Income Isn't Wealth—But It Builds Wealth
Making $100K/year doesn't make you rich. Investing $30K of that $100K annually for 20 years at 10% returns makes you rich ($1.89M). Income is the raw material—investing is what turns it into wealth.
The Three Income Paths to $1 Million
1. Salary Income (W-2)
This is how most people build wealth. You earn $70K-150K/year, save 15-30%, and invest consistently. At a 20% savings rate on $100K salary, you invest $20K/year. Over 25 years at 10% returns, that's $2.16M. The key isn't earning $500K—it's saving a high percentage of whatever you earn. Use the Salary to Millionaire Calculator.
2. Side Hustle Income
Freelancing, consulting, e-commerce, gig work. The advantage: You can invest 100% of side income because your W-2 salary covers living expenses. A $1,000/month side hustle invested fully becomes $217,000 in 10 years at 10% returns. Many people reach $1M in their 40s by combining salary savings + side hustle investments. Calculate with the Side Hustle Calculator.
3. Passive Income
Dividend stocks, rental properties, REITs, royalties. The goal: Build assets that generate income without active work. A $1M portfolio at 4% yield generates $40,000/year passive income—enough to cover basic expenses. Reinvest passive income early, live on it later. Model this with the Passive Income Calculator.
How Much Income Do You Need to Become a Millionaire?
| Annual Income | Savings Rate | Annual Savings | Years to $1M |
|---|---|---|---|
| $60,000 | 20% | $12,000 | 26 years |
| $80,000 | 25% | $20,000 | 21 years |
| $100,000 | 30% | $30,000 | 17 years |
| $150,000 | 40% | $60,000 | 11 years |
Key insight: Someone earning $60K saving 20% ($12K/year) reaches $1M in 26 years. Someone earning $150K saving 40% ($60K/year) reaches $1M in 11 years. Income matters, but savings rate matters more.
The Side Hustle Advantage
Why side hustles build wealth faster than salary increases:
- 100% investment rate: Your salary covers expenses, so side income goes straight to investments
- No lifestyle inflation: Side income is "invisible"—you never adjusted your lifestyle to include it
- Scalability: Side hustles can grow 10-50%/year vs. 3% salary raises
- Tax optimization: Business expenses reduce taxable income
Example: $1,000/month side hustle, 100% invested at 10% returns:
- Year 5: $78,000
- Year 10: $217,000
- Year 15: $434,000
- Year 20: $760,000
Combine this with salary savings, and you hit $1M in your 30s-40s instead of your 60s.
Building Passive Income: The 4% Rule
The goal of wealth building is to replace active income (working) with passive income (investments). The 4% rule states:
Annual expenses Ă· 0.04 = Amount needed for financial independence
- Live on $40K/year → Need $1,000,000
- Live on $60K/year → Need $1,500,000
- Live on $80K/year → Need $2,000,000
Once your passive income exceeds expenses, you're financially independent. You can quit your job, work part-time, or pursue passion projects. Income becomes optional.
Common Income-to-Wealth Mistakes
- Lifestyle inflation: Earning $100K but spending $95K. You stay broke no matter how much you earn.
- Treating side income as "fun money": Side income should go 80-100% to investments, not lifestyle upgrades.
- Focusing on income instead of savings rate: Earning $200K but saving 10% ($20K) is worse than earning $80K and saving 40% ($32K).
- Not tracking where money goes: You can't optimize what you don't measure. Track spending monthly.
Start Here
Begin with the Salary to Millionaire Calculator to model your current W-2 income. Then explore the Side Hustle Calculator to see how extra income accelerates your timeline. Finally, use the Passive Income Calculator to plan your financial independence number.