman in the world October 2017.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Gibby45 » Thu Nov 15, 2018 10:32 pm

You can absolutely do it. The degree of difficulty depends on your expenses and market returns. You basically get there by maxing out your IRA and 401k from your first real job through age 40. Housing can be 'solved' to a certain degree if you either live in a smaller place, or live in a bigger place with other people. If you bike/walk/take public transportation, you can lower your transportation costs. Kids and/or expensive habits change the equation. If you're under $100k you can get a side job/gig to supplement your income.

Saving becomes easier once it becomes routine. Save half of all future bonuses and raises and let compound interest do the heavy lifting. We haven't had a bear market in a while so it's easy to be too optimistic about future market returns. Make saving automatic (still take time to enjoy yourself though) and you should be in pretty good shape even if you fall short of 1M at 40.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by b0B » Thu Nov 15, 2018 10:42 pm

It took 20 years, from age late 20s to late 40s, with salary from $35k to $80k, to hit $1M in investments. (Also bought a cheap house, paid off.) Married with three kids (one income).

It absolutely can be done.

I expect to hit $2M with salary is still being under $100k.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Nissanzx1 » Thu Nov 15, 2018 10:44 pm

bigtex wrote:
Thu Nov 15, 2018 4:03 pm
Hello,

I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
Absolutely totally possible. I think you can do it on $50K especially in a LCOL area.

I know lots and lots of millionaires. Everyday people, you would never know they had money. They don't flash it and they don't talk much about it. There have to be 10's of thousands of them in the USA.

I know more posers than real millionaires. The poser has the new Mercedes (lease) and Rolex (financed on his credit card). I can think of one guy I know personally worth over $6,000,000 that drives an older minivan everyday. He is one of the most kind and gentle people I've ever met.

In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...

MathWizard
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by MathWizard » Thu Nov 15, 2018 10:59 pm

Medium COL area. Took 25 yrs (1990 to 2015) on inflation adjusted income steadily rising from 50 to 90K.

This through the 2001, 2003 and 2008/9 recessions, and raising 2 kids through college. So it is doable.

We lived in 3 different mobile homes through grad school and beyond until we had enough for 20% down. Drove well used cars and fixed them myself. Did all house and yard improvements.

Had three loans for cars early on, never again.

Paid off school loans early, paid off house in 17 yrs.

Clipped coupons. Make our own coffee, take lunch every day.

Were very active in church so we were generous with time and money there.

Vacations almost always by car to national parks.

Miriam2
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Miriam2 » Thu Nov 15, 2018 11:02 pm

bigtex wrote: I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? . . .
This article may help explain some of your questions. It starts with a wonderful quote and advice from Charlie Munger (Warren Buffett's partner at Berkshire Hathaway):
https://www.fourpillarfreedom.com/charl ... -is-a-btch

At an old Berkshire Hathaway Shareholder Meeting in the late 1990's, a young man asked Charlie Munger for his best advice on creating wealth. The young man complained that he was having a hard time getting started and that his net worth wasn't increasing as fast as he would like. This is when Charlie Munger uttered a quote that quickly became famous within the finance industry:

"The first $100,000 is a b*tch, but you gotta do it."

I couldn't find the exact words he used to follow up this statement, but it was something like:

"I don't care what you have to do - if it means walking everywhere and not eating anything that wasn't purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit."
The article then explains why the first $100,000 is the hardest and how your wealth increases thereafter - it's all about saving as much as possible early on so the magic of time and compounding starts to take over the heavy lifting.

Another thread you may find useful: viewtopic.php?f=10&t=257302
Last edited by Miriam2 on Sat Nov 17, 2018 4:27 am, edited 1 time in total.

MathWizard
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by MathWizard » Thu Nov 15, 2018 11:09 pm

Nissanzx1 wrote:
Thu Nov 15, 2018 10:44 pm
bigtex wrote:
Thu Nov 15, 2018 4:03 pm
Hello,

I am wondering how hard it is to become a millionaire on an income of less than $100k? Is millionaire status still achievable by 50? by 40? At some point, expenses can't be reduced any further. At what point does income have to rise substantially in order to reach early financial independence goals? If all these investment calculators show that becoming a millionaire is attainable regardless of income, why do so few people ever reach a million dollar net worth? Do children usually end up more or less wealthy than their parents? Or is parent wealth compared to children not related?
...

In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...
I would disagree with this. I would also say that luck was a part for me.
I had steady employment for 25 yrs, no downsisizing.
My employer provided good health insurance and stayed in business.
My kids had no serious health care needs.
I did not become seriously sick or disabled.

I chose my spouse wisely.

Lots of things could have gone wrong, even when making the best choices available without the luxury of hindsight .

sawhorse
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by sawhorse » Thu Nov 15, 2018 11:14 pm

One thing to keep in mind is that net worth fluctuates. Many people during the housing bubble were millionaires due to the value of their homes. Then the housing market crashed. Same with stock market ups and downs.

Life events also affect trajectory. Kids will totally alter the trajectory. In my early 30s, my husband and I were on path for a good net worth by age 40 or 45. Maybe not a million, but half a million. Then I lost my job and couldn't find a new one. My husband could only find one in a high cost of living area whereas we had lived in a low cost area before. I developed a debilitating illness that prevents me from working and costs tens of thousands a year even with insurance. I didn't have disability insurance because when I had previously applied, I was turned down each time due to preexisting conditions. We went from saving a big chunk of money to dipping into our savings. In addition we moved to conservative investments because we need the money to be available any time, so we have largely missed out on the stock market growth of the past few years.

My financial situation and path look completely different than they did even 5 years ago. Maybe someday I'll get back on the path, but I'm acutely aware that it may not ever happen especially if my condition further deteriorates and I'm unable to ever work again.
Nissanzx1 wrote:
Thu Nov 15, 2018 10:44 pm
In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...
Wow, talk about being privileged and out of touch. Although I tend only to wish ill on awful people, and I don't think this statement makes you an awful person, sometimes I wish people who hold this view could get a temporary dose of bad fortune.
Last edited by sawhorse on Thu Nov 15, 2018 11:26 pm, edited 2 times in total.

KlangFool
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by KlangFool » Thu Nov 15, 2018 11:21 pm

Nissanzx1 wrote:
Thu Nov 15, 2018 10:44 pm

In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...
Nissanzx1,

1) My good friend worked in Enron for over 22 years. He lost all his 401K savings.

2) In every recession/economy crisis, many folks are wiped out when they are unemployed and all their assets' value dropped at the same time. Could you survive 1 to 2 years of unemployment?

2) There is at least one US recession every 10 years. Across 20 to 30 years, we have to survive many recessions.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by TheHouse7 » Thu Nov 15, 2018 11:29 pm

goblue100 wrote:
Thu Nov 15, 2018 4:30 pm
bigtex wrote:
Thu Nov 15, 2018 4:21 pm
Smorgasbord wrote:
Thu Nov 15, 2018 4:11 pm
Becoming a millionaire by 40 can be done by saving $60 a day from age 21 through 40 with an 8% return on investments. How hard it is to save $60 a day depends greatly on how close to the $100k/yr mark you get.
Yes, that would be tough. $60 a day is $1,800 a month.
That is not that tough. Live below your means, save the rest, invest in low cost etfs or mutual funds, and you will be a millionaire. Now, by the time you get there a million won't be what it used to be, but once you have one million it's fairly easy to get to two.
-1 at 21 I was trying to live on less than 21,000 a year, not save it!
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by AlphaLess » Thu Nov 15, 2018 11:49 pm

The parameters of the problem are too vague:

- under $100K is a big range,
- expenses are not specified,
- millionaire is not precise.

If you earn $100K before taxes, pay, say, $24K in taxes, spend $12K a year, then you can save $64K a year.
Do that for 12 years, and with growth, you will be a millionaire.

But in the same situation, if you spend $66K a year, instead of $12K a year, then you are only able to save $10K a year, you probably need 50 years to become a millionaire.
"You can get more with a kind word and a gun than with just a kind word." George Washington

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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by Nissanzx1 » Thu Nov 15, 2018 11:57 pm

KlangFool wrote:
Thu Nov 15, 2018 11:21 pm
Nissanzx1 wrote:
Thu Nov 15, 2018 10:44 pm

In fact, (I realize this might be controversial) but I'll go so far as to say if you aren't a millionaire (or close to it) by 50-60, you really made some big mistakes. It doesn't mean you are a bad person, but you made some real mistakes...
Nissanzx1,

1) My good friend worked in Enron for over 22 years. He lost all his 401K savings.
Sorry to hear about your friends misfortune. Same here with my next door neighbor, also a victim of Enron. Of course, we here are educated enough to know about diversification. Major mistake that those two sadly paid the price for.

2) In every recession/economy crisis, many folks are wiped out when they are unemployed and all their assets' value dropped at the same time. Could you survive 1 to 2 years of unemployment?
Of course I could. However, I would take any job I could get. I'm not one to sit idle, and there isn't ANY work that I'm above.

2) There is at least one US recession every 10 years. Across 20 to 30 years, we have to survive many recessions.


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JoMoney
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Re: How Long / Hard To Become a Millionaire on Under $100k Income

Post by JoMoney » Fri Nov 16, 2018 12:03 am

How much you're able to save and invest is a bigger factor than how much income you have.
I know plenty of broke people who make a lot more than I do.

Someone who saved $700 a month, and adjusted up with inflation for the past 25 years, and put it in the Vanguard S&P 500 index fund, would be a millionaire today. PV Link

$700 in 1993, was about the equivalent of $1,200 in 2018 CPI Calc

$1,200 a month is $14,400 a year, which is less than the 401k maximum contribution amount ($19,000 in 2019)

It seems pretty reasonable to me, that if someone making $70k a year was able to stash 20% pre-tax into their retirement account, they have a good chance of getting to the equivalent a million dollars today (...well, in August - slightly under currently in November).
Last edited by JoMoney on Fri Nov 16, 2018 12:13 am, edited 1 time in total.
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