I have good news for you. In a press release on March 12, 2019, the Spectrem Group indicated that there were in 2018, 11.8 million Americans with a net worth of at least $1,000,000. Press Release – Spectrem Group’s 2019 Market Insights Report Reveals 10th Consecutive Annual Increase in Wealthy American Households – March 12, 2019 This is about 3.6% of the American public.
Furthermore, it is estimated that about 80% of these millionaires are self-made (i.e., first generation) millionaires (See The Millionaire Next Door by Thomas J. Stanley.) Therefore, almost 3% of Americans are self-made millionaires, as measured in 2021 US dollars. So, if IQ and wealth do not have a strong correlation, those of average IQ are as likely as others to become millionaires and therefore we can conclude that about 3% of people of average IQ are self-made millionaires. But what do we know about the correlation between IQ and wealth? In a study published in 2007 (Zagorsky, Jay, L. 2007. “Do you have to be smart to be rich? The impact of IQ on wealth, income and financial distress.” Intelligence, 35 p. 500.) Jay Zagorsky reported:
If IQ test scores are an accurate measure of intelligence and if intelligence is relatively fixed from teen years to adulthood, then the results indicate the answer is no…individuals with low intelligence should not believe they are handicapped in achieving financial success, nor should high intelligence people believe they have an advantage.
If intelligence is not a major factor in accumulating wealth than what’s needed? Many people will answer “luck.” While luck is almost always a component in success of any kind, there is another factor that is common to virtually all those who have accumulated wealth–tenacity or intensity of purpose. When people dismissed humorist Stephen Leacock’s success as merely luck, the quit-witted author retorted, “Ya, but the harder I works, the luckier I gets.”
If you are young and you understand the power of compound interest, you can almost certainly accumulate $1,000,000 in net worth by the time you reach retirement. The secret is to earn as much as you can in your early years and spend as little as possible, investing the difference between your earnings and expenditures as soon as possible. As you watch your investments grow over the years you will come to understand the quote (often attributed to Einstein): “Compound interest is the eighth wonder of the world; he who understands it, earns it. He who doesn’t, pays it.”
To fully comprehend the power of compounding, imagine a scenario in which you earn 1¢ and the first day of the month, 2¢ on the second day, 4¢ on the third day, and so forth for 31 days, each day earning double the earnings of the previous day. Calculate how many days it would take you to earn $1,000,000.
