In a population of 8 billion people, there are only 3,000 billionaires on planet Earth. That’s not even one ten-thousandth of one percent! And, seemingly for good reason…
You’ve probably seen viral posts about how if you made $100 an hour, you’d need to have been working since 2000 years before the time of Jesus to have earned a billion dollars, or if you earned a million dollars a year, it still would take a millennium to earn a billion dollars. Yikes.
Not only does the math check out on both of those examples, but they also ignored taxes and living expenses, so it’s actually even harder to become a billionaire than that…or is it?
I intend to demonstrate that it’s possible for a modern-day American to become a billionaire — within their lifetime — on a middle-class salary alone. No trust fund, no winning lottery numbers, no Silicon Valley startup — just a job.
Middle-Class Income; Billionaire Tax Loopholes
Let’s use a regular, made-up guy — we’ll call him Bob — as our wannabe billionaire. Bob graduates college at age 22 on an academic scholarship with a net worth of $0. He scores a solid engineering job that pays $100,000 per year.
He didn’t start out with any inherited wealth, and his income — while it’s nothing to scoff at — is actually considered squarely middle-class these days.
Of course, he doesn’t get to keep all of that income.
For tax purposes, let’s assume he lives in my home state of Florida, in the current year of 2025. Most people think that since his income falls in the 22% tax bracket, he’ll pay 22% of $100,000, or $22,000 per year in income tax. Add to that another 7.65% for social security and medicare taxes, and it’s nearly $30,000 a year — but fortunately, that’s not how taxes work. Bob also has a few billionaire tricks up his sleeve to shield his income from taxes as well.
While he won’t be able to avoid the 7.65% for social security and medicare — which means he’ll have to pay $7,650 no matter what — he will reduce his income tax in the following ways:
- First of all, he’ll take the standard deduction of $15,000 that the IRS allows for individual taxpayers.
- He’ll also max out his 401(k) by contributing $23,500 to it per year, which reduces his taxable income by that same amount.
- Finally, he’ll also max out a Traditional IRA, contributing $7,000 per year and further reducing his taxable income.
After subtracting these deductions from his $100k income, he’s now only getting taxed on $54,500 instead of the full $100k — and income tax brackets are marginal, so his first $11,925 will be taxed at 10%, then his next $36,550 will be taxed at 12%, and only $6,025 of his income will be left to get taxed at the 22% rate.
With all of this, Bob will pay a total of just $6,904 in income tax. Combined with his unavoidable social security and medicare taxes, he’ll pay a grand total of $14,554 in taxes each year, for an overall tax rate of 14.5% — much better.
Living on a Billionaire Budget
Like everyone else, Bob has to spend money to survive. But he’s committed to becoming a billionaire, so he lives frugally on the following monthly budget:
- Rent: $800 (his half of a 2-bedroom apartment)
- Groceries: $350 (from Walmart, ALDI, and Costco)
- Transportation: $250 (gas, repairs, replacement, liability-only insurance for his cheap used car, and a used bicycle)
- Utilities: $100 (his half of electricity, water, and Internet)
- Phone: $30 (his portion of a family/friends plan)
- Health Insurance: $0 (employer-provided)
- Fun Money/Other Stuff Unaccounted For: $350
- TOTAL EXPENSES: $1,880 per month
Bob has some awesome habits like splitting rent with a roommate or a partner, riding a bike to work most of the time, and cooking his Walmart groceries at home instead of eating out.
Side note: Lauren and I actually did all of these things ourselves and each lived on less than half of the above budget throughout our 20s, which is a huge part of the reason we’re currently millionaires in our early 30s. So, I know that sticking to a budget like this is possible from personal experience.
Anyway, Bob is already saving $30,500 per year inside his 401(k) and IRA. And because Bob lives so frugally, he still has an additional $32,386 left over from his paychecks each year, after paying his taxes and all his bills. That means Bob can save a total of $62,886 every year, or an average of $172 per day.
Now, to make the math a little easier to understand, I’m just gonna assume he saves that same $172 a day for the rest of his career.
In reality, he would probably be able to save an increasing amount each year as he earned raises and promotions at his job, which typically outpace inflationary spending increases and changes in the tax code. Instead, we’ll just let that be some padding and assume he blows all of his raises on a fancier lifestyle and some well-deserved vacations.
Billionaire Investor Magic
Here’s the most important part: Bob isn’t going to let that money just sit in a bank account. He’s going to invest it. Remember, Bob’s hypothetical life isn’t supposed to have any giant windfalls, so he’s not going to be some expert stock picker who invests all of his money into the next Apple.
In fact, we’ll have him be completely boring and average. He’ll just buy and hold a passive S&P 500 index fund, which automatically tracks the average performance of the US stock market – including winners and losers – without any special management. He’ll do the same thing in his 401(k), his IRA, and his taxable brokerage account, and he’ll set them all up to automatically reinvest dividends along the way.
Bob works from age 22 to the standard US retirement age of 67. At this time, his investments have grown to $69 million – still nowhere near billionaire status.
But Bob is DETERMINED to become a billionaire. So, he lives off of Social Security during retirement, leaves his portfolio untouched, and just lets it ride for another 27 years – letting time work its magic.
At the ripe old age of 94, after 72 total years of investment growth, Bob achieves his dream. His portfolio is worth almost $1.2 billion.
By the way, if you’re wondering what kind of investment return was assumed in this calculation, I want to be really clear about this: Instead of using some totally hypothetical number, I used the actual average return of the S&P 500 for the last 72 years (June 1953 to June 2025), which was 11.16% annualized, including dividend reinvestment.
Sure, maybe the fastest way to become a billionaire is to get a giant inheritance and invest it into a meme coin that goes to the moon – but I think I’ve shown here that you can do it the old-fashioned way, too!
Mind-Blowing Investing Math
The math underlying all of this is actually pretty crazy.
Of the $1.2 billion Bob ended up with, he only had to save 0.24% of it himself because he started so early. The rest of the money came from passive investment returns over a very long period of time.
In fact, his very first day’s contribution of $172 grew to $350,000 all by itself. In investing, time does most of the work for us. That’s why Albert Einstein famously said, “compound interest is the eighth wonder of the world.”
If you want to be a successful investor, you can learn three big things from Bob:
- Start investing early, because time is your biggest financial ally.
- Live frugally, because your money can’t grow if you’re not saving it in the first place.
- Don’t worry too much about being an exceptionally skilled investor, because the average return of a passive stock market index fund produces breathtaking results, effortlessly.
Why You Probably Shouldn’t Become a Billionaire
Now you know how to become a billionaire, but…should you do it? If you were 22 years old, would you actually try to embark on Bob’s journey to become a billionaire by age 94?
Think about it like this: Warren Buffett is a real 94-year-old billionaire right now. If you could trade places with him — would you? Personally, I wouldn’t even consider it. That’s because time isn’t just the most important asset in compound interest calculations; it’s your most important asset in life.
Rather than trying to accumulate as much money as humanly possible, just focus on investing enough money at a young age so you don’t need to spend your whole life at work if you don’t want to.
Lauren and I basically did the first few years of Bob’s journey and then permanently quit our jobs at age 29 once we had enough invested to retire — and we have no regrets about that. We’ve stopped obsessing over our finances, we no longer set our alarm clocks, and we now spend several months each year traveling the world.
If you’re a middle-class American, then you have the means to do the same thing. Just be sure to spend the next 72 years of your life wisely, because that time is worth over a billion dollars.
— Steven
