Content of the material
- 12 habits of self-made millionaires
- What do millionaires do with their money?
- Types of millionaires
- Why does real estate produce so many millionaires?
- How Millionaires Invest (and Spend)
- The Four Paths to Seven Figures
- How Can I Get Rich With No Money?
- Millionaires Dont Always Make Big Bucks
- The Pros and Cons of a Live-and-Rent Approach
- About the Author
- 2. The Dreamers path
- Surprisingly Simple Ways to Become a Millionaire
- 1. Work smarter and harder than your competition.
- 2. Learn from your mistakes and move on.
- 3. Build something new that you would love – and be sure to experiment.
- 4. Learn to budget – or at least get help doing so.
- 6. Don’t believe discouraging people.
- 7. Save some of your income for a rainy day.
- My Takeaways
12 habits of self-made millionaires
“Rich Habits” author and certified financial planner Tom Corley interviewed 177 self-made millionaires to discover what they had in common.
Here are a few of the habits he came up with:
- They “dream-set”
Dream-setting means defining your future life by imagining all your dreams coming true and writing down what you come up with.
- They hang out with other successful people
Part of the millionaire lifestyle involves spending time with other people with similar goals, habits, and achievements.
- They have multiple sources of income
Self-made millionaires tend to rely on multiple streams of income — roughly 65% secure at least three sources of income before banking their first million.
- They sleep at least seven hours a night and get up early
Almost all self-made millionaires report sleeping seven or more hours every night, and nearly half wake up at least three hours before their workday begins.
- They exercise
A significant percentage of self-made millionaires do 30 minutes or more of aerobic exercise every day, like running, jogging, walking, or biking.
- They read a lot
Approximately 88% of self-made millionaires spend 30 minutes or more a day reading. What kinds of books do they read? Biographies, self-help books, and history books.
- They have a positive attitude
A positive mental outlook is essential to develop successful habits that help achieve millionaire status.
- They’re persistent
Self-made millionaires aren’t discouraged by failure. At least a quarter of them report having failed at least once in their business before finding success.
- They’re original thinkers
Successful people aren’t afraid of thinking outside the box and not following the herd. Instead, they create their own pack and work on attracting others to their point of view.
- They aren’t afraid of criticism
Receiving feedback — whether positive or negative — is an essential part of success because it gives you the information to reinforce productive behavior and make adjustments if necessary. Self-made millionaires apply this belief to all aspects of their life and don’t shy away from negative feedback.
- They help others succeed
Self-made millionaires don’t see success as a zero-sum game. That’s why they often share their knowledge and expertise to ensure a team of other success-minded people surrounds them.
- They volunteer
Most millionaires volunteer five or more hours for charitable organizations and nonprofits every month.
What do millionaires do with their money?
When it comes to investment strategies, self-made millionaires were more likely to add equity investments, while those who were born wealthy typically had more real estate investments, according to the study. Diversifying those investments is key among many millionaires.
Millionaires put their money in a variety of places, including their primary residence, mutual funds, stocks and retirement accounts. Millionaires focus on putting their money where it is going to grow. They are careful not to invest large sums into items that will depreciate. A car for everyday driving, for example, will most likely lose value over time.
The key for most millionaires is to save money before spending it. No matter how much their annual salary may be, most millionaires put their money where it will grow, usually in stocks, bonds, and other types of stable investments.
Key takeaway: Millionaires put their money into places where it will grow such as mutual funds, stocks and retirement accounts.
Becoming rich is not easy. Many people who inherit wealth or have money come easily to them lose it. If you want to get ahead of the game and live an awesome life you have to do what most people aren’t willing to do. Otherwise, we would all be rich! Whether you choose real estate or another avenue to make your riches, make sure you choose the path and you do whatever falls in your lap because it is the easiest route. Most people will not follow through with their plans or intentions when things get tough, don’t be most people.
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Types of millionaires
In his study, Corley identified three major types of self-made millionaires:
These millionaires make money by first accumulating a wealth of knowledge and skills to become experts in their field.
The big company climber
This type of millionaire accumulates their wealth by spending several decades working their way up the ranks of a publicly held company.
To succeed as entrepreneurs, these millionaires work tirelessly to overcome obstacles and failures before finally making it big.
Why does real estate produce so many millionaires?
Many people will argue that stocks or mutual funds are a much better investment than real estate because the average gain of the stock market is higher than the average gain of housing prices over the last 100 years. However, when you invest in real estate or even buy a house to live in, the wealth you are gaining is not as simple as the increase in the value of the home.
- Leverage: Most people get a loan when they buy a house. Getting a loan increases your returns if housing prices increase. If you buy a house for $300,000 and it increases in value to $360,000, that is a 20 percent increase in value. But if you only put $10,000 down on the property, then you actually made a 600 percent increase on your investment.
- Buy below market: When I buy houses I do not pay retail value, I want a great deal and you can do that with real estate. Many houses can be bought for less than they are worth if the seller is motivated, the home needs repairs, or for many other reasons. On my rental properties and fix and flips I usually pay at least 20 percent below market value. As soon I buy the house I increase my net worth by the discount I got on the property.
- Cash flow: Owning rental properties is not all about the value of the home increasing. In fact, I pay more attention to the cash flow my properties make me, not appreciation. My first rental properties made me about $400 a month. That is not a ton of money, but when you buy multiple properties that money begins to add up.
- Equity pay down: When you use leverage to buy rental properties you are paying down the balance of the loan every month. Depending on the type of loan you get, you could pay off the house in 30 years, 15 years or sooner if you want to pay off the loan early.
- Tax advantages: Real estate has awesome tax advantages for your personal house and for investment properties. In some cases, you can make money on cash flow every month and pay no taxes thanks to depreciation. You can also use a 1031 exchange to defer taxes on sales.
Buying one rental property and holding it for 30 years may not make you a millionaire. Actually, it most likely would make you a millionaire thanks to inflation, but being a millionaire in 30 years will not be the same as being a millionaire today. If you can buy multiple properties over time that are great deals you can become a millionaire rather quickly. You don’t even have to have a lot of money to start with.
How Millionaires Invest (and Spend)
According to the survey, 8 out of 10 millionaires invested in their company’s 401(k) plan, and that simple step was a key to their financial success. Not only that, but 3 out of 4 of those surveyed also invested outside of company plans.
But they didn’t risk their money on single-stock investments or “an opportunity they couldn’t pass up.” In fact, no millionaire in the study said single-stock investing was a big factor in their financial success. Single stocks didn’t even make the top three list of factors for reaching their net worth.
Three out of four millionaires (75%) said that regular, consistent investing over a long period of time is the reason for their success. So, the story about the young computer genius who developed an app that earned millions overnight is the exception, not the rule.
Even when millionaires don’t have to worry about money anymore, they’re still careful about their spending. Ninety-four percent of the people studied said they live on less than they make, and nearly three-quarters of the millionaires have never carried a credit card balance in their lives!
These milloinaires also said they spend $200 or less each month at restaurants. And 93% of millionaires use coupons all or some of the time when shopping. By staying out of debt and watching expenses, they’re able to build their bank accounts instead of trying to get out of a financial hole every month.
The Four Paths to Seven Figures
In writing for CNBC, financial expert and author Tim Corley outlined the results of research he conducted for one of his books. The results revealed that people tend to follow one of four paths to becoming millionaires.
Make Your Money Work Better for You
The easiest way, and the only way that comes with something like a guarantee, is what Corley calls the saver-investor path. Around 1 in 5 millionaires in his study banked their first million in their mid-to-late 30s despite their middle-class incomes. They did so by living frugally and by saving and investing at least 20% of their income consistently from early on in their working lives.
The hardest path — followed by about 28% of millionaires — is the so-called dreamers path. These millionaires strike it rich by beating the odds at a high-reward, low-probability endeavor like becoming a successful actor, athlete, musician or millionaire business owner. The lifestyle is defined by long hours, lots of stress and years of toiling without a steady paycheck. When they hit, however, they hit big — their average net worth is $7.4 million, the highest in the study by far.
About 1 in 3 millionaires made their money through what Corley calls the company climbers path. Ascending the corporate ladder into executive territory lands the average climber $3.4 million after 22 years.
Finally, there’s the virtuosos path, which is Corley’s name for the tradeoff of money for knowledge and expertise. About 1 in 5 millionaires takes this route and earns $4 million after 20 years of doing so. Many of those years are spent learning and becoming one of the best in a highly competitive and complicated field like law or medicine, where they’re paid a handsome sum for their standout skills and knowledge.
Make Your Money Work Better for You
How Can I Get Rich With No Money?
Unless you come from a very wealthy family, are expecting to win the lottery, or are on the verge of getting a patent on the next great invention, there's very little chance that you can become rich by doing nothing. You'll need discipline, a plan, and, in some cases, good advice from a registered professional who can help push you in the right direction to reaching your goal of becoming a millionaire.
Millionaires Dont Always Make Big Bucks
The next logical question is: What kind of salaries do wealthy people make? Not as much as you might think. The majority of millionaires in this survey didn’t have high-level, high-salary jobs.
In fact, only 15% of millionaires were in senior leadership roles, such as vice president or C-suite roles (CEO, CFO, COO, etc.). Ninety-three percent of millionaires said they got their wealth because they worked hard, not because they had big salaries.
Only 31% averaged $100,000 a year over the course of their career, and one-third never made six figures in any single working year of their career.
The Pros and Cons of a Live-and-Rent Approach
This approach does require moving about every year, however.
But if you’re a 22-year-old just graduating from college, that means you will own 10 pieces of property by your early 30s. If a 15-year mortgage is obtained and paid off early, several could be owned free and clear. That would provide for a significant stream of income for the investor. From that flow of funds, more properties can be purchased, too, continuing into the future if you wanted to.
About the Author
Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street’s investment community in New York City.
2. The Dreamers path
Approximately 28% of the folks in my study were Dreamers, and they accumulated an average net worth of $7.4 million — far more than any of the other groups — over a period of about 12 years.
All of them told me that pursuing their dreams was one of the most rewarding things they had done in their lives. They loved what they did for a living, and their passion showed up in their bank accounts.
Those who want to take this path, however, must be willing to work long hours and able to handle financial stress. The Dreamers in my study worked more than 61 hours per week before finally achieving their dreams. Weekends and vacations were almost non-existent.
Trying to make ends meet was not easy. At first, getting a steady paycheck was "nearly impossible," one Dreamer said. It was even harder for those who had families to support. To finance their dreams, some decided to put off buying a home, while others dipped into their retirement savings.
If you're risk-averse, this path may not be for you.
Surprisingly Simple Ways to Become a Millionaire
Simple tasks are not always easy tasks. If I were to hand you a spoon and ask that you dig a hole nine feet down into packed soil, that’d be pretty straightforward and simple but it certainly wouldn’t be easy.
Likewise, you’ll find some of these simple ways to be just that – simple but not easy. But come on, you’re tenacious enough for the job, right?
Jaime Tardy, author of Eventual Millionaire who has interviewed hundreds of millionaires has this to add , “One of the main traits of a millionaire is perseverance. The ability to KEEP GOING in the face of adversity even when the finish line is very far away.”
One last thing. Remember that many of these tips are surprisingly simple, don’t underestimate their effectiveness just because you’ve “heard that one before.” Put these babies to good use and watch your millionaire potential soar!
1. Work smarter and harder than your competition
Identify your competition. How hard are they working? What are some differentiators you can bring to your workplace or market?
Start by working smarter. There’s no use in working harder if your work isn’t effective at producing income – you’ll be spinning your wheels.
There’s no sense in selling ice cream cones on your front lawn in the dead of winter. Instead, set up a booth at the park in the sizzling summertime – you get the idea! Simple, commonsense changes can greatly improve your effectiveness.
Work harder than others are willing. We’ve all seen the guy or gal at the office who works harder than anyone else. Maybe they’re a little nerdy or a little too interested in their job – or are they?
Maybe they’re onto something. After all, aren’t they the ones getting the promotions? Aren’t they the ones who become the office linchpins?
I remember when began my career with A.G. Edwards & Sons in 2002, I was in a training class of around 55 people. After completing training a year later, our class was reduced to less than half. My fifth anniversary mark? Only five of us were left.
Most failed. Why? Because they weren’t willing to put in the hard work required.
I beg you to not be afraid of hard work. Not only will your boss feel better about what you’re doing for them – you will too.
I’m not afraid to die on a treadmill. I will not be outworked. You may be more talented than me. You might be smarter than me. And you may be better looking than me. But if we get on a treadmill together, you are going to get off first or I’m going to die. It’s really that simple. I’m not going to be outworked. – Will Smith, Actor
2. Learn from your mistakes and move on
Everyone makes them. I do, you do, we all do.
And believe me, I’ve made some pitiful mistakes.
Would you get suckered into two multi-level companies that go nowhere? Would you throw $8,000 into an online business venture only to lose it all? Those are just a couple of several investment mistakes I’ve made with my money.
Mistakes are difficult to swallow. I think our first gut reaction as human beings to the realization we messed up is to shift blame – to others or to circumstances.
The very best way forward is to admit we fumbled the ball. Are you willing to admit when you make mistakes?
Some people, when faced with their own inadequacies, beat themselves up. And you know what that does? It paralyzes them from making the decisions they need to make to achieve success.
It’s important to remember that . . . .
Only those who are asleep make no mistakes. – Ingvar Kamprad, Founder of IKEA
So, take the simple step to fess up and move on. Yes, it’s simpler than you think – especially once you have practice. If you are still in the middle of a debt mistake one of the best things you can do is to stop paying interest by transferring your balance over to a 0% APR credit card. This will free you up to hammer down on that debt instead of paying big interest payments.
Millionaires don’t give up because of a few silly mistakes. They press on toward the goal.
3. Build something new that you would love – and be sure to experiment
You can read book after book about how to research what your customers will love, and by the time you deliver it, they’ll already be bored with it.
If you’re the entrepreneurial type – I know I am – make sure to work on projects you can get excited about!
Chances are, if you create something that you’d use and love, others will too.
Millionaires understand that some of the best ideas don’t come out of costly research, they come out of a passion for making the world a better place.
Also, remember to experiment. Have fun! Some of my best ideas come out of experimentation.
In 1945, Percy Spencer experimented with a new vacuum tube while doing research for the Raytheon Corporation. He popped popcorn and melted a candy bar, and saw the great potential for this process which eventually culminated into the advent of the microwave.
Tim Cook, the CEO of Apple recently explained in an interview with Charlie Rose that it’s more difficult to edit than it is to create something entirely new. But I’ve learned that sometimes creating something new can be the best way forward to becoming a millionaire.
One of the things that I’ve been most excited about building is my blog. My financial planning practice was growing at a steady rate but after I launched GoodFinancialCents.com in 2008 my practice and revenue have grown significantly. Some of that is a direct result of getting new clients to my practice while the other more surprising revenue source has been directly from the blog.
A combination of advertising revenue and introduction to new business opportunities (because my name and face are all over the web) have been a huge blessing.
Here’s the thing you have to realize though: I KNEW NOTHING ABOUT BLOGGING.
That’s right. The launching of my blog was a total experiment and still is today. I’m always testing different ways to monetize and build my brand. Experimenting is the fun part!
You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new. – Steve Jobs, Former CEO of Apple
4. Learn to budget – or at least get help doing so
You know that I hate budgeting. Thankfully, my wife budgets like a pro.
Here’s a tip from one of the financial greats (a millionaire, to say the least):
Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. – Warren Buffett, CEO of Berkshire Hathaway
If you don’t budget, I promise you’ll lose money to overspending.
Want to make yourself sick? Count up how much you’re spending on eating out, clothing, gadgets, and other delights and write it down. Then, start budgeting. After a year, look at how much you’re spending and compare with your initial count.
Yikes. Try not to lose your lunch.
A hugely important part of budgeting is ensuring you’re spending less than you’re making. And the only way to do that friends, is to track everything.
If you’re not a spreadsheets-kind-of-person, that’s okay. Just make sure you have some help.
6. Don’t believe discouraging people
As soon as you accept that you’re not going to become a millionaire, you probably won’t – you’ll settle for the ordinary.
Your beliefs about your future matter a whole lot, and will – in part – help determine your future.
After all, your beliefs affect your actions, and your actions affect your outcomes.
When you listen to discouraging people, you’re letting them accomplish their goal – to drag you down and ensure you don’t surpass their success. No good.
Instead, I suggest you prove them wrong – but be humble about it. Your results will speak louder than your words, I promise you.
I just love it when people say I can’t do it, there’s nothing that makes me feel better because all my life, people have said that I wasn’t going to make it. – Ted Turner, Founder of CNN
7. Save some of your income for a rainy day
If you’ve lived on this planet for any considerable number of years, you know that bad stuff happens.
Not only that, sometimes several bad things happen all at the same time. Talk about knockout power!
That’s why I recommend that you save some of your income for a rainy day.
Medical emergencies can last years.
Trees go through roofs.
Jobs can be lost.
Don’t get caught without an emergency fund. You hear?
What does this have to do with becoming a millionaire? I’ll tell you.
If you have an emergency and don’t have some liquid cash saved up in a savings account like one from Capital One 360, you’re likely to either go into debt (bad idea) or borrow from family members (very bad idea).
Don’t be the guy that owes his parents.
Don’t be the couple that drowns in debt.
Think of debt as the polar opposite of investing. Instead of you investing in companies, companies are investing in you – looking to make as much profit as possible by pulling it out of your wallet. It’s bad news people.
According to many experts, you should have around three to six months of expenses in your emergency fund – in bad times, I recommend you shoot for eight months.
I have a couple takeaways:
1. High earners have a lot of different income sources. You need to earn more, save more, and invest the difference. Then reinvest the gains. Rinse, repeat. And the richer they are, the less of their income comes from their wages. The top 10% (90-100 percentile) had only 47.1% of their total income from wages.
2. The wealthy own a lot of stuff but a lot of that stuff appreciates. And that’s key. If you want to see your wealth grow, it needs to be in assets that appreciate significantly. Real estate can do that if you are good at picking properties but as a whole industry, it’s not a great investment, you’ll want to go with the stock market.
What did you think of this data?