The First Million

Earning Your First Million Dollars – A Stroll Down Memory Lane

In Financial Analysis by Gen Y Finance Guy29 Comments

Have you ever heard the saying that “earning the first million is the hardest?” Or what about “the 2nd million comes faster than the first?” Supposedly it gets easier and faster the further along you travel in your financial journey.

These questions got me thinking about how long it took me to earn my first million (or more accurately asked, how long it would take). This required me to go back in time and reconstruct my earning history. The Social Security website makes this pretty easy. You can also request copies of your tax transcripts from the IRS website (I filed my first tax return in 2003). Luckily, I had saved copies of all my tax records back to 2006 and only had to use the resources above to fill in the gaps for 2003-2005 (I was a junior in high school in 2003).

Note: The earnings in this post are for Mr. GYFG only and do not include those of Mrs. GYFG. If you looked at our finances on a combined basis, we would had obviously made it to the million dollar earnings mark in much less time. Likely in 10 years or less.

GYFG 2003 – 2016 Earning History [$935,824]

Although I did earn money prior to 2003, it was doing odd jobs that I got paid for in cash, and other side hustles like selling candy out of a shoe box in between classes. But since I don’t have good records of those earnings, I am excluding them from this analysis (prior to 2003 I probably earned a cumulative $20K).

PeerStreet

GYFG Cummulative Earnings (2003 to 2016)

You will notice that I am including 2016 based on my current compensation package. There are still a few moving pieces going into the New Year, but I will let those flow through as they happen (hopefully all favorable). The 2003 to 2016 period covers a 14 year time span and I am still not yet to the $1 million dollar earnings mark. Even if you were to add the estimated $20K that I believe I earned for all years prior to 2003, I still come up about $44K short.

Note: This income does not include any income that was earned in tax deferred accounts (401K & IRA’s), rental income (that is a joint thing that wouldn’t have happened without Mrs. GYFG), company matches into my 401K, or any earnings prior to 2003. Essentially this is all earned/active income and income that I can tie directly to my own personal efforts.

Based on what I know now it looks like it will take me a total of 14 years and 3 months to finally reach my first $1M in earnings.

I debated a lot on whether I would actually show the annual figures or not, as I have made an active effort to keep the incomes of Mrs. GYFG and Myself combined. This is mostly due to the fact that everything we do financially is a team effort and each person’s individual contribution is not as important as achieving our overall goals. Over the course of the last 10 years that the Mrs and I have been together, there have been times where we have both taken turns out earning each other.

With that said, I decided that I would share the annual amounts, in order to provide context around how each years income contributed to the cumulative earnings amount these past 14 years.

GYFG Gross Income 2003 to 2016

What Were the Jobs I held?

{2003 – 2004} I was still in high school during this time. I worked for a medical devices company folding boxes and doing assembly work. I only worked part time when I was not in school or at swim practice. Made $10/hour. I did work full time over the summer breaks.

{2005 – 2006} 2005 was my first year in college where I continued to work for the medical device company doing assembly work out of my dorm at $15/hour. As a part of my financial aid package I qualified for federal work study, so I worked on campus for $7.5/hour. I essentially was being paid to do my homework…not a bad gig. During the summer I would work full time for the medical device company when I came home from school.

{2007 -2008} In 2007 I continued doing assembly work out of my dorm for $15/hour, but I stopped the work study program in favor of a Finance Internship paying $13/hour (in 2007). I stopped the assembly work in 2008. In May of 2008 I graduated college and started my career as a Financial Analyst, with a starting salary of $52,000 (for 4 months, and not at the company I interned with).

When I graduated school I had two job offers, one was with the company I interned with for $58,500/year and another was in my home town for $52,000. I took the one in my hometown because that is where Mrs. GYFG and I planned to move back to. After 4 months I realized I had made a mistake and called up the company I interned at to see if the offer was still on the table.

Luckily I had stayed in contact and left my internship on good terms. They embraced me with open arms at $58,500/year. Although I was only there for part of the year, I did end up getting a $1,000 bonus.

{2009 – 2012} I stayed with the company I had interned with for about 5 years (including the internship). During that time I had the title of Financial Analyst and Trader. In 2010 through 2012 I moved into the trading group where I got the chance to trade West Coast Products (i.e Gas & Diesel on EFP), run a hedge program, and trade an options book for profit. By the time I had left in 2012 I had a base salary of $77K with a bonus of up to $10K. In the middle of 2012 I left this company and made a move back into corporate finance as a Senior Financial Analyst at $80K/year. After being with the new company for only a couple months my salary was increased to $88K/year.

{2013 – 2014} I only stayed with the new company for about 18 months before realizing they were about to experience a butt load of financial pain. In the 18 months that I had been there they had already had 6 major layoffs, and I could see the writing on the wall. This was not going to be the place my career would flourish. So, I moved to the company where I currently work today as a Senior Financial Analyst (which was really a Finance Manager role). My starting salary was $90K/year with an $8K bonus.

{2015 – 2016} After only 9 months of employment at the new company my salary was increased to $95K with a $10K bonus. Then 8 months later I was promoted to Director and my base salary increased to $125K/year with a $40K/bonus. Going into 2016 (with what I know so far), my base is still $125K/year with a new bonus of $60K.

This is roughly what has progressed over the past 14 years (well 13 years + 1 year projected [2016]).

Compound Annual Growth Rate of Earnings

Earnings 2003 to 2016 Data TableIn the table to the right you can see the year over year increases. But to me the most interesting stat is the compound annual growth rate (CAGR) of my earnings at almost 36%.

The question going through my head is whether I can keep this pace up and for how long?

You will also notice that although I received a substantial change to my compensation package in 2015, a big piece of that change was to my bonus that will actually be realized in January of 2016 (when year end bonuses are paid out).

So, this is probably a good time to point out that the data table you are seeing to the right is based on when the money was received and not necessarily earned.

GYFG vs. Slight Edge

The last chart above compares my earnings curve vs. the curve of the Slight Edge. Anyone who knows me well, knows that the Slight Edge is my favorite book, and one that I re-read every year. It is essentially a book about the power of compounding whether it comes to money, fitness, family, etc. It really shows that compound effort leads to exponential returns (not linear). If you have not had a chance to read this book, then please go click the link above and order a copy on Amazon. It will change your life!

Back to the chart…

What I did is I converted my first years earnings to $1 then each year grew that dollar by the year over year growth rates in the data table above. What this showed me is that for every $1 I was earning in 2003, I am now earning $53 (that is bananas). Now it doesn’t follow the Slight Edge path exactly (anything rarely does), but I think it does a really good job of illustrating the Slight Edge in real life.

Conclusion

I think the saying is right, the first million is the hardest, and does take the longest to achieve. But I can totally see how it gets easier and quicker as you work on the 2nd, 3rd, 4th, and so on. I honestly think that the next million will take a 3rd of the time at 5 years or less (I am betting less, but there are plenty of unknowns).

Remember that the power of compounding (or the Slight Edge) is alive and well in every area in your life. Sometimes we get discouraged by the amount of time it takes to see the progress we want overnight. But it is important to remember that results are exponential and not linear.

Look at my own example. It took me 6 years before my cumulative earnings passed the $100K mark. It would only take me another 5 years to hit $500K in cumulative earnings. And then only another 3 years and some change to finally surpass the $1M mark. Or put another way it took me 11 years to earn the first $500K and less than 4 years to earn the next $500K.

Have you earned your first $1M yet? How long did it take you? Or how long do you anticipate it to take you? Can you see how it only gets easier?

-Gen Y Finance Guy



Personal Capital allows you to aggregate your entire financial life into one account. All you need to do to see all your accounts in one place is log in to Personal Capital and voila! But it doesn’t stop there. They even automatically classify all your income and expenses for you. You get a FREE and fully AUTOMATED tracking system!

Comments

  1. GYFG, that is some very festive artwork! Gotta ask…what’s in the mug? hmm? hmmM? HMMMM?:-)

    That is really impressive, and the fact that you actually know this about your earnings history is great. So many people spend huge amounts of time, energy, sweat and tears trying to get more skills and more money, yet never keep track of the changes. One quick shortcut for those interested…every two years you receive a Social Security Administration summary of earnings by year, in the USPS mail. If you keep your hardcopy handy (i.e. with your tax records) it is something you can easily refer to when filling out mortgage applications, employment history, etc.

    Myself, it took me 30 years to earn my first $1mm in W-2 income. (Those first 25 years were depressing!) Nine years for the second million. ‘Slight Edge’ is a great book, and I wish I knew about it and the concepts decades ago. “Easy to do, easy not to do.” Continued success to you, GYFG, momentum is with you!

    1. Author

      JayCeezy – The mug just has a little hot apple cider 🙂

      To emphasize your point…you can also log on instantly to the Social Security website and get your earnings history there as well. I have actually never received anything from Social Security in the mail with my earnings history…I wonder why???

      Felt like this was a perfect post to lead up to your guest post on Thursday.

      Cheers!

      1. “Hot apple cider”? Right? I’ll have to remember to spin it that way, too!:-)

        Looked into who gets the S.S. hardcopy mailed, and because you have a personalized online account you will not be receiving it. Here is the most current policy for those interested. https://www.ssa.gov/myaccount/statement.html Also, you were the one who recommended “The Slight Edge” to me early in 2015, thanks again!

        1. Author

          So, maybe it’s a Mexican Coffee with a little Tequilla in it…I’ll never tell 🙂

          Thanks for looking that up JayCeezy and sharing with everyone.

          Really glad you enjoyed the Slight Edge.

  2. I’m not to the $1mil W2 income and still have at least a few years to go. I do see an upward movement to my earning arc as well thou, which always make you feel better! Haha. I’ve never heard of Slight Edge. I will need to add it to the reading list!

    1. Author

      Hey Thias – Up and to the right should always put a smile on your face. The Slight Edge is a great book and I hope you read it, it will change your life!

    1. Author

      Hey Marko – Just to clarify, this is not my portfolio, but instead a historical look at my earned income (i.e W-2 income + a little non W-2)

  3. Raises sometimes come when you least expect them and to those that do the work without expecting them! I get frustrated with those that expect a 5% raise every year, but don’t put in the effort. It sounds like you did it the right way.

    My earnings trajectory was a bit more methodical in my early career, but has continued to increase much more than inflation the last few years. I thought once I got into the six figure salary range it would slow down, but it has been just the opposite the last 4-5 years.

    1. Author

      Vawt – I could not agree with you more. I have never expected a 5% raise or any kind of cost of living adjustment just for breathing air. All of my raises have always been based on value delivered. I have a very strong belief in doing the work and then getting the reward.

      What frustrates me are the people you mention that just expect a 5% raise for doing their job. You get paid extra when you do extra. You have to find a way to make your contribution more valuable then what you were brought in to do. Or even worse are people that want the raise first…then they will do the work. Those people won’t make it very far.

      Glad to hear that your own compensation has done well 🙂

      Cheers!

  4. Thanks for your honest income graph. Your top income definitely helps to increase your net worth that has been growing extremely fast.

    Thanks for sharing.

    BSR

  5. Hi genyfinanceguy,

    Nice growth on that portfolio. Once you get started the power of compounding will slowly take over the hard work.

    Cheers,
    Geblin

    1. Author

      Hey Geblin – Sorry if it wasn’t clear, but this is cumulative earnings and NOT my portfolio.

      Thanks for stopping by 🙂

  6. Love your graphs as always Dom! Interesting article. I never actually calculated my W2 earnings over time until now.

    Looks like I hit 1M in accumulated W2 earnings after 11 years (my first year of PT work being in college – 1999).

    I’m glad the SSA has everything online now.

    1. Author

      Having the SSA records online is very convenient.

      Glad you like the graphs and glad it motivated you to calculate the amount of time it took you to earn your first $1M.

      11 is my lucky number 🙂

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  8. wow I was literally just looking at my social security account yesterday and then saw your post today. crazy! One thing that I found very interesting is my net worth isn’t all that far behind my total gross income, which is quite remarkable considering I have to pay taxes and live life. Here’s my breakdown:

    2004: $998
    2005: $3,310
    2006: $5,410
    2007: $4,402
    2008: $4,226
    2009: $18,901
    2010: $43,094 < first full year out of college with a real job
    2011: $45,182
    2012: $39,666 < hopefully that will be my last negative growth year!
    2013: $88.520
    2014: $80,105 < while this was technically less than the year before, I took a substantial pay cut with large upward mobility, the $8k less doesn't accurately depict the pay cut as it was more like a $30k pay cut, I just did it towards the end of the year
    2015: $132,000 < taking the pay cut paid off!
    2016: (projected) $150,000-$180,000+

    So far I've made about $460,000 over my life and am worth about $360,000. It will be nice once I am worth more than I've managed to work for.

    1. Author

      You have done a great job Sean..much better than I have. All I could think when I put that post together is where the F*ck did all that money go???

      Keep up the good work! The ultimate goal is to have Net Work be equal or ideally more than lifetime earnings. Sounds like another good post idea…on net worth efficiency.

      Looking forward to your guest post going live early next year.

      BTW, I think I will catch you in January on the Net Worth front…watch out I’m coming for you 🙂

      Cheers!

  9. Since I own my company I paid myself only 1000 a month plus another 1000 to my wife in w2. Just recently started paying 2k a month each. My accountant keeps telling me to pay myself the lowest possible in w2 since I am Losing money to ss for no reason. Do you think this is right? If you own a corp how do you balance out earnings in w2 vs other pay out where I only pay about 15 percent of the income? I ask my account he doesn’t answer as to my understanding. I pay myself and wife 48k but make almost 200k. Where do you draw the line on the legality?

    1. Author

      Hey Andy – sounds like you have a very nice business. Unfortunately I am not a CPA and am not really qualified to answer your question. You could check out Josh over at CPA on fire and see if he has written anything on this subject, or just flat out ask.

      Thanks for stopping by.

  10. Still trying to figure out what to do with my life. Just graduated last year and can’t see myself staying with the company. Sounds like you’re what, 10 years out of school? Seems like you make decent money, but I’m trying to figure out how to break into the “big bucks”. I saw this post yesterday among the many blogs i’ve been following:

    http://wallstreetplayboys.com/investment-banking-compensation-2015/

    Looks like insane money right out of a mba program and can quickly make multi-millions. By my math, can pull in 2.7 million in the first 7? years out of school. Is this what you do? if not, what’s the difference between your finance job and investment banking? I just noticed you have “lesser” numbers so trying to reconcile the differences. Also, I might have a new career goal! Thanks for any insight you have.

    1. Author

      Hey Tim – Congrats on your recent graduation.

      I am coming up on 7 years out of college. Graduated in December of 2008.

      I do not work in investment banking, but the compensation is alluring. The problem is, I was never willing to move and put in the insane hours for the extra compensation.

      Instead I went into Corporate Finance and it has taken a bit longer to get there, but the work life balance has been much better.

      Wish you luck!

      1. GenY I love your posts along with Financial Samurai but the dedication and sacrifice you guys go through to make a buck I’m just not willing to do. After I got diagnosed with Ulcerative Colitis (like Crohns disease) I do just about everything I can to avoid stress and live a healthy life. Doing too much shit I don’t like causes me stress so I don’t do it.

        What I can hope is that this up and down road of entrepreneurship will pay off and I’ll be wealthy enough to not have to worry about money again pretty soon. I have a book coming out this month and I’m going to leverage the exposure for more consulting options about health and wellness alongside medicinal cannabis. If I may ask Gen Y guy… What are you passions aside from finance?

        What do you do for fun in your free time or gets your heart pumping?

        God bless in 2016 Sir and best of luck with your goals!

        1. Author

          Hey Steve – Glad you like the content.

          We are all wired differently my friend, that is what makes the world so interesting. I will say however that I really don’t feel like I sacrifice that much to make a buck. On the work front I typically only work 50 hours a week (except for the 4th quarter where hours average 90/hours a week, but that is a choice). The good news is that I love my job 80% of the time. And it doesn’t cause me any stress…at least not distress…maybe some eustress (the good kind, thriving under deadline driven environments).

          Then outside of work I do spend about 10-15 hours a week on the blog and writing, but that is pure joy for me.

          The key to life is to find something you love and you will never have to work another day in your life.

          Regarding You & Entrepreneurship

            Entrepreneurship is certainly a solid path to wealth. Congrats on the book you have coming out. Are you going the self publishing route?

            What I do for fun?

          – I am a fitness fanatic (recently crossfit is my newest addiction, actually look for a sub domain in 2016 on fitness)
          – I have really come to enjoy writing/blogging.
          – I love reading
          – I love food (we cook and eat out a lot)
          – Believe it or not there are days I love just vegging out on the couch binge watching a show
          – Obviously I love all things finance
          – Watersking
          – Snowboarding & Skiing
          – Bowling
          – Travel

          Those are some of my passions.

          Cheers!

          1. Awesome GenY. Glad to hear you have a healthy work/life balance and some cool hobbies. Looks like we share a lot of the same interests. Like you my favorite is fitness. I’ve been wrestling and doing brazilian jiu jitsu for around a decade now. My doctor says exercise is the #1 prevention for anxiety/depression. He’s an avid cyclist. I’d have to agree with what he says.

            I didn’t meant to sound like an ass about doing the stuff we love. I’m just real passionate about entrepreneurship and one making their own way. W2 income is fine as long we have enough time to pursue our calling. My comment may have been more directed towards Financial Samurai as he recognized immediately on Wall Street that he couldn’t do that stuff forever due to distress. Eustress is all good buddy – the word itself brings me back to undergrad Brain and behavior class.

            Best of luck with your goals in the new year! I think I’m due for a couch veg binge watch session myself 🙂

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  12. Man great post here! I like these type of articles how you show your progress, tell a story & demonstrate it step by step.. While you’re a powerhouse & not sure I’ll get to your level, mostly due to extra curricular activities & a focus on learning outside of work, which I know you also manage to fit in heaps of 🙂

    Answers to your questions though:

    Have you earned your first $1M yet?
    Possibly? I should start/be tracking this although I could look back
    How long did it take you?
    If I’m there would have taken me about 9 years, otherwise will be probably by 30 I’d say 🙂 & yes definitely gets easier..

    Cheers!

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