Following these basic financial practices is a great place to start.
the main points
- The results of the largest study of millionaires may surprise you. Almost 80% of millionaires did not inherit a single cent.
- 80% of millionaires invest in their workplace retirement accounts and invest regularly.
- 94% live on less than they earn and nearly 90% have college degrees.
There are 22 million millionaires in the United States, more than the population of Florida. The number of millionaires increased by almost 10% from 2019 to 2020. This trend is expected to continue. While many may think that becoming a millionaire is a long way off, by studying the habits of millionaires, you too can set yourself on the path to becoming one.
According to one of the largest studies of millionaires ever conducted, millionaires have not built a net worth of $1 million or more through inheritance. Only 2% of millionaires said they belong to a high-income family. It took hard work, discipline and following these four simple steps to reach millionaire status.
1. Invest in a 401(k)
According to the survey, 8 out of 10 millionaires have invested in their company’s 401(k) plan. This simple step was one of the key keys to their financial success. In addition to taking advantage of a workplace retirement plan, 3 out of 4 respondents also invested in a separate IRA and brokerage account.
2. Invest regularly
Becoming a millionaire does not happen overnight. Only 5% achieved this milestone in less than 10 years. It took the vast majority 28 years to become one and the average age they reached was 49. What’s more, 3 out of 4 millionaires report that they have invested a regular and consistent amount of money over a long period of time.
By taking advantage of “compound interest,” they were able to build their fortune over time. If you invest $350 per month and get 12% annual return, you will be a millionaire in 30 years. But, just $100 per month in the same scenario would result in close to $300,000. It doesn’t take much to become a millionaire as long as you are disciplined and save regularly.
3. Stick to the budget
Millionaires are anxious about how their money is spent. Becoming a millionaire does not necessarily mean how much money you make, but how much you can save. 94% of millionaires live on less than what they earn using a budget and nearly 75% have never held a credit card balance.
When grocery shopping, 85% of millionaires used a menu with 94% using coupons. One of the biggest expenses is eating out. The study found that millionaires spend less than $200 a month in restaurants.
4. Focus on investing in yourself
The study found that while the quality of millionaires who attended school was not a huge factor in their success, the degree itself was. In fact, 62% of millionaires graduated from public schools, while 8% graduated from a reputable university.
Roughly 9 out of 10 millionaires graduate from college versus 38% of the general population. Not surprisingly, more than half (52%) of millionaires have a master’s or doctoral degree, compared to 13% of the rest of the population. Millionaires have invested in themselves knowing that more jobs require advanced education.
In addition, 8 out of 10 millionaires did not receive a dime in inheritance. Only 31% average salary earnings over $100,000, and a third never made six figures in any working year. You don’t have to come from a wealthy family or earn a lot of money to become a millionaire. The millionaires in the study focused on their education, steered clear of debt, and kept an eye on how much they spent. By spending less than they earn, they were able to invest and build the foundation of their wealth.
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