After reading The Simple Path to Wealth, I started wondering: Could anyone become a millionaire?

And better yet, could anyone become a millionaire early in life, regardless of income? Obviously, the answer is no: But depending on how creative you’re willing to get, the payoff could be massive.

If you’re hoping this post is going to offer some variation of, “Here’s how this person who makes $12/hour and only works two days per week became a millionaire in 18 months!”, you’re going to be disappointed.

Because here’s the truth:

Long-term investing strategies are not “get rich quick” hacks

In fact, I think they’re better than that a get-rich-quick scheme: They’re “get rich in a replicable, reliable, and fairly predictable way” strategies.

(I get messages a lot that sound like some variation of, “What’s the best short-term investing strategy for X?” There is no “best short-term investing strategy,” because investing for the short-term is no different from gambling.)

Often times get-rich-quick strategies rely on that razor’s edge of chance: Everything has to go perfectly, right on time, in order for your big pay day to come through. If any little piece of your scheme goes wrong, you risk losing it all.

Long-term, passive index investing is not like that. In fact, most of the time, a lot will go wrong. A J.P. Morgan Asset Management study found that the 10 best days in the market over the 20-year-period from 1999 to 2018 accounted for half the growth (technically, the finding was that if you had missed those 10 days, your return would be cut in half – but functionally, these two statements mean the same thing).

Because we’re relying on a long-term strategy that’s replicable and reliable, you’re trading the off-chance of a gamble for the likely, slow and steady outcome.

(I feel obligated to add the classic finance legalese here: Past performance is not indicative of future returns.)

I think there are a few common misconceptions about building wealth quickly, chief among them that only high earners can do it – after learning about a Milwaukee grocer named Leonard Gigowski who died and left a $13M donation to his former school (this article has other amazing examples of “secret millionaires”), I realized it probably made sense to walk through the logistics of just how much money you’d need to invest to become a millionaire after only 15 years of working (if you start work at 22 like most of us do, this will outline the path to being a millionaire by 37).

Why so many people with high incomes don’t become millionaires

It may seem like only the high earners are destined to become fabulously wealthy, but the bizarre thing about earning a lot of money is that often times it’s accompanied by spending a lot of money – it’s called “lifestyle creep,” and it’s natural and pervasive (unless you’re aware of it).

And as we know, your income matters less than your save rate.

To quote Morgan Housel: “When most people say they want to be millionaires, what they usually mean is, they want to spend a million dollars.”

And that is – you guessed it! – the literal opposite of being a millionaire.

So what level of income does someone need to get to a million over a 15-year span?

Remember, you’re not just saving the money – you’re using it to buy assets (via investing) that theoretically go up in value. Maybe not every day, or every month, or even every year – but over that 15-year period, the money you’re investing is growing on its own and supercharging your timeline. Without the power of investing, you’d have to save $66,666 per year to have $1,000,000 after 15 years – and by then, $1,000,000 doesn’t buy what $1,000,000 buys today, thanks to inflation.

But in order to be a millionaire via investing in 15 years, you’d only have to invest $43,000 per year (assuming a 6% real rate of return, which accounts for inflation). I know, I know – only $43,000 per year. No big deal.

*From this point forward, the average real rate of return we’ll be assuming is 6%. A “real rate of return” is lower than the rate of return you’ll see on the stock ticker, because we’re shaving off 2-3% of our return since our money loses purchasing power every year as the price of goods rises.

Another way to think about this is $3,583/mo. – and how much money you’d have to be making in order to be able to afford to invest $3,583 *really* depends on the person, and (I think) highlights why keeping your spending in check is crucial. 

Tax-advantaged investing first

In order to max out a tax-deductible 401(k) with a contribution limit of $23,000 per year, you’d be contributing $1,917 per month – which knocks a pretty convenient, tax-deferred chunk out of your monthly $3,583 obligation to your future millionaire self.

That leaves a cool $1,666 of your take-home pay that’s left to invest, or $833 per paycheck if you get paid twice per month.

At this point, it’s probably helpful to pause and remember that we’re shooting for an arbitrary number in an arbitrary timespan (really, when I was writing this article, I thought, Hm, a million sounds like a nice round number, and 15 years would get you comfortably under 40 if you start investing around the same time you start working!, but there’s no real science behind either choice).

But let’s say that WAS your target.

After maxing out your 401(k) contribution, you’d need to invest $833 of your take-home pay, per paycheck, every month for 15 years in order to have a million.

What does this look like in practice?

Let’s say you could live happily on $2,500 per month. After taxes, your $2,500 in spending and $3,583 in investing would equal $6,083 in after-tax income. We can get around some of the taxes on the investing piece by contributing it to our Traditional 401(k).

If you imagine that the effective tax rate for someone making this much money is likely around 15% total, we’d multiply $6,083 * 12 to figure out what the annual take-home pay is (about $73,000), and then multiply by 1.15 in order to find the pre-tax salary: about $84,000 total. 

Theoretically, someone that can start working at age 22 could retire with a million by age 37 if they were able to enact this path (without receiving a single raise).

Obviously, $84,000 is a pretty high starting salary, and I don’t know many people who enter the workforce with an income this high. Instead of $84,000 per year every single year with no raises or pay cuts in the entire 15-year period, it’s probably more accurate to think about this like an average salary of $84,000 over 15 years — and again, that’s assuming you need the entire $2,500 per month to live. 

Remember how I said $1M was an arbitrary goal?

If our hypothetical investor only needs $2,500 per month to live comfortably, technically their “FI” number is $750,000 – “only” three-quarters of a million! Woohoo! But his or her “Fat” FI number – annual spend multiplied by 33 – is $990,000, which is conveniently a little closer to a million. I like working from the Fat FI number, personally, because I think it allows for a little more wiggle room. Someone might see the math and believe intellectually in the 4% rule (that states you can withdraw 4% of your investment balance per year and the interest will always replenish itself), but foregoing a paycheck and trusting investments to do their thing indefinitely is quite another thing in practice.

How much did you end up earning over time?

While your pre-tax salary was an average of $84,000 over 15 years, your actual take-home pay – the money available to you after taxes – was $73,000, or $1,095,000 in take-home pay over 15 years.

That means you physically received $1,095,000, spent $450,000 of it ($2,500 per month), and still ended up with a little over $1,000,000 in your investment accounts. In that way, investing aggressively made it so that it was almost as if you literally never spent a single penny of your take-home pay. The compound interest replaced what you spent.

Most people get raises of between 2-3% per year at a minimum (or higher!), because employers try to keep up with inflation (the good ones, anyway).

In order to have an average salary of $84,000 over 15 years, your starting salary would have to be $68,000 (again, that’s assuming every year you receive no more than a 3% bump).

Of course, in practice, most people switch jobs a time or two, which provides more leverage when negotiating a salary increase (or they receive a substantial pay bump within their same company). For example, if your income goes up by 5% per year, a starting salary of $58,000 will get you to an average of about $84,000 by the time your 15-year window ends.

The tough part about this, of course, is that it’s not going to be possible to invest the full $3,583 per month in the first few years of your career when your income is in the $50,000-range, even though you’d probably be able to handle a lot more later on (in this scenario, your income caps out at $114,836, or a pre-tax income of nearly $10,000 per month).

As you probably know by now if you’re an #EliteReader of Money with Katie, time is your money’s best friend. The more you can sock away earlier, the better.

This introduces the power of side hustles to the equation, and is partly how I’ve managed to still invest $4,000 or more per month despite the fact that my income in my full-time job hasn’t yet crossed even the $70,000 mark.

How much did you need to earn to become a millionaire?

While $86,000 per year on average over 15 years is certainly not minimum wage, it’s also not as much as I would’ve expected.

A 30-something-year-old millionaire HAD to have been pulling down six figures, right? Technically, no. You could have $1,000,000 invested in your thirties without ever breaking the $90,000 mark if you can reach the $80,000-range early enough.

What’s most important is your ability to keep your structural expenses small, and layer on only the discretionary stuff that brings you the most joy.

When your save rate is high, your timeline to FI gets trimmed tremendously.

What’s “Coast FI”?

Have you ever wondered what that person might do? Someone who has $1M invested before they’re 40?

What if they like their job? What if they don’t want to leave their traditional line of work?

There’s a principle known as “Coast FI,” and to sum it up, it’s the amount you need – by a certain age – to have a “standard retirement” amount of money in your investment accounts at traditional retirement age without ever saving another dollar. It’s simply the power of compounding and time.

If someone could reach $1M by age 40, they’d never have to invest another dollar ever again.

By the time they retired at the traditional 65 just 25 years later, they’d have more than $4M waiting for them.

This is even more staggering when you wind the clock back a few years: Pretend our 38-year-old millionaire started when they were 22, 15 years prior, and had amassed $150,000 in investment accounts by age 25.

If you’ve got $150,000 by the time you’re 25 and you plan to retire at 65, you could technically already be done.

$150,000 turns into $1.5M by the time you reach standard retirement age, which is already more than what the average 65-year-old retires with. Of course, we aren’t shooting for average.

Even if you’re not obsessed with hitting the magic million…

Now you know what it takes.