Free Ebook.

Enter your email address:

Delivered by FeedBurner

« How to Stay Relaxed During (And Make the Most of) a Job Interview | Main | Being an Active Investor is a Lot of Work »

April 18, 2011


Feed You can follow this conversation by subscribing to the comment feed for this post.

Very informative article. Some of the statistics do surprise me, that is an awfully low amount of charitable giving for the top 7% of the nations wealth. Though I did read recently that the working poor contribute a greater percentage of their compensation to charity than the upper middle class and above.

Being worth $5 million is not the same as $5 million in cash. Ask any entrepneur, their wealth is generally locked up as their business.

Regarding the two stats that seemed low to FMF: If we look at the $13k going to charity and estimate this as a tithe (10%), then that gives us $130k income. If we then look at the ~$39k of savings, then we'd have a 10/30/60 budget (charity/savings/expenses). That doesn't sound low to me even assuming a pretty liberal annual income of $130k. I'd bet that the vast majority of millionaires have salaries less than $130k, which would make their charity and savings numbers look even better.

Keep in mind that "having a million dollars in accumulated wealth" is very different from "making a million dollars a year". As FMF regularly reminds us, one of the biggest factors in how wealthy you become is how early you start investing. A lot of people become millionaires on moderate incomes, simply because they save and invest for 40+ years. Far fewer become millionaires by making a million bucks in a single year.

It doesn't surprise me that many millionaires don't think of themselves as wealthy. Many of them are regular middle class types whose regular middle class incomes and regular middle class investments gave them a reasonable amount for a middle class person to retire on.

It actually surprises me that charitable giving is that high. $13,000 per year seems small compared to $1,000,000 total, but how does it compare to the annual amount? 81% say "frugality" is important, and their annual savings is $39,000, so I think it's reasonable to guess at a median income of around $120,000. This would put annual charitable giving at a little over 10%. That's not stellar, but it's not shockingly low either.

My parents would be a good example of this. I know my dad's retirement account was up over a million a decade ago. Annual income was always less than six figures, and giving was close to 20%. I wouldn't consider my parents "wealthy" in the sense of being able to blow large stacks of cash on stuff; they drive a car that's over a decade old, shop at thrift stores, and still live in their first house. But they are reasonably financially secure; given their spending habits, they're not going to run out of money until they're both past a hundred.

I wonder if donating to private schools, is considered donating to charity. I know a lot of people who donate to private school as well as charity. That make may a difference in amount of giving.

@ Ginger:

Then I guess I should call the children's $20,000+/yr. private school tuition a 'donation' next year when I do my taxes (I WISH!), lol.

Great article! I'm surprised at many of the statistics. I'm not surprised at how frugality played into it.

-Ravi Gupta

$39,300 -- the amount they save or invest annually.

Awesome - since I just qualified to start contributing to my 401k plan this month, our annual savings actually top this number by about $5,000. Not a millionaire yet, but it looks like we are on the right track. Only been at it 4 years so far, about 1/5th of the way there.

very surprised at many of these, VERY. charity is not even 2% of $1M! what does it take?

First $1M before age 40, lost almost 40%~ of it via divorce and reaccomplished 3~ years later before retireing at 47 w/ $2.85M~ "liquid" (tax eval of real estate and liquid investments), had to pay a lot in taxes first two years of retirement as deferred comp came through and business sale profits, still almost $2.3-2.4M net worth since then yet, an efficient portfolio, previous booked "losses", - I only average less than $50K "income" on my 1040 since. Saving 15%++ from day one, to over 100K in my best years ($150K in Federal income tax too!),frugality (always lived on less than $60K, figured $5K a month net is PLENTY), HARD work (3000+ hours a year), PUBLIC school (BS and MBA) and being an self-employed business owner that made less than $4K~ in my first year (1993) but, several hundred K a year after. Moved from high tax CA to low Tax TX and WA after 1st 4 years saved $20K~ or more a year in taxes/business fees. THe article is pretty spot on of fellow millionaires I know. My Dad never earned more than $20K a year...

I wonder what the average annual income is for these millionaires. It would be interesting to see the % of millionaires who accumulated their wealth on "middle class" salaries through frugality and sound investing.

The highest annualized salary I ever earned was $72,488 in September 1992 when I retired.
The highest annualized salary my wife ever earned was $8,113 in 1993 when she retired.

In our case we became wealthy as a result of:

1) Staying married for 55 years and avoiding paying lots of money to attorneys and ex-wives.
2) Living well below our means when working and within our means throughout retirement.
3) I was never unemployed for a single day of my life, my wife worked part time for 16 years, sometimes at two jobs.
4) We both receive pensions and SS checks.
5) I studied the technical analysis of stock trends after I retired, as in Edwards & Magee's book, et al.
6) Benefiting from the enormous power of compounding when losing years are avoided.
7) Using active mutual fund selection to only stay in funds or income securities that are trending up.
7) Our Municipal Bonds & CDs are valued at the price that we will receive at maturity even though Fidelity currently has them priced much higher.

My software generates a new line in the following abbreviated table every single market day.
The second line is when I consolidated all of our investments at Fidelity a few months after retiring.
Subsequent lines are for the first day our portfolio reached a new million dollar milestone.
These data have been adusted for all additions and withdrawals which have been few in number.
We also own two pieces of real estate, worth about $1.5M that we own outright but do not consider to be investments

Period "12/28/1992" to "04/18/2011"
"12/28/1992", 319,950 .................... The
"10/20/1997",1,042,547 ................... Dot
"11/16/1999",2,003,222 ................... Com
"02/29/2000",3,068,987 ................... Bubble
"04/07/2009",6,008,917 ................... Started to become conservative at end of 2007
"04/18/2011",6,609,821 ................... Continuing life in the Slow Lane - No Stock funds

I just have a question about the amount invested each and every year. Is that $39,300 all coming from the amount of money that a person makes in a year? If so how is that possible? Seems high to me for the average working person.

rgrrabbit --

You have to have at least a "decent" income to make it work. But if you make $70k per year and live on 50%, you're just about there.

The $13,000 dollars a year donated to charity seems about right on to me. Assume if you will that you have donated to charity all your life going along(Big assumption in america but still) When you retire you have 5mil in bank. But you are only living off the interest. So 5mil * .03 = 150,000 earned in interest. If you donate 10% to charity you are at 15,000 which seems about right to me. Figuring that alot of millionaires do not give much this is actually encouraging to me.

rgrrabbit - It's definitely possible. My wife and I combined earn about $120k (plus maybe another $10k from alternative sources of income), give over $20k, and save/invest nearly $60k in cash. We're not really even that frugal (though we do have a great living situation that keeps our costs fairly low, and neither of us are shoppers).

I am a single income household with 2 kids (over 18)that live with me. I make a decent income using the term from FMF but with my expenses I just can't imagine having that much to try and save. I was putting about 18% of my pretax before in a 401K and another percentage after into an individual stock account and I was still only saving about $18,000 - $20,000 a year. I guess I have to go back and rework all my bills and try to find out where I am losing money which I could possibly be saving.

rgrrabbit --

Here's an idea: start charging the kids rent. ;-)

Sometimes that is easier said than done! Has anyone ever rented rooms in there house out to college students? What are some of the pros and cons to that? I have 2 empty bedrooms and I do live within a stones throw from a university. I think about renting out the 2 rooms to bring in extra income.

He meant, charge YOUR kids rent! And really, this is good advice for anyone with kids over 18 living with them, regardless of whether you're feeling pinched or not. For the kids' sake.

rgrrabbit --

See this:

BTW, Jonathan is correct in what I meant. ;-)

>$39,300 -- the amount they save or invest annually.

That seems like a VERY large amount/year if it is the amount taken from one's salary... That would be more than 50% of my salary, I live pretty frugally but I can't manage to save that much!

However, if they are looking at increase in net worth/year then I could manage that ~30% of salary to investing, $6K/year for mortgage principal, + investment returns.


unless you count returns on current investments

. , I could probably do it if I didn't have a family.

Umm... $39,300 is about 19,000 more than my annual salary and let me tell you that there is no saving though we try... something always comes up. Cars (especially old ones like mine) need servicing to keep working (because there is no way I could afford a car note). I have no idea what I will do when my car is dead. Every time I have to go to the grocery store I check my bank account to make sure that I have enough to buy anything. I have a college degree and am aggressively searching for jobs that pay more. The problem is that everyone else who has a college degree that is not a law degree or a medical one are vying for the same positions. There are few well paying jobs out there these days. I wish I knew why or what to do about it but something needs to be done. More jobs made perhaps, its funny how the wealthy don't open up assistant management positions etc that would do so because they want to save their businesses money. We are beyond that point people! If America fails and looks bad so do the people who run these huge businesses.

The comments to this entry are closed.

Start a Blog


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.