Another Millionaire At 33?
Posted by Frugal on August 19th, 2008
The story of Rodrigues family in money magazine reaching a potential networth of $2.9 million by 40 is the prime example of how “easy” one can become a millionaire.
How does that work? Gina and John Rodrigues have a combined income of $174000. But that is not the biggest reason that they will make it to 7 digits, from their current net worth of $380000 at age of 27. After all taxes and expenses, they save $91000 a year! As I have repeated many times, it’s not how much you earn, but how much you save that counts. Their frugality is certainly beyond any ordinary couples would undertake. However, at the rate of almost $100K saving a year, you can become a millionaire in about 10 years, even assuming that your money compounds at close to 0%.
Obviously, if you have kids, you will be in an entirely different league of saving competition. So don’t feel too upset about your own saving level.
The pre-requisite to a high saving amount is certainly a high income. Dual income usually helps, if you can justify the visible childcare and tax expenses, and invisible human cost. Otherwise, a career in doctors, lawyers, accountants, architects, engineers, and financial industries are usually a faster track to a high income.
For obvious reasons, Rodrigues will most certainly exceed my net worth at the age of 40. This will be an ongoing trend partly due to inflation. It will simply be easier and easier to become a millionaire for the people whose wage rides on the inflationary wave. Probably 90% plus of the people cannot grow their net worth at a rate that exceeds inflation rate due to taxes and other reasons. Therefore, a new fresh graduate in the right career will always have a much better chance in joining the millionaire status and beating the older people who may have not accumulated and grown their assets faster. For those people who are in their twenties, grab your chance and make your own heydays. There will be people who are left behind. Don’t be one of them.
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August 19th, 2008 at 10:13 am
Your example shows how lifestyle and consistent savings will lead to creating wealth. I recall reading about a Veterinarian in Money magazine that made over $100k a year but also had over $36,000 in debt that was hurting his savings goal. They also didn’t have the basic emergency savings account. Makes you scratch your head how a Dr. has a hard time saving just $5,000. If it’s hard for a Dr., it’s just as hard or more, for someone making $40k a year. If the Rodrigues’ can save $90k a year, good for them! That is a tremendous goal.
August 19th, 2008 at 10:30 am
Obama would make those Rodrigues’ pay their fare share! Knock that down to $60k of savings a year.
August 19th, 2008 at 4:23 pm
Since you have only less than 500k net worth right now…they are already ahead of you at age 27!!!
August 19th, 2008 at 7:08 pm
Nice discussion on these folks here
August 19th, 2008 at 9:16 pm
Max,
My net worth is scaled down by a fixed factor. Why don’t you read carefully? Whether I have more or less than Rodrigues, does it make you sad or happy??
Westwest888,
Rodrigues are already paying $30K in taxes. And they’re decent people too, tithing $18K every year.
I think we all forget that taxing the rich is usually counter-productive as a whole society. Communism is the ultimate form of that taxing the rich. And in a communistic society, the productivity of the entire society reaches to the lowest point. A balance is needed no doubt. But more taxes is not a solution to a excessive government. And that’s why I support Ron Paul.
August 20th, 2008 at 3:16 am
It does not make me sad or happy…I asked that only because you said “For obvious reasons, Rodrigues will most certainly exceed my net worth at the age of 40.”
August 20th, 2008 at 8:21 am
I was being sarcastic. Even on a six figure income it’s difficult to get ahead. I’m also a Ron Paul fan and I still champion his ideas.
August 20th, 2008 at 10:53 am
At an income of $174,000 they don’t make enough to have to worry about a tax increase under Obama. He was talking about raising taxes (by 4%) on individuals making over $250,000. I make over $250,000 and don’t mind having to pay an extra 4% on that last part of my income given the state of our economy and burgeoning deficit. I will also see an increase in my payroll taxes, currently because I earn a high income I pay less in payroll taxes than most of you. Right now you only pay payroll taxes on the first $100,000 of your income and nothing more. So if you earn less than $100,000 you pay just as many dollars in payroll taxes as someone who makes $10,000,000. For people earning less than $100k payroll taxes are a big tax that no one ever talks about in politics since it doesn’t effect rich people. If I were earning a middle class salary I would be pissed as hell about that. Mind you that is individual income too, assuming both the Rodriguez husband and wife work their net tax increase under Obama would be zero (both in income tax and in payroll tax). In fact for over 95% of wage earners this would be the case, the people who would see a tax increase are people like myself who make over $250,000 a year (and this will probably change to applying only to people making over $365,000 per year).
August 21st, 2008 at 9:36 am
The key issue in building wealth isn’t savings. It’s not building up debt.
Personally I heard financial advisors state to “pay yourself first”…nice advice…if you don’t owe huge amounts to credit cards, etc.
These people at least have savings, but >$400K in rental mortgages…Nah…they need to back off the quantity of properties, lower the liabilities (yes lowering cash flow) in order to reduce their debt exposure. (Don’t tell me that it’s good debt either. No debt is good.)
August 21st, 2008 at 12:58 pm
They will never make their goal, unless they walk into a sizable inheritence. They were highly lucky on their first real estate sale, and, won’t fare as well on their current properties, as they are under water on both. Are they selling them asap? They’ll pay 6% to sell, plus they are losing money on a monthly basis since they own in the Phoenix area. Owning that much Microsoft stock is an ignorant and perhaps greedy play (probably only the former). Even if they make their goal of $1 million by age 40, then what? Live off of that??? Hardly. Mine as well become a pauper. There plans are pie in the sky.
August 29th, 2008 at 5:21 pm
Agree with JD, the Rodrigueses don’t make enough to face higher taxes under Obama, they would need to add over $100k to their income just to make the minimum threshold. They will see a TAX DECREASE under Obama’s plan just like anyone else making less than $250,000 a year (95% of the population). Like JD I also make over $250K per year and don’t mind paying a little more if the middle-class can finally get some relief. And to Frugal you mention most people won’t be able to increase their income in-line with inflation, you need to look at history and you’ll see that except for the last 8 years incomes have always risen higher than inflation since the Great Depression. This past 8 years marks the first time since the Depression that incomes haven’t kept up with inflation. The high inflation we’re seeing is due almost exclusively to the weak dollar, while America has always had a strong dollar policy this is the first administration that never acted on it. When you have a huge budget deficit and need to be increasingly dependent on the Chinese and Arabs to fund operations this is what you get.
September 4th, 2008 at 4:51 pm
Get a 2nd job or income. I got a 2nd job 17 years ago, working about 10 hours per week extra. It is a consulting job averaging about $40.00 per hour. My hours are very flexible. I usually work a couple of hours a night on weekdays only.It has given me about $19k of extra cash every year. I have made over $300k in extra money in the last 17 years. I have never spent this extra money. I have tracked every dime I have made. I have invested it in stocks that raise dividends every year. My cash flow is great now. What did I give up? Well, I have watched no stupid sitcom TV shows in 17 years. I have never seen American Idol or Dancing with the Has Beens. I am not familiar with any of those shows. I hear people talking about those shows during the workday at my day job. I basically gave up nothing and set myself up with financial independence.