How to Become a Millionaire

American households have never been wealthier but that wealth is not evenly distributed.

The top 10% controls more than 70% of the total wealth in this country as of year-end 2022.1

The good news is, there are those outside of the top 10% who are catching up.

Based on the latest estimates from the Federal Reserve there are around 16 million American households with a net worth of $1 million or more. That’s up from fewer than 10 million millionaire families in 2019.2

Most of these newly minted millionaires came from the 10% below the top 10%. The Wall Street Journal says the most significant wealth gains went to the upper middle class:

Indeed, the biggest wealth gains between 2019 and 2022 were among the approximately 13 million families in the 80th to 90th percentile of the income distribution. Their median wealth jumped 69% from 2019, adjusted for inflation, to $747,000 in 2022.

I’m sure some of these members of the two-comma club got there by making a lucky bet or winning the proverbial lottery in crypto or start-ups or something exciting.

But most got there taking a more boring, long-term approach. The Journal explains:

Rather than being swallowed by the 1%, the economy, according to these numbers, is creating a growing upper middle class. Many people got there by pursuing college degrees, steadily building retirement accounts and purchasing homes. For the most part, they became wealthy slowly, and were well-positioned when pandemic-era stimulus programs boosted asset values. 

I know some people think the American dream is dead but that sounds like it to me. Get an education. Get a good job. Buy a home. Save in a workplace retirement plan. Build wealth over time.

Life might be easier if you could become rich overnight but building wealth slowly is more realistic.

Getting wealthy is not easy for most people but staying wealthy is harder than it sounds as well.

I wrote about this in Don’t Fall For It:

The top 10 families by wealth in 1918, 1930, 1957, and 1968 saw their wealth cut in half in 13 years, 10 years, 13 years, and 8 years, respectively. There’s an old saying that the first generation builds the wealth, the second generation maintains it, and the third generation spends it. Research shows this saying may be too lenient to the second generation. Grouping the top 30 members of the Forbes 400 list by generation, Arnott, Bernstein, and Wu found it was the first generation that maintained their wealth over their lifetimes, but the second generation saw a half-life of 24 years, while it took the grandkids just 11 years to cut their inheritance in half.

High-income earners have a similarly difficult time staying at the top. Research shows over 50% of Americans will find themselves in the top 10% of earners for at least one year of their lives. More than 11% will find themselves in the top 1% of income-earners at some point. And close to 99% of those who make it into the top 1% of earners will find themselves on the outside looking in within a decade.

One of the reasons these wealthy families blow through their money is because it’s like winning the lottery.

Slow wealth is stickier because it doesn’t hit you all at once. You become accustomed to it in bits and pieces as opposed to experiencing a one-time jump that shocks the system. People appreciate slow wealth more than fast wealth.

There are many different ways to become a millionaire.

Starting your own business. Betting big on a winning investment. Marrying into wealth.

For most people, your best bet is making more money over time, saving a decent chunk of that income, investing wisely and getting out your own way.

Building wealth slowly works.

Further Reading:
Americans Have Never Been Wealthier & No One is Happy

1The good news is the biggest jump in wealth came for the bottom 25%. It’s still a small amount relative to the total but the median gain was nearly 800% (adjusted for inflation) for this net worth cohort.

2These numbers include real estate which is why it might be higher than most people would assume. There are an estimated 131 million U.S. households, which means 12% of them are millionaires. Multimillionaire households make up 6% of the total.

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