The first million is bought by earning. Everything after is bought by investing.
I spent a week pulling hundreds of millionaire profiles into a spreadsheet.
I was trying to decide where to put my effort next.
I expected the answer to be earning. It mostly was.
Then I found the handover point: about one million.
The thing I was actually trying to work out
I worried that I was giving investing too much weight. Investing can feel productive without asking much of me, which makes it a convenient excuse.
So I checked the arithmetic.
Finding one: their portfolios out-earn them
Some profiles include net worth, income, and savings rate. With those, I can compare annual saving against expected annual returns.
At 7 percent real, 86 percent had portfolios producing more each year than they saved. At 5 percent, 77 percent did.
The median case looked like this:
| Annual amount | |
|---|---|
| Saved from income | 68,000 |
| Return at 7 percent real | 182,000 |
The portfolio was producing 2.7 times the annual saving.
Finding two: the handover happens at the first million
The handover is the point where annual returns equal annual saving.
Using the median annual saving of 68,000:
- At 7 percent real, it happens at about 971,000.
- At 5 percent real, it happens at about 1,360,000.
At the corpus medians, saving about $68k a year. Both lines are straight, so the crossing point is exact.
Seeing the crossover written down made it harder to ignore.
It is simple division, but it changes how I see the milestone. Below that point, my savings do most of the work. Past it, returns do more.
More annual saving pushes the crossover later; less brings it forward. One million is the median case, not a law.
The part that looks like a contradiction
Three quarters say earning made them rich. Yet 86 percent now have portfolios adding more each year than they save.
I had been treating two different questions as the same one.
People tend to credit what they did. Earning involves job changes, negotiations, and years of work. Investment growth is easier to overlook day to day.
Timing matters too. They are describing how they got there. Before the crossover, their saving mattered more than the returns. The 86 percent figure describes where they are now.
| Phase | Main annual force |
|---|---|
| Before the handover | Earnings and saving |
| After the handover | Investment returns |
What I'm doing with this
Before the handover, earning matters most. I wanted the data to tell me otherwise. It did not.
After it, my job changes. Now I'm more worried about screwing up the money I already have.
Caveats, and what I'd check next
The return figures assume 5 and 7 percent real. A lower return pushes the handover later.
Everyone in this dataset succeeded. There is no control group and no record of the same choices failing. Survivorship is baked in.
The figures and stated strengths are self-reported.
I want the age at the second million. That would be a better test than backing into it from the math. The questionnaire does not ask, though some people mention it in prose.
A quicker second million would help check the calculation. I may be able to pull that from the written responses later.