This article will challenge your preconceptions about the millionaires in our society. When you think of millionaires, you may envision private jets, opulent mansions, and extravagant lifestyles. However, the reality is often far removed from these images peddled by popular media. What if we told you that many millionaires live right next door, leading lives not too dissimilar from your own?
Let’s unravel the truths and shatter the myths surrounding the lives of self-made millionaires. Drawing from rigorous studies and insightful research, we will explore the habits, career choices, educational background, and investing practices of those who have reached the million-dollar milestone.
If you’re intrigued to learn how these individuals amassed their wealth, the sectors they work in, their investment strategies, and how they manage their daily lives, then continue reading. This exploration may change your perspective on wealth and equip you with the knowledge to embark on your journey toward financial independence and prosperity.
The Real Millionaire Next Door
“The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” is a book by Thomas J. Stanley and William D. Danko that was published in 1996. It explores the common characteristics of millionaires in the United States, dispelling many commonly-held stereotypes about the rich. Here are some key findings from the book:
- Living Below Their Means: Many millionaires live well below their means, investing the surplus instead of spending it. They prioritize financial independence over displaying high social status.
- Self-Made Wealth: A significant proportion of millionaires are first-generation rich. They did not inherit their wealth but accumulated it through hard work, discipline, and financial planning.
- Self-Employment or Owning Businesses: Many millionaires are entrepreneurs or business owners. They created wealth by owning and operating their businesses.
- Frugality: Millionaires tend to be frugal, not ostentatious. They’re careful with their money and often buy used cars, avoid luxury items, and do not live in high-priced neighborhoods.
- Investment Focus: They invest wisely, often in income-producing assets, and they invest a significant proportion of their income. They also avoid conspicuous consumption, which could reduce their investment capital.
- Educational Attainment: Many millionaires value education and encourage their children to pursue higher education. However, a college degree is not always a guarantee of wealth.
- Long-Term Marriages: A stable family life, often with a long-term spouse who shares the same economic habits, is a common characteristic among millionaires.
- Targeted Marketing: Millionaires are often immune to targeted marketing, encouraging people to spend lavishly. They make purchasing decisions based on their needs and values rather than advertising.
- Economic Opportunity: They are good at spotting economic opportunities and using tax laws to grow and protect their wealth.
These findings help to debunk the image of the millionaire as someone who lives a lavish lifestyle. Most millionaires are ordinary people who practice good money management habits.
The National Study of Millionaires
Dave Ramsey, the personal finance expert, and his team conducted a large-scale study called “The National Study of Millionaires.” Ramsey Solutions conducted the largest survey of millionaires ever, with 10,000 participants. The nationally representative sample was fielded from November 17, 2017, to January 31, 2018. This research aims to debunk myths about millionaires, providing insights into how these individuals amassed their wealth.
Here are some highlights from their findings:
- Self-Made Millionaires: Similar to the conclusions of “The Millionaire Next Door,” Dave Ramsey’s research shows that most millionaires are self-made, debunking the myth that most wealthy people inherit their money.
- Education Matters: The study found that many millionaires graduated with a four-year degree. Contrary to popular belief, they do not all attend Ivy League schools.
- Consistent Investing: The study found consistent investing, especially in employer-sponsored retirement plans and IRAs, was common among millionaires. Traditional 401ks are a considerable tax advantage for compounding capital tax-free until withdrawal.
- Frugal Living: Echoing “The Millionaire Next Door,” Dave Ramsey’s research indicates that millionaires tend to live below their means, emphasizing the importance of budgeting, avoiding debt, and saving.
- Home Ownership: Most millionaires surveyed reported living in the same home for over a decade. This suggests they value stability and long-term investments over frequent and potentially risky moves or upgrades.
Here is a list of some of his most important findings.
- Eight out of 10 millionaires invested in their company’s 401(k) plan.
- The top five careers for millionaires include engineer, accountant, teacher, management, and attorney.
- 79% of millionaires did not receive any inheritance from their parents or other family members.
- Three out of four millionaires said regular, consistent investing leads to success.
- Most millionaires graduated from public, state schools.
- Most millionaires use a written grocery list when shopping.
- Only 15% of millionaires were in senior leadership roles, such as vice president or the C-suite (CEO, CFO, COO, etc.).
- Ninety-three percent (93%) of millionaires said they got their wealth because they worked hard, not because they had big salaries.
- Only 31% averaged $100,000 a year throughout their career, and one-third never made six figures in any single working year of their career.
You can read the full report here.
Key Takeaways
- Most self-made millionaires invest in retirement savings plans such as 401(k)s.
- The primary occupations amongst the wealthy are roles such as engineers, CPAs, educators, managers, and lawyers.
- Inheritance isn’t the primary source of wealth for most rich individuals; approximately 79% have amassed their wealth independently.
- Consistent and disciplined investing is a common practice among the rich.
- Pursuing higher education, especially at public and state schools, is a common trait among millionaires.
- Many wealthy individuals adhere to frugal practices such as using a grocery list for shopping.
Conclusion
Breaking down the stereotypes around the wealthy, it becomes apparent that millionaires are often self-made and achieve their seven-figure net worths through long-term discipline, prudent financial habits, and intelligent investing rather than through inheritance. Occupations like engineering, accounting, teaching, management, and law are prominent among this demographic, pointing to the value they place on education and professional careers. Rather than indulging in conspicuous consumption, they lean towards frugality and wise money management. They emphasize investing highly, especially in retirement plans like 401(k)s, demonstrating their long-term financial planning. Thus, the reality of millionaires is less about extravagance and more about financial diligence, strategic planning, and consistency.
