Ever been curious about how many millionaires live in the USA? Ever wanted to be one?
Then you're in the right place.
The Credit Suisse Research Institute recently released its Global Wealth Report 2016 (link opens PDF). It's chock-full of interesting information, but I was fascinated to learn that, according to the report, the United States has approximately 13,554,000 millionaires.
That's a lot of people -- roughly 4% of the total U.S. population. Here's how you could join that club.
Here's how not to join the club
If you want to be a millionaire, awesome! Let's start with things that generally won't work:
- Winning the lottery: It's just not going to happen. You have a 1 in 292 million chance of winning the Powerball. As noted by the International Business Times, you're more likely to be elected president of the United States than you are to win the Mega Millions jackpot.
- Getting a super-high-paying job: Check out this great infographic from Business Insider of the highest-paying jobs in each state. Most of these jobs are for doctors of one sort or another. Or CEOs. (Or, while they're not mentioned in the infographic, professional athletes.) Those are specialized jobs requiring specialized skills. If you aren't already on track for them, they're probably just not going to happen.
- Most get-rich schemes you read online: Day-trading has worse odds than gambling -- according to most stats on the internet, day-traders can expect a roughly 95% failure rate. Flipping houses usually costs more money and time than you expect, and it doesn't make sense for people without a lot of experience and a cash cushion. Learning search-engine optimization and then operating websites for other people? Take it from someone who works in SEO: Learning and then marketing those skills to local businesses is a lot easier said than done.
But don't give up hope.
The simple (boring) way to become a millionaire
Forget all that high-powered, exciting nonsense above. The easiest way to become a millionaire is also the most boring: spend less than you make, build up some short-term savings, and invest everything else.
Like I said: boring. But it can work, so long as you put money away each month and let the magic of compounding do the rest. Let's say you commit to saving $5,500 in 2017 and investing it in a low-cost index fund or exchange-traded fund that matches the S&P 500's return (Vanguard's S&P 500 Index ETF is a great example). I picked that number specifically because it's the maximum you can save in an Individual Retirement Account (or IRA) this year. If you commit to saving that amount in 2017, and increase the amount you save by 5% each year after that, then in 30 years, you'll have...$1,136,661. That assumes 8% annual returns from the stock market, which is within historical averages for the S&P 500, and no taxes -- which, since your money isn't taxed while in an IRA, seems pretty reasonable. Of course, the amount the government allows you to save in an IRA may not grow at 5% annually, so you may have to sock some of the additional money away in a 401(k), 403(b), or other tax-protected account (or even a regular brokerage account).
Investing in the stock market, done right, is boring; you won't get that hit of dopamine from throwing your money around. But the compounding effect of investing for the long haul is one of the most powerful forces out there. And, when it comes to joining the millionaires' club, success is all that counts. Here's how to get started.