Before I understood the almost-unbelievable magic of exponential compounding, I thought becoming a millionaire was an almost-impossible goal only achievable by the highest earners or people who were already rich. Granted, inflation has certainly shifted the meaning of a million dollars over the last 20 years—but it’s still no small potatoes.

Fortunately, we can calculate this path to the magic million with relative ease—so that’s exactly what we’re doing on the show today. If you’re trying to reach a $1 million net worth with a partner in 10 years or fewer, good news—neither partner even needs to make six figures.

Of course, the temptation is strong to try to time the market in the context of our current volatile shitstorm. We’ll address why that’s a fool’s errand, historically speaking, and discuss some ~alternative options~.

Listen now on your favorite podcast player, or catch the numbers-heavy episode on YouTube!

I live with an interesting cognitive dissonance as a personal finance content creator: On one hand, I’ve always believed knowledge is power. I don’t buy that most people are “bad with money” and actively choose to behave in a way that’s disadvantageous to them, and generally speaking, I believe when people know better, they do better. Clearly, on some level I believe more education makes a difference.

On the other hand, I can read graphs like these, documenting the rampant wealth inequality in our country that’s been steadily worsening since 1975. Today, the top 10% of earners take home 50% of the total income, leaving the remaining 90% to share the other 50%. Surely information alone is not enough to close this gap, right? I’d think to myself in varying degrees of despair: Does what I do even matter?

Maybe that’s why—when I stumbled upon the two academic papers we’ll be exploring today—my self-preserving confirmation bias sprang into action: Yes, it must matter!

To be sure, it’s certainly not enough to close the gap or solve the problem on its own. But we do have empirical data (from the National Bureau of Economic Research and the University of Pennsylvania) that prove financial literacy has a direct impact on financial outcomes.

Financial literacy played a pretty substantial role in my money—and life—glow-up. (Because it turns out having more money does, in fact, improve your life. “Money can’t buy happiness” merely means there are diminishing returns on happiness from accumulating excess wealth, not that having more money doesn’t make your life objectively easier.)

For the first year I worked, I had no plan. I didn’t understand investing. I saved haphazardly. I couldn’t have explained the logic behind a Roth IRA even if you had threatened to submerge me in hot queso (which I happened to eat a lot at the time, since I was going out to lunch every day).

After working for a year and earning a salary around $52,000, I had about $12,000 in savings—meaning I spent the other $33,240 of after-tax income on…well, I’m not sure, since my rent was only $800/month and I didn’t have a car payment.

But once I started learning about how to manage money (how to save it, how to invest it, how to track where it was going), I quickly amassed a net worth of around $100,000 in a little over two years. Without a doubt, learning the basics had a profound impact on my financial picture.

My income hadn’t changed, but my approach did—and as a result, I was able to plug all the holes in my monthly balance sheet and institute a more formulaic strategy that included:

• Increasing my 401(k) contribution to 15%
• Contributing $500/month to a Roth IRA
• Contributing $200/month to a taxable brokerage account
• Focusing more intently on increasing my income, though that took a few more years

Keep reading to learn what the #studies tell us about just how important financial knowledge is.

With 2023 Wealth Planner prep in full swing, this year’s wealth-building best friend is making her oh-so-graceful exit on October 11.

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