The Math of Becoming a Millionaire in 13 Years

When I browse the web or social media, guides on how to become a millionaire pop up everywhere.

If you read them, you’ll quickly find out that they’re filled with the same fluff. Let’s call it “slow-lane thinking” after DeMarco’s popular book.

Most of those guides assume you have four decades of diligent savings left.

But even if you do, are you really inspired by the idea of reaching millionaire status with 65? Is it possible to reach it way earlier?

In this guide, we’ll look at the math of all of it. So, let’s get started!

You can follow along by checking out the Google spreadsheets here:

Base Strategy

So, here’s the slow-lane strategy that is sound and will make you a millionaire if you live long enough and you or the market don’t mess it up:

• Work as an employee and earn a salary. Let’s make it the median US household income of $63,179.
• Under-spend your income and invest 10% of your paycheck in a low-cost index fund, which is $6,300 per year.
• Assume you get an inflation-adjusted annual return of 7% which is the historical average of the S&P 500.
• Do this religiously for decades and never stop.

Using these very reasonable assumptions, you’d be a millionaire in 37 years. In nominal terms, you’d reach it even sooner because this is inflation-adjusted millionaire status.

Here’s the table:

So if you follow these simple steps starting with the age of 30, you can expect to be a millionaire in 37 years at age 67.

But can you do even better? Let’s find out!

Don’t-Be-So-Lazy Strategy

The previously discussed assumptions are very lazy.

They assume your median income never grows as you mature. It also assumes median income and not average income. It assumes you’ll remain an average person all your life and you’re not willing to read more than a technical book a decade. It also assumes you don’t increase your savings rate as you earn more.

Even more, you can expect your income to increase with inflation so the nominal amount you add to your nest egg will increase as well without you even needing to save more.

• Start with a median income of $63,197.
• Assume your income grows by a modest 3% per year as you mature and become more valuable to the marketplace. You can be more aggressive but let’s make it not too hard for now. We assume your income growth stops as soon as you’ve reached the six-figure income mark. This makes it even more realistic, doesn’t it?
• Start investing 10% of your paycheck but grow your savings rate by 1% per year. This is less than your salary growth!
• The same average annualized return of investment rate of 7%, the inflation-adjusted average of S&P 500.

Here’s how the chart looks like in this case:

Let’s check out the table that has become significantly shorter! In just 25 years, you’d be a millionaire!

The double-flank attack of increasing your savings rate and your income modestly accelerates your journey to millionaire status significantly from 37 years to 25 years.

So, if you start at age 30, you’d be a millionaire at age 55!

But can you do even better?

Save-More Strategy

Say, you start with an aggressive 20% savings rate right away—and you invest in small-cap value index funds that expectedly yield 1% more than the S&P 500.

• Start with a median income of $63,197.
• Assume your income grows by a modest 3% per year as you mature and become more valuable to the marketplace.
• We assume your income growth stops as soon as you’ve reached the six-figure income mark.
• Start investing 20% of your paycheck but grow your savings rate by 1% per year. This is less than your salary growth!
• An average annualized return of investment rate of 8%, the inflation-adjusted average of S&P 500 plus 1% premium for small-cap value stocks.

Here’s the graph:

And the table:

An aggressive 20% savings rate to start with combined with an investment in small-cap value index funds can accelerate your reaching millionaire status to 20 years.

Side-Business Strategy

Until now, we’ve assumed you remain employed and you don’t do anything on the side. However, the world is filled with opportunities and you can easily build a side business while working in your main job.

Creating a business is the ultimate way to riches. Instead of only buying other people’s businesses via the stock market, you now become a business owner yourself building your own second income stream slowly and steadily.

All the other assumptions remain the same.

• Start with a median income of $63,197.
• Assume your income grows by a modest 3% per year as you mature and become more valuable to the marketplace.
• We assume your income growth stops as soon as you’ve reached the six-figure income mark. This makes it even more realistic, doesn’t it?
• Start investing 20% of your paycheck but grow your savings rate by 1% per year. This is less than your salary growth!
• An average annualized return of investment rate of 8%, the inflation-adjusted average of S&P 500 plus 1% premium for small-cap value stocks.
• Build a side business that earns $12,000 in the first year and grows by 20% each year.
• We value the side business at a price/earnings ratio of 5 which is very conservative comparing it to the stock market’s average P/E multiple of 20.

Here’s the chart:

After only 13 years, you’d be a millionaire under those assumptions. You can find the detailed table here (scroll left and right to see the whole table):

If you wonder how you can build a growing side business, there are so many opportunities:

• Become a freelancer.
• Create your own website.
• Collaborate with other business owners or content creators to create information products.
• Do real estate (e.g., flipping houses).

You can learn more about how to become a freelance developer and scale your online coding startup in the detailed Finxter freelancer course.

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There are Many Ways to Millionaire Status

Don’t worry if you didn’t like the previous way of creating a side business. There are so many different ways. Just do your own math, and dream your own dreams. Build upon the basic plan that takes you 37 years and try out wild ideas. Then choose what suits you best.

You can check out the spreadsheets used in this article here:

Create your own millionaire math!

Bonus: The Frugal Investor Strategy

Say, you don’t want to learn and improve in your job. Instead, you do the bare minimum for your job, and don’t grow your income, but you invest the free time resources to study your own stock or real estate investments.

Warren Buffett made over 30% on very small sums of money. Say, you make 15% per year focusing your energy and willingness to learn to invest.

• Frugal lifestyle or cover expenses otherwise: save 50% of your paycheck.
• Investing energy: Achieve a 15% yield on your investment through stock market research, crypto, or real estate leverage.

Here’s the graph:

Under those assumptions, you’d be a millionaire in 13 years.

And here’s the table:

Conclusions

There are many ways to riches:

• 37 years to millionaire – Base strategy
• 25 years to millionaire – Don’t be so lazy strategy
• 20 years to millionaire – Save more strategy
• 13 years to millionaire – Side business strategy
• 13 years to millionaire – Frugal investor strategy

Disclaimer: I’m not an investment advisor or financial planner. I’m not affiliated with any website or link mentioned in the article. I’m just a coder who has built his own scalable business online.

Programmer Humor

Q: What is the object-oriented way to become wealthy?
💰

A: Inheritance.