Everybody wants to become a millionaire. Unfortunately, not everybody’s chances of becoming a millionaire are the same as the playing field is not even. This article looks at historical data on your chances of becoming a millionaire by race, age, and education.
Getting to at least one million dollars in net worth is a nice milestone to achieve. However, due to inflation, you need more than $3 million to live the traditional millionaire lifestyle today. Thankfully, I firmly believe the majority of people reading Financial Samurai and other personal finance sites will be able to achieve millionaire status.
If I were to guess the exact percentage of Financial Samurai readers who become millionaires in their lifetimes, I would say 60 percent. This doesn’t seem like a particularly high percentage. But once you’ve read the statistics below, you’ll come to agree that 60 percent is a home run figure.
For the remaining 40%, even if you don’t become millionaires, you’ll likely still build way more wealth if you keep on reading Financial Samurai and other finance sites than the average person who does not.
Since 2009 I’ve received dozens of e-mails from readers saying they’ve busted through the $1 million net worth figure thanks to aggressive saving and investing. Many have mentioned they wish they had discovered the personal finance world sooner. But better late than never I say!
So what about the rest of the 330+ million Americans who were fortunate enough to be born or gain citizenship to our great country? What are their chances of living the champagne dream and caviar lifestyle? Let’s have a look.
How Many Millionaires Are There In America?
Before learning about your chances of becoming a millionaire, let’s find out roughly how many millionaires there are in America.
According to Spectrem Group’s Market Insights Report, in 2020, there were roughly 9.8 million individuals with a net worth between $1 million and $5 million. There were 1.8 million individuals with net worth between $5 million and $25 million. Finally, 156,000 households (not individuals) had more than $25 million in net worth.
In other words, there are roughly 11.8 million millionaires in America, making up roughly 3.5% of the population. This count is at a record high thanks to a long bull market in stocks, bonds, and real estate.
According to Credit Suisse’s latest Global Wealth Report, they estimate there are actually 22 million millionaires in America. That’s an impressive 6.5% of the population. Whatever the true millionaire count is, there are millions of millionaires and growing!
With stocks, real estate, and other risk-assets continuing to do well in 2021, the number of millionaires is likely even higher. Further, I suspect the actual millionaire number is higher due to stealth wealth and plenty of unreported or underreported assets. It’s easy to obfuscate the value of your own private business.
Now let’s look at three insightful charts based on Federal Reserve data that shows your chances of becoming a millionaire by education, age, and race.
Your Chances Of Becoming A Millionaire By Educational Attainment
The chart says that the more education you receive, the higher your chances of becoming a millionaire across all races.
This makes sense since high-paying jobs often require higher levels of education e.g. lawyer, doctor, executive management, and scientist. However, thanks to free online learning and shorter specialty school programs, a college degree is slowly getting devalued.
Chances Of Becoming A Millionaire With A High School Degree By Race
- Asians 6%
- White 5%
- Hispanic 2%
- Black 1%
Without a high school degree, you practically have no chance of becoming a millionaire across all races.
Chances Of Becoming A Millionaire With An Associate’s Degree By Race
- Asians 3%
- White 7%
- Hispanic 2%
- Black 1%
For Asians, your chances of becoming a millionaire are actually higher if you only have a high school degree versus an Associate’s degree (6% vs 3%). Perhaps this is due to the prevalence of more Asian small business owners.
If you are Hispanic or Black, the percentage probability of becoming a millionaire does not change if you have a high school degree or an Associate’s degree.
Chances Of Becoming A Millionaire With A Bachelor’s Degree By Race
- Asians 16%
- White 18%
- Hispanic 4%
- Black 3%
If you are Hispanic or Black, this data should make you very wary of getting into student loan debt. Please apply for as many scholarships and grants as possible to minimize the cost of attending college.
If you are Asian or White, getting a college degree significantly increases your odds of becoming a millionaire.
Chances Of Becoming A Millionaire With A Master’s Degree By Race
- Asians 27%
- White 38%
- Hispanic 11%
- Black 6%
By the time someone has a Master’s degree, chances of becoming a millionaire should be similar across all races. However, the difference between the percentages between White (38%) and Black (6%) is striking.
If I was a White person, a Master’s degree is exactly what I’d get. Maybe just not a Master’s degree in History or Journalism if you want to become a millionaire.
Unless Hispanic and Black people are getting a Master’s degrees in mostly low-paying fields, the huge percentage discrepancy is too egregious. Put it differently, the chance of a Black person with a Master’s degree becoming a millionaire is the same as an Asian person with only a high school degree.
The Master’s degree percentage discrepancy between Whites and Blacks is the strongest evidence of systemic racism. I’m not talking about one person hurling a racial slur at another person.
I’m talking about things like a private club, where it was originally 100% Whites only 70 years ago. Today, the club says it is open to all races. But to get in, you need to get five letters of recommendation from existing members. If you are a minority, you will have a harder time getting this support network together.
You see the same thing happening when applying for preschools, private schools, high-paying jobs, and so forth.
People Tend To Take Care Of Their Own
To explain why this huge difference exists, my theory is that people tend to take care of people who are most similar to themselves. Thus, if the majority of people in power are White, then more Whites will benefit at the expense of other races. Therefore, the chances of being a millionaire is higher if you are White and lower if you are a minority.
When I was working in Asian Equities, the head guy based in Hong Kong was a White English chap. To nobody’s surprise, he appointed White English heads at our offices in London and New York.
When the head English guy left, a Korean guy became the boss. The English heads in London and New York got laid off, and in came two Koreans to head the respective offices.
I bet if your new boss came from Tasmania, you would suddenly see a lot more Tasmanian lieutenants. If your new boss was a woman, you’ll likely have more female colleagues.
Despite over 11 years of online writing experience, there is probably little chance I could land a job at the Huffington Post given I’m male and Asian. The reality is, I probably wouldn’t even try to apply there based on the lack of diversity. Therefore, if a company wants to recruit a diverse group of employees, there needs to be diverse representation. Nobody wants to feel like the odd person out.
I don’t think most people are intentionally racist. I just think that most people tend to hang out with and help people who have similar backgrounds. Just look around your social group and in your workplace.
Your Chances Of Being A Millionaire By Age
The older you are, the greater your chances of becoming a millionaire. This is obvious thanks to compound returns. The earlier you can start investing, the better. Most of Warren Buffet’s wealth came after his 60th birthday.
Everybody’s chances of becoming a millionaire improves up until the age of 61. But after 61, the chances for Hispanics and Blacks to become millionaires declines.
It’s interesting to note the slopes for Asians and Whites are much steeper. Asians and Whites have significantly higher chances of becoming millionaires as they age likely due to a higher representation of Asians and Whites in higher-paying industries.
Another hypothesis is that Asians and Whites make up a greater representation of investors in stocks, bonds, and real estate at all ages. Given investments don’t differentiate between races, investments tend to keep appreciating after the age of 61.
Equal Opportunity Is The Goal
The slope differences between races means there is different levels of opportunity. Therefore, there’s been such a huge rally cry for Hispanic and Black diversity in many industries. Equal opportunity is really all we can really ask for. The rest of our success depends on work ethic, skills, and lots of luck.
The call for diversity is particularly strong in Tech and Finance, two of the more higher-paying industries.
If you were able to join Apple as a 22-year-old 10 years ago, you’d mostly likely be a multi-millionaire by now. But look at the gender and race representation of Apple in the chart below. It looks quite similar across all the big tech companies.
However, I’ve also noticed there’s not much of an uproar in industries that traditionally pay less.
For example, there has been no call for diversity in grade school teaching where the vast majority of teachers are female (~76%). There has also been no call for diversity in the military, where the broad majority of service people are male (~84%).
Hopefully, those who fight for diversity are also willing to fight for diversity across the board, not just at places that pay the most money.
Your Overall Chances Of Becoming A Millionaire By Race
- Asian 22.3%
- White 21.5%
- Hispanic 6.8%
- Black 6.4%
Putting everything together, the Fed data says Asians have the highest probability of becoming millionaires. This is interesting since Asians are the smallest minority, representing roughly ~6% of the American population.
On the flip side, perhaps it is easier to mobilize a smaller population to heavily invest in their future. Singapore and its 5.6 million population is an example. Singapore has a per capita GDP of $53,000. Now compare the difficulty of mobilizing 1.5 billion people in China with a per capita GDP of only $8,200.
Finally, U.S. immigration policy may have something to do with giving Asian Americans a head start. In 1992, Congress created the Immigrant Investor Program to stimulate the US economy and promote job growth.
If you and your family can invest $500,000 in an overseas commercial venture, it’s highly probable that you are already a millionaire. Thus, given the relatively small base of the Asian-American population, it may be fair to ascribe a small portion of Asian millionaires to this cohort group.
However, I also know of several Asian families who escaped difficult government regimes and arrived in America with absolutely nothing. Therefore, it’s hard to generalize, since there are many different types of Asians.
Finally, perhaps there is a cultural reason due to the intense focus on education in many Asian cultures. Here are some personal insights into Asian wealth and income.
Do You Like Your Odds Of Becoming A Millionaire?
The odds of becoming a millionaire in America are between 6.4% to 22.3% according to data from the Federal Reserve Board’s Survey of Consumer Finances.
I’d gladly take those odds over trying to become a millionaire in any other country. I bet the odds of becoming a millionaire in Zambia, where I lived for one year, is less than 1%. Zambia’s GDP per capita is only $3,900, or 1/9th the GDP per capita in the US.
But returning to my original thesis, I believe that around 60 percent of you who consistently read personal finance sites will become millionaires in your lifetime. You will naturally take action to boost your wealth with a positive money-mindset.
60 percent didn’t sound like much in the intro, but now you know that 60 percent is 2.72X higher than the highest chance anybody has of becoming a millionaire in America.
How To Increase Your Chances Of Becoming A Millionaire
One of the biggest goals on Financial Samurai is to help people of all races become financially independent sooner, rather than later. With interest rates so low and future investment returns likely going down, financial independence often requires becoming a millionaire.
Put it this way, $1 million only generates about $5,000 – $17,000 a year in risk-free income. The reason why is the 10-year bond yield is around 1.7% and the best money market savings rate is now only about 0.5%. As a result, investors are being pushed to take on more risk for higher returns.
Here are my recommendations for how to increase your chances of becoming a millionaire:
1) Read personal finance sites every day.
Personal finance sites do a lot of things, but most of all, they make you pay attention to your finances.
As soon as you have heightened awareness about how much you are saving, what you are investing in, your net worth asset allocation, and your retirement plan, it’s only natural to generate more wealth than the typical person who is financially unaware.
Personal finance sites are often like free financial coaches, pushing you to continue instead of giving up. When you see someone day in and day out work on their finances, you can’t help but want to improve your finances as well.
In addition to reading personal finance sites every day, read as many finance-related books by people who are multi-millionaires. You don’t have to reinvent the wheel. You simply have to follow the guidance of those who’ve been there before.
2) Run the numbers.
Becoming a millionaire is a function of income, savings rate, investment returns, and time. Therefore, you can easily run various financial scenarios that will make you a millionaire. Here are some examples:
- Put away $350 a month and earn 6% a year, you will become a millionaire in 46 years.
- Max out your 401k and earn 7.5% a year, you will become a millionaire in 22 years.
- Max out your 401k and invest another $1,000 in after-tax proceeds a month, you will become a millionaire in just 17 years if you earn 7.5% a year.
Religiously track your net worth in order to optimize your finances. You don’t want to wake up 20 years from now and wonder where all your money went.
3) Do what the average person won’t do.
Obviously, if you want to become a millionaire sooner, you’re going to have to do things the average person won’t do. Here are some examples:
- If the average person works 40 hours a week, try working 60 hours a week to see if you can get paid and promoted faster.
- Try to create multiple income streams instead of just having one income stream, which is typical of the average person.
- If the average person only invests in index funds, try to invest 10%-20% of your stock allocation in individual stocks. Your overall portfolio might underperform, but at least you’ll have a chance of outperforming.
- If the average person wakes up at 7 am, try waking up at 5 am for a year to work on your side hustle. Maybe an extra 730 hours a year will make you more productive.
4) Get motivated by the statistics and don’t quit too soon.
What’s annoying about statistics is that they can discourage you from trying. However, one of the core principles of Financial Samurai is to never fail due to a lack of effort because effort requires no skill.
If you don’t like your millionaire odds, change them!
Do not settle for what the data says about your chances. In fact, the lower your percentage chance of becoming a millionaire according to the Fed, the more motivated you should be to beat the odds. Once you do, it will be all the more gratifying.
One of the keys to building great wealth is not giving up. If you can try consistently for at least 10 years, I’m positive you are going to dramatically improve your odds.
5) Work in the highest paying industries.
If you want to be a millionaire, then you might as well seek employment opportunities in the highest-paying industries. These industries include finance, tech, medicine, law, strategy consulting, and entrepreneurship.
Generating a high income makes becoming a millionaire much easier. That said, you still have to have the discipline to save a good portion of your money. There are plenty of high income earners who end up broke due to poor financial habits.
6) Invest in the least diverse companies.
Let’s say you can’t join a fast-growing company no matter how hard you try. You also don’t think the company will ever change its homogenous workforce. Instead of getting left behind, if it is publicly traded, consider investing in the company.
This way, you get to participate in the company’s growth and have its homogenous workforce work for you!
Come up with a list of the least diverse publicly traded companies. Compare their diversity report card from five years ago and today. If not much has changed, you might be onto something.
Companies love to talk about diversity & inclusion, but it’s really hard to change established culture. If you can skillfully recognize human biases, you can increase your chances of becoming a millionaire.
7) Build your social network of highly motivated people.
Your parents were right. If you want to have a greater chance of success, whatever that means to you, you should probably hang out with people you think are going places. This includes marrying the right person.
Let your friends challenge you to do more. Over time, your friends will naturally become wealthier and more successful. If they are your true friends, they will want to bring you up along with them. If you are their true friend, you will do the same.
Your good friends will invite you to participate in various promising private investments. They will shoot you more enticing job leads. Some will make customer introductions. Others will help your children get ahead.
Welcome to the world of how things have worked for centuries! Your network is your net worth. The key is to be a genuine person who is always looking to help first. No matter your race or gender, this type of attitude will build you a great network. The stronger your network, the higher your chances of becoming a millionaire if that is what you want.
8) Don’t rent for life.
Although it’s a nice thought to rent and invest the difference each month, most renters don’t end up regularly doing so. The return on rent is always -100%. Every month you get a place to stay with you rent money. However, you don’t build any equity or have a chance to build equity. In 30 years, a renter is guaranteed to be left with no real estate equity. Whereas a homeowner, if he regularly pays his mortgage, will end up owning the house free and clear.
In the Federal Reserve’s 2019 Survey of Consumer Finances, it was revealed that the median net worth of homeowners was $231,400. Renters had a net worth of just $5,000. In other words, the typical homeowner had a net worth 46X greater than the typical renter.
We can argue until the cows come home why there is such a stark difference. However, just know that over the long term, you want to benefit from inflation and not get hurt from inflation.
Related: Mortgage Interest Rates By Race
At Least Get Neutral Real Estate
As soon as you find a place where you see yourself comfortably living for 5-10 years, get neutral real estate by owning your primary residence. Obviously, make sure you can afford your purchase. One home buying rule I suggest everyone follow is the 30/30/3 rule.
Over time, you will see a widening spread between the cost to rent and the cost to own due to inflation and largely fixed costs of owning a home. During this time period, you’ll also be paying down principal and building equity. If the home also appreciates in value, you will have a nice tailwind towards millionaire status.
If you can’t afford to buy a physical property, then you can still participate in real estate’s rise by buying a publicly-traded REIT, like VNQ. Or, you can invest in real estate crowdfunding, like I have done after selling my physical rental property in 2017.
The rental property was too much of a pain to manage as a new father, so I sold it and reinvested $550,000 of the proceeds in crowdfunding. My favorite real estate platform is Fundrise. It has innovative private eFunds that contain a diversified portfolio of income-producing real estate investments across the country.
Earning money 100% passively is my favorite way. Fundrise is free to sign up and explore. I’ve personally invested $810,000 in real estate crowdfunding to diversify my investments and earn income passively. Real estate is my favorite way for average Americans to build wealth as we recover from the pandemic.
9) Participate in the new “permissionless” society.
There are people making big money every day without the prerequisite traditional credentials. For example, you no longer need a fancy degree to get a job in tech. You just need to know your tech.
In the personal finance world, there are some very successful bloggers who are doctors, journalists, engineers, cooks, and school teachers. Most do not have a finance background. All they did was start a site and get creative.
You don’t need radio experience to start a podcast. Neither do you need broadcasting or acting experience to start a YouTube channel. Anybody can start a podcast or a YouTube channel.
Tech and the internet have created a wonderful permissionless society for historically marginalized groups. If you have kids, please teach them everything you can about the permissionless society. There are no gatekeepers.
The Inevitable Millionaire
In an ideal world, it would be wonderful if everybody could have an equal chance to become a millionaire by race, by age, and by educational achievement. Unfortunately, the system is rigged by the people already in power who naturally take care of their own.
It’s up to all of us to proactively enrich our minds with knowledge that can help us grow our wealth, regardless of circumstance.
Believe that becoming a millionaire is highly possible in your lifetime. And once you feel you’re on track to get to $1 million, you might as well shoot for $3 million due to inflation. If you keep grinding long enough, maybe you might get to a top 1% net worth of $10 million!
Money does buy happiness because it helps you feel less stressed about money, especially during difficult times. Once you have enough money, make sure you do your best to preserve your capital. The last thing you want to do is go backward!
Readers, what do you think about the various chances of becoming a millionaire? Why do you think there is such a massive discrepancy in percentage chance for White and Black Americans with Master’s degrees? Any more suggestions on how to increase your chances of becoming a millionaire?
Intro graphic by https://ckongsavage.com/