The Stages of the Financial Life of a Future Millionaire

Millionaires are not normal.  They are not special.  They are not lucky.  But they are not normal.

They don’t accept the “truths” of life.  That you must always have a car payment.  That you should buy the biggest house you can afford.  That you need to use a credit card to build your credit.  That you need to go to an expensive school and take out student loans to succeed.  That rich people have some special connections and that no one in the middle-class can ever become wealthy.

Future millionaires are weird.  They drive old cars and just don’t care what people think.  They bring their lunch and eat at their desks.  They buy modest, unremarkable houses in the established part of town and when they buy them they put down a big down-payment, or pay cash for the whole thing.  They don’t care about having the latest electronic gadgets.  They don’t play golf.  They don’t dress for success.

They know that the way to become wealthy is to spend less than you make and to earn money from their savings.  They receive extra income from investing, rather than paying extra money to credit cards and car finance firms.

The weirdest thing about future millionaires is that they have a plan.  They know where their money goes each month because they tell it where to go.

The stages of the life of a “normal” person and a future millionaire are as follows:


Joe Normal: Goes to the expensive college, taking out student loans to do so.  Takes out extra loans to pay for meals and an apartment.  Has difficulty choosing a major, so spends 5 or 6 years getting a degree.  Graduates with $50,000 in loans.

Sam Millionaire:  Could go to an expensive school, but chooses a state school because of the low tuition.  Gets as many little scholarships as possible the summer before starting.  Works a part-time job during school and full-time during summers to pay tuition.  Graduates in 3 1/2 to 4 years with a practical degree in something like engineering or business.


Joe Normal:  Starts his first job.  Buys a new car and a new house with 0% down.  Starts paying student loan debt.  Gets premium cable with NFL Sunday ticket.  Has a phone with the full data plan.  Eats out all lunches and most dinners.  Goes to the bars on the weekends and buys several expensive drinks.  Has no idea where his money goes.  Has no savings and spends every dollar he earns.

Sam Millionaire:  Starts his first job.  Buys a used car and rents a room in a home or gets a small apartment.  Saves up money for an emergency fund and then start putting 15% of his pay into the company 401k plan and an IRA.  Brings most lunches in and eats out about once a week.  Splits the meal and eats the rest for lunch when he does go out.  Starts an investment account once his emergency fund is formed and starts putting extra money into stocks a little at a time.  Knows and tracks and plans for where each dollar goes.


Joe Normal:  Continues to climb the corporate ladder and make more money.  He buys new cars every couple of years and has made some renovations to his house.  He has also acquired a timeshare that he never seems to be able to visit.  He has two children and spends most meals eating out, feeling too busy to cook.  Despite making almost $100 thousand per year, he has only a couple of thousand dollars in the bank.  He has amassed $20,000 in credit card debt due to all of the unplanned expenses like car repairs and home repairs, along with a few vacations and meals out he has put on the cards.  He also still has $35,000 in student loan debt, owes $30,0000 more on his home than it is worth due to a HELOC he used to pay for the renovations.  Any equity he has amassed has been used to pay down credit cards.  He has also cashed out his 401K to pay down debt and take a vacation, despite the 50% in taxes and penalties he paid to do so.

Sam Millionaire:  Sam moved into his first house five years ago, paying a 50% down-payment and taking out a 15 year loan that he can easily afford.  He has already amassed about $100,000 in his 401k.  He still drives used cars, although the quality has increased considerably, having enough income beyond his expenses to easily pay for four-year old cars out of his savings.  He also has about $100,000 in investment accounts, from which he can float home repairs and other expenses.  He also has two children, and has created college savings accounts for them into which he puts the maximum each year.


Joe Normal:  Despite making a couple of million dollars in earnings, has no real savings to show for it.  Still has some student loan debt, and continues to have credit card, mortgage, and car debt which are taking about $15,000 per year from his income in interest payments.  Both children have completed college and are coming out with tens of thousands of dollars in student loan debt.  At this point Joe Normal is starting to get a little worried about retirement and start contributing what he can to his 401K, which has been decimated a couple of times and therefore only has about $20,000 in it.

Sam Millionaire:  Sam made his first million at about 43 and has since doubled that split roughly between retirement savings and his other investments and assets.  He has no debt and his earnings from investments are more than enough to pay for all of his expenses, although he continues to work anyway because he likes his job (or alternatively, he starts a different career, using the freedom gained from his investments).  He paid off his first home loan at 39, several years early, and continued to save.  Deciding he wants to have home in a different location with more amenities, he buys a more expensive home, paying cash.  He also buys a cabin as a weekend getaway.  He thinks about renting it out but decides that it is not worth the hassle.

Because of the educational IRAs and other investments his children have graduated without student loans.  In fact, he was able to provide money as gifts during their high school years and set up investment portfolios for them that allowed them to pay for a lot of their college expenses with the earnings.  When they graduate, they already have a good cushion that provides a more than adequate emergency fund and will give them money for a down payment on a house.  Because they have become accustomed to investing they naturally contribute funds from their jobs to grow the investment account.


Joe Normal:  Joe realizes that the best he can hope for in retirement is a savings of about $200,000, which will only provide about $12,000 per year in income, and realizes that this will require a drastic reduction in his lifestyle.  He works all of the extra hours he can to save as much as possible.  He takes much more risk in investing that he should because of the small amount of time left.  He decides he will need to work until he is at least 70, and possibly beyond, and hopes that he is healthy enough to do so.

Sam Millionaire:  Sam is now worth about $5 million and knows that he will be worth about $15 million by the time he is seventy.  His wealth is split among the properties he owns, a stock account, a bond portfolio, and a couple of savings accounts.  The earnings from his work seem trivial compared to his investment earnings, but he keeps working because he really likes his work.  He has also found that not worrying about his income has allowed him to pick the work he likes rather than doing what is needed to climb the ladder.  He takes a nice vacation each year, paying cash generated by an investment account he has set up specifically for travel, and also spend weekends frequently at his cabin.  He has also made several improvements to his home, again paying cash each time which has allowed him to get discounts from contractors.  He also gives generously to charities and individuals.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.


  1. This reminds me of the book “The Millionaire next door”. Rich people aren’t special, they just made smart, often boring choices along the way that mean putting off todays joy for later financial stability.

    Makes me wonder why their is so much anger towards rich people in the States right now. For the most part, wealth is a choice.

    • I don’t think there really is a lot of real anger. I think it is people trying to create anger by making people in the middle class envious of rich people to gain power. It is similar to how the Nazis scapegoated the Jews before WWII, saying that they were the reason for the depression the German population was going through. The tactic doesn’t seem to be working very well in the US though, given recent low attendance at Occupy events. There seems to be more anger at government spending, given the strength of Tea Party events.

      • At the occupy event in Vancouver they had a sign that said “eat the rich”.

        I love the idea that working hard and being smart with your money makes you evil somehow!

      • Right. It is people trying to get into power by feeding off envy. “If that guy is rich, it must be because he somehow wronged you, so you should vote for me and I’ll take his money and give you some in the name of “fairness.” Never mind that that guy got rich by creating a product or service that makes your life easier, and that you gladly pay the price he asks for it. Because he is wealthy and you’re not, it’s not fair.”

        In the US, at least, that isn’t selling so well. It goes against the basic American ideal of personal responsibility and the ability to go from poverty to riches if you are willing to work hard and have some luck. It will take a couple of generations to forget how good things are when everyone is working and has freedom of opportunity. It may sell better in Canada, given that the country is more Socialistic.

      • Agreed. What are the stats? In America 5% of the people pay 40-60% of the taxes and then people say the rich should pay their fair share?

        How about a nice “thank you” instead.

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