Growing up with middle class parent, I’ve always had dreams of becoming rich. For most of my life, I grew up in a small town with less than 30,000 people with a household income in the high five to low six figures.

My net worth after graduating from college was -$45K due to student loans and my first-year all-in compensation as an investment banking analyst was $135K. At the time, I thought I made it in life – making six figures right out of college was unimaginable just a few years prior.

I still remember the day when I received that internship offer for my junior year summer after getting rejected by nearly a dozen of different investment banks. Hate to admit it, but it was one of those few moments in my life when I had tears of joy calling my parents to tell them the news.

If you have read some of the older articles on this blog, you already know my life story and know that I had no idea how much money people on Wall Street really make. I thought doctors and lawyers clearing $200-$500K a year were the uber wealthy.

It wasn’t until I started my job in investment banking in NYC when I started to realize that there were some managing directors clearing low to mid seven figures a year. Then I landed a job at a hedge fund and then my perspective of money and wealth completely changed where I suddenly met people making $10MM+ a year.

What Does Being Rich Even Mean?

When I was a lot younger, the number was $1 million. I thought with a $1 million net worth I would be set for life. Now I hate to admit it, but that number is now somewhere between $10 to $20 million. For those who haven’t worked on Wall Street, you’d probably think my expectations are way too high and these are ridiculous/unachievable numbers. I would have thought the same just a decade ago.

Our expectations of wealth go higher and higher as we succeed, make more money throughout life and compare ourselves to others who are richer. Once you hit your number, your new number is double your old one. Sure, most say be satisfied with what you have otherwise it’s a never-ending rat race to make more and more, but once you hit your number, why would you just quit?

Everyone needs a purpose / goal to strive for otherwise you’ll be stuck at home depressed sitting on your millions. I’ve worked for people who have made $50 million+ and they are still working as hard as they used to.

$1 Million Net Worth in 10 Years

One of the hardest steps of getting rich is when you are just starting out – when you are broke, have a negative net worth due to student loans, make an entry level salary, and don’t have a clear long-term goal defined that you can work towards every day.

Unless you are dealt a really bad hand in life, most people can achieve a $1 million net worth in 10 years if you really wanted it. With the internet, you can reach millions of people with some product or service very easily vs. pre-internet this was much harder as your market was local. The problem is even though most people think they want to be rich, they don’t truly desire it and are unwilling to consistently make the sacrifices needed to be rich.

There is so much money in this world and so many different ways of making it – a career in finance over the long-run is one of the best ways to a achieve a 1% net worth.

Think of wealth as a snowball. Starts off very small and takes time to gain traction. Once you get that snowball to a certain size, it quicky gets bigger and bigger with little to no effort. That’s the reason why rich people become richer so easily. It’s much easier to make $1 million when you already have a few million to begin with.

When you are just starting out, obtaining that first million is the hardest. This is the time when you should be laser focused on two things:

1. Increasing Income
2. Keeping Expenses Low

Increasing Income

You will not get rich by making $100K-$300K a year working your W2 job, especially if you live in a high cost of living area like NYC/SF/LA where taxes and rent combined eat up ~80% of your income.

To get rich you need to produce income while you sleep. You need to build equity in a business. There is a reason people in finance who work in private equity or a hedge fund make millions. These industries make money by investing in companies, and after a certain level you get an equity stake in the profits of the firm through carried interest.

Working in these high finance jobs for a long time is just one of the ways where you can increase your income significantly. And with the internet, the potential is limitless for anyone to create a business online and instantly reach millions of people.

Keeping Expenses Low

The other side of the equation is to keep your expenses low. It’s true that penny pinching is not the way to make a lot of money. Nobody is going to get rich by spending less on coffee every day. But once you get to a point where you are increasing your income, then you must make sure you avoid lifestyle creep.

Time and time again I have seen people in finance spend increasingly more and more money when they go from making $150K as an investment banking analyst to $500K+ when they have a few years of experience on the buyside in private equity or a hedge fund.

They think if you can afford it, why not spend $7K on rent for a nice 1 bedroom in Tribeca or $5K+ on a weeklong vacation in Greece or $2K for a weekend trip to the Hamptons? Why not get that second vacation home that you get to stay in a few months out of the year?

Like I said, the key to getting rich is building that snowball slowly over time. The extra $30K-$100K+ high earners spend on rent/vacations/homes/etc. adds up over time, especially if you are single in your 20s without all the expenses of having a family. That is the time to build your snowball.

Worst Money Mistakes People Make

There are a few common-sense money management tips I’ve learned over the years. Some are very obvious to most, but surprisingly people still don’t follow them.

Keeping Cash in the Bank

When you keep money in a checking or savings account, the bank takes that money and invests it in loans or securities and keeps all the profit while paying you <0.1% a year. Any cash sitting in the bank that is not needed for monthly expenses should be transferred to an investment account where you can invest in risk-free securities like US Treasury bonds.

At the time of writing this article, you could make 5% on 6-month/1-year treasuries risk free! That means if you buy $100K of these short-term treasuries, you are guaranteed to get paid $5K after just one year. That’s ~$420 of passive income every month by doing absolutely nothing! There is zero risk of losing money because treasuries are backed by the US government.

Remember this, any cash sitting in a bank account is making money for the bank. If you don’t need it but are too scared to invest in stocks, then in the meantime at least invest in risk-free US Treasuries.  Why would you let the bank profit off you?

The most I keep at the bank fluctuates somewhere between ~$1K to $10K at any point in time.

Buying Expensive Cars

Cars are one of the worst assets you can own. They are guaranteed to go to zero over time. I never understood why people take out massive car loans so they can drive a fancy car when making very little each year. You are taking out a 5%+ loan on an asset that is GUARANTEED to goes to zero. There are people who make <$100K per year who drive fancy cars that cost $50K+. Makes absolutely no sense.

Instead, you should live by the rule to spend no more than 10% of your gross annual income on a car, especially early on when you have very little savings. That means if you make $100K, then don’t plan to spend more than $10K on a car. Sounds ridiculously low, I know, but you never want to spend large amounts of money on assets that go to zero, especially when you have no savings.

If you want a fancy car, then focus on increasing your income first. Later on, when you have a large amount of savings and make more money, then feel free to splurge a little on a nice car.

Living in a High Tax State

After COVID, it doesn’t make sense to live in big cities where the cost of living is insane. Why live in NYC/SF/LA if you can now work remotely from home half the time and save 10-15% of your income just from taxes by living in Florida or Texas? There is a reason why more and more people are moving to places like Miami, especially amongst the high earning finance crowd.

Most don’t have the ability to work remotely or find a high paying job outside of these cities. But if you have the option to work in Miami/Palm Beach, why wouldn’t you? You instantly save money through taxes and have a much better quality of life.

 If you want to know how Miami compares to NYC, make sure to read the different reasons why Miami is a much better place to live long-term compared to NYC.

Having Credit Card Debt

If you are not paying off your credit card bill to zero every single month, then good luck getting rich. Aside from student loans (which do not get wiped during bankruptcy), credit card debt is the worst kind of debt anyone could have.

Banks love credit card loans. Credit card loans charge the highest interest rate out of any other type of loan. You will pay 18%+ on whatever balance you don’t pay at the end of each month.

If you find yourself in credit card debt, cut up your cards and stop dining out to eat or going on vacations until you have fully paid off that debt. Otherwise, you’ll endlessly waste so much money paying off interest to your bank.

Spending More Than 30% of Their Monthly Salary For Rent

After graduating from college, I moved to NYC and lived with two roommates in a two bedroom, flexing the living room with a fake wall to make room for a third. I paid $1,350 a month in rent to live in a prime location in Manhattan that was a quick subway ride to work.

With what I was making my first year, that comes out to ~12% of my gross income. I figured that most of my time will be spent working very long hours in the office as an investment banking analyst. I would never be at home, so living in a fake room with no windows didn’t really matter much.

Nowadays with all the rent inflation it’s a bit tougher to only spend just 12% of your income on rent, especially when you don’t work at one of the best paying jobs on Wall Street. That said, if you are just starting out, you need to manage your expenses so you have the ability to start building your nest egg.

If you make $100K of income a year, don’t spend more than $2.5K on rent ever.

Saving <10% of Your Post-Tax Salary Each Paycheck

If you haven’t automated your savings, do so immediately. For most of my career, I calculated what I wanted to spend every month, then had my firm automatically send the remainder of each paycheck into a separate investment account.

I automatically save at least 50% of my salary through automatic transfers from each paycheck in a separate account. For most people, you are more likely to spend money in the bank if you see it. By automating your savings, you spend less and force yourself to save without even thinking about it.

And regardless of how little you make, always force yourself to save at east 10% of your income.

Speculating on Individual Stocks or Other Investments

It’s hilarious to see people in their 20s and 30s speculate on individual stocks. People love to gamble. The stock market has become such a casino following the pandemic. Household stock ownership peaked in 2021 and remains near the highs of the 2000 tech bubble.

You really think you will make money with everyone still gambling in the stock market? Trust me, the time you spend thinking about and investing a few thousand dollars in individual stocks in not going to make you rich. It’s such a big distraction as people end up spending a large amount of their time distracted on the day-to-day price moves of their stocks.

Unless you actually know how to analyze stocks and have experience doing so, don’t play the stock market casino. Like I said before, focus on increasing income and keeping expenses low.

Having One Source of Income Working a Salary Job

Once you start working full time, you must figure out how to make another source of income. It took me burning out from a $500K per year job to figure out that you can’t always rely on your job to pay the bills. Just look what happened in investment banking in 2023 – deal flow slowed down and almost every firm had to announce big layoffs.

You go from making $300K a year as an investment banking associate to zero just like that. That is why you must focus on creating a second stream of income ASAP.

Getting an MBA

Going back to school for an MBA is such a big waste of time and money and only makes sense in a small group of people. If you have already landed one of the best paying jobs in finance, why would you quit, spend $200K+, and make no money for two years just to get another degree?

Sure, if you/your parents are already rich and don’t ever have to worry about building wealth, then by all means go have fun for two years in business school. It’s a great way to build your network and meet people, but spending your prime working years going out and partying/traveling every weekend instead of focusing on increasing your income will set you back significantly when it comes to getting rich.

What You Should Be Spending On

Investing In Yourself with Books / Courses / Education

I knew absolutely nothing about finance and investing growing up and throughout most of college. My parents were middle class and neither of them were exposed to finance or investing throughout their lives.

The only way I broke into investment banking right out of undergrad was by going to a semi-target school, spending countless hours preparing for interviews by going through a number of investment banking courses.

One of the best purchases I made in college and early on in my career was Wall Street Prep’s Financial Valuation course. It helped me understand all the basic finance, accounting and valuation methods that are needed for investment banking. Can read more about whether the $400+ course is worth it here.

Then once I broke into investment banking, I read all the top books on investing so I could break into the buy side at a hedge fund. The point is, if you want to break into a certain field you need to spend a lot of time on your own learning about it first.

Gym Membership

Everyone should already know this, but exercise is the easiest way to destress, reduce anxiety, and feel good about yourself. If you build bad habits letting your body go in your 20s, then it gets much harder to develop those habits and get in shape in your 30s.

If you look at almost anyone who is rich, they have two things in common: 1) they read a ton and 2) they exercise. Why would you want to cut 10-20 years off your life by not maintaining a healthy lifestyle?

If you can afford it, spend money on that nice Equinox membership. Sure, $200+ a month for a gym membership is a good amount of money, but paying to be around smart, likeminded, motivated people is worth it.

School Events / Social Clubs

If you went to an Ivy league or a school where you can pay annual dues to join their club in NYC, then by all means do it. One thing I regret early on in my career is that I didn’t spend enough time networking and meeting people outside of my social circle.

The more people you know, the easier life gets later on when you need help looking for jobs, breaking into a new field, or building a business.

One Nice Suit

Once you start working full-time, there’s no need to be walking around in your Jos A Bank or Men’s Warehouse suit that’s a few sizes too big. You will have a ton of interviews and weddings coming up throughout your 20s and 30s where a good fitting suit can be put to good use.

Suit Supply is your best bet where you can get a nice suit tailored for you for $500-$1K.

Compound Interest Will Make You Rich

There is a reason why Albert Einstein once said:

“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

If you can consistently save small sums every year, you are guaranteed to have at least $10 million of net worth by the time you retire. Just do the math. If you manage to save $50,000 a year from ages 25 to 65 assuming an 8% return, you will have ~$14 million by 65. Even if you just manage to save $25,000 per year throughout your career, that’s over $7 million by the time you retire.

Now of course to the vast majority of people in the US, saving $50,000 or $20,000 a year is no easy task. And life just happens – random expenses come up, you unexpectedly become unemployed, spend more money over time due to lifestyle creep, etc.

But if you are reading this blog, you are not like the rest of the people in the US. Most of the people reading this blog work at some of the best paying jobs in finance and earn at least $150K to $750K with just a few years of experience. If you can’t manage to save $25K or $50K a year making these sums, then don’t expect to get rich. If you create multiple streams of income and don’t just rely on your W2, then automatically saving becomes a lot easier.

Don’t be impatient – be consistent in your money habits and play the long game. It’s not that hard to get rich if you truly desire it.