Turns out, earning half a million dollars every year makes it easy to be a millionaire after a few years.
The majority of his NW comes from investment and savings, not income.
The point of the article is that cutting expenses, saving, investing wisely, and aggressively pursuing pay raises can yield a few million well before retirement age.
These sort of casual dismissals negate the educational value of the post.
Most people will have nowhere near the same results as the author by implementing these things.
The biggest factors here are:
1) Earn a lot of money
2) Don't spend it all
I don't think this post has much educational value at all because I think most people already understand those points, they just can't execute on them in a meaningful way.
Living expenses tend to grow slower than incomes, as incomes go up.
You don't pay 200% rent for 2 people, but for sure you can earn 200% with 2 people.
I would say $475k is close enough, in all honesty.
> The majority of his NW comes from investment and savings, not income.
Sum of (earnings - spent) over the career is $2,611,000. Net worth by the end is $2,400,000. In order for investment returns to be above savings on income, taxes would have to be 42.3% of lifetime earnings, which would be a bit surprising.
You should also hire a CPA or at least spend some time reading about strategies to minimize taxes if you are paying close to an effective 50% income tax on $500k of income.
You will not get as low as someone with their own business or S corp, but the tax advantaged savings account should help.
If you earn more than $523,600 and are single, then your tax rate is not 50% but 37%, which is still meaningful amount that is often not considered when looking at those big numbers. https://www.manafld.com/blog/2021/2/26/rsus-no-sell-tax
If you are in California, then your employer will not give you all your RSU but sell 40% and give you 60%. So you don’t have a big scary surprise when it’s tax season. https://blog.myrawealth.com/insights/rsu-tax-rate
The federal income tax rate only for income above $523k is 37%. Only for income above $523k.
> If you are in California, then your employer will not give you all your RSU but sell 40% and give you 60%. So you don’t have a big scary surprise when it’s tax season.
Withholding amounts seem irrelevant when discussing effective tax rates.
https://smartasset.com/taxes/income-taxes#gJwOxy2ei7
But that is without 401k/HSA/etc.
I calculated 42% effective on lifetime income, and I suppose the writer was not taxed at 42% on their 100k income from the first years, so the tax rate for later years must have been higher.
That is entirely irrelevant. You will get taxed the same no matter what they sell and give you. If your tax rate should be less than 40% (true for me, and probably most people here), you'll get the money back as a refund.
You do miss out on any appreciation, but if you know your marginal tax rate is < 40% (just look at your previous tax returns to figure it out), you can simply spend the delta to buy the stocks you should have gotten and you'll still get the appreciation (and the cash in the tax refund to compensate you for doing this).
475k == 500k for all practical purposes. The guy averaged 525k for 3 solid years (not "one year") -- which makes the parent comment rather less flip.
These sort of casual dismissals negate the educational value of the post.
The bottom line is that while saving and investing is certainly smart -- you better damn sure be earning 98 percentile income as well if you want to get as far ahead of the game as this guy has.