I was having a conversation on Quora earlier today. One person asked, which jobs will make you a millionaire?
My answer is below:
“No job can make you sustainably wealthy, if you have bad spending habits. Mike Tyson made $500M, but he faced bankruptcy, and so have countless other sports and entertainment stars. Income won’t result in sustainable wealthy unless you have good spending habits – Why the wealthy spend less on luxury: the 70/30 rule in finance
Anybody with a $50,000-$60,000 job can become a millionaire by 40 or 50 by simply having good spending habits, investing, not speculating or doing anything silly. The academic evidence is quite clear on that.
Consider something else, which is related to spending habits. For both high earners and even for high earners, negotiating a $5,000 a year rise could lead to you having more than $1M extra in 30-40 years, if you invest the $5,000 wisely. That is based on pretty normal market returns. An average return of 10%-10.5% doesn’t sound like much, but over 30 years it is huge. It can lead to more than $1M over a lifetime.
If you already have a $200,000 portfolio before the pay rise, and invest the $5,000 yearly into the markets, you will have more than $2M after 30 years. A $500,000 portfolio will result in $4.3M after 30 years if you invest the $5,000 a year! These are all inflation-adjusted figures as well.
So getting a rise to $55,000 from $50,000 is enough to become a millionaire, if you know how to invest correctly.
Of course, if you become a sports or entertainment celebrity or a very famous doctor or dentist or engineer, you will become a temporary millionaire even if you have bad spending habits. But that isn’t sustainable”
This questioner, who seems like a perfectly intelligent person, illustrates the difficulty many have in building wealth. It is seen as common knowledge that the wealthy have high incomes. That often isn’t the case.
Adam Fayed – International AMG – adamfayed@iamgltd.com
