How to Become a Millionaire by 40: A Guide for Young Adults

Let me start with a disclaimer, I did not become a millionaire by age 40… but I could have.

Also, if you are not a strategic thinker, and you lack patience, this post may not be for you.

One more thing, money is just a concept- an idea. It is nothing to be afraid of, yet it is one of the least discussed topics among young adults, mostly because of how difficult it can be to communicate. Herein, I will attempt to make clear one of the most feared, anxiety-inducing subjects for young adults: Money Management!

Achieving financial independence early in life is not a pipe dream—it’s a choice. For young people willing to listen, the key lies in making smart decisions early, leveraging time, and embracing discipline. Below, I’ll outline three scenarios to show how you can set yourself on a path to financial independence, potentially becoming a millionaire by 40. These are based on three core principles: thrift, strategic decisions, and the power of compounding (I’ll explain in a future post).

Scenario 1: The High School Student

Decision Point: Should I pursue sports, a college degree, or a trade?

1. The Trap of Student Loans: Avoid them at all costs! Whether you pursue college or a trade, prioritize scholarships, grants, fellowships, work part-time, attend community college, take fewer credits and go to school year-round (you don’t need summer breaks. That’s for kids), or any combination of these to minimize debt. A staggering amount of wealth is wasted repaying student loans.
2. The Trade Route: Skilled trades (electrician, plumber, HVAC tech) are often overlooked but can yield six-figure incomes without years of debt. Apprenticeships and certifications pay dividends quickly. Further, a master tradesperson can have a clear path to business ownership!
3. The College Route: If college is your choice – and it is a good one - be strategic. Choose degrees with clear earning potential: STEM fields, finance, or nursing. Avoid degrees that don’t offer strong job prospects. You can do that later, if you wish, but for now, be marketable.
4. Live at Home Longer: If your family is supportive, stay home after high school. Paying minimal rent (or none) gives you a head start on saving while others are drowning in rent or debt. There’s no shame here. Our culture prioritizes some silly principles sometimes.

Scenario 2: The College Student

Decision Point: Should I pursue grad school, professional school, or start working?

1. Weigh the ROI: A graduate or professional degree is only worth it if the future earnings significantly outweigh the costs. For example, becoming a doctor makes sense because earning $200K+ is typical. A master's in underwater basket-weaving, however, often results in debt with no clear financial return.
2. Optimize Undergrad Choices: If you’re still in undergrad, choose a degree that employers value. STEM, business, and healthcare degrees offer strong starting salaries.
3. Start Earning Early: If grad school isn’t essential, start working with your bachelor’s degree. Entering the workforce earlier lets you build experience and take advantage of employer-sponsored retirement plans like 401(k)s.

Scenario 3: The Twenty-Something Worker

Decision Point: How do I manage my income and build wealth?

1. Thrift Is Your Friend: Live below your means. Instead of upgrading your car or apartment, funnel those raises into savings. Aim to save 50% or more of your income in your twenties. (10% spend, 10% tithe/charity, 30% taxes/living expenses)
2. Invest Early and Aggressively: Time is your greatest ally. Max out your 401(k), invest in low-cost index funds, and take advantage of employer matches. Compounding works wonders if you start early.
3. Avoid Lifestyle Inflation: Resist the pressure to spend excessively on nights out, vacations, or luxury items. Sneakers are rarely a good investment. Sacrifice now.
4. Stay at Home Longer: If you can live with your parents into your mid- or late-twenties, do it. This allows you to avoid rent, and invest.

Core Principles for All Scenarios

1. Thrift Is Underrated: Not spending is saving. Don’t be penny-wise and pound-foolish, but the less you spend, the more you save. The more you save early, the harder your money works for you later.
2. Avoid Student Loans: The financial and psychological (and emotional) burden of loans can delay wealth building for decades. Choose affordable education options.
3. Sacrifice in Your 20s for Ease in Your 40s: The earlier you make sacrifices, the greater the rewards. Living modestly for a decade sets the foundation for financial freedom later in life.

Financial independence isn’t about luck; it’s about strategy and discipline. Your twenties aren’t the time to "live it up." They’re the time to set yourself up. Stick to the plan, and your future self will thank you.