Quiz time. Is it True or False?
Most millionaires receive most of their money through an inheritance.
Most millionaires come from high income families.
Most millionaires use coupons when shopping.
Extra credit: Do you know the top three occupations that have the most millionaires?
See below for all the answers and other interesting facts based on research from the two books I highlight below.
I recently read two excellent books on this topic. Every Day Millionaires by Chris Hogan and The Next Millionaire Next Door by the father and daughter team of Dr. Thomas Stanley and Dr. Sarah Stanley Fallaw. Both books provide interesting insights into the early life impacts, lifestyles, behaviors and jobs held by the typical millionaire today. The tagline in the Chris Hogan book How Ordinary People Build Extraordinary Wealth and You Can Too highlights key points from Chris Hogan and the Ramsey Solutions research team’s recent study of over 10,000 U.S. millionaires. They asked about how they achieved wealth, the time frame to get there, where they came from, the financial behaviors they applied, the tools they used, and useful tips they pass on and more. The book is a very interesting read and it’s packed with true stories of actual everyday millionaires. It dispels the myths of people who successfully manage their money to accumulate vast sums of wealth. I highly recommend this book.
The Next Millionaire Next Door is an excellent update to the Millionaire Next Door by Thomas Stanley and Willian Danko, released in 1996. There are a lot of comparisons to the millionaires studied twenty years ago and today. A good bit of the discussion centers around the behaviors of “under accumulators of wealth” and “prodigious accumulators of wealth” and what separate the two. They reference a chapter in the first book called “Stop Acting Rich” where people seemingly think they are wealthy because of their McMansion, shiny new cars and other expensive items they have (not own) to “keep up with the Jones”. I highly recommend this book too.
Both books highlight the influences these millionaires had at various stages of their lives and how they manage their personal finances. I would be doing a serious injustice to both books to say that I can summarize them in a blog post.
Here are some interesting myths discussed in these books:
- The wealthy didn’t earn their wealth.
- They take big risks with their money.
- Most of them graduated from prestigious private colleges (actually 9% never graduated from college).
- They are in top management, business owner, pro athlete or a highly compensated entertainer.
Some other key takeaways:
- Millionaires take personal responsibility, practice intentionality, are goal-oriented, hard workers, consistent and disciplined.
- What you think about and what you do with your money is more important than what you make, although a good income is helpful.
- Your wealth building potential comes down to one person – You.
- Only 21% of millionaires received any inheritance and in most cases it was less than $100k.
- Millionaires aren’t afraid to work for their success – they believe winning with money is definitely better than losing, but winning with integrity is key.
- 8 out of 10 millionaires come from families at or below the middle income level.
- The top three occupations of millionaires are engineers, accountants and teachers (surprisingly not doctors, lawyers, top executives, athletes or entertainers).
- Millionaires think there’s enough opportunity to go around – they don’t fall prey to the victim thinkers who try to say otherwise.
- Millionaires state overwhelming that they achieved their wealth through discipline, consistency and focus on their finances over any kind of luck.
- There are no get rich quick schemes, instead it’s about gaining knowledge of saving, investing, balancing risk and reward and not getting distracted with “opportunities” from people who don’t know what they are talking about.
- 93% of millionaires use coupons when shopping.
- Wealthy people don’t rely on debt, in fact they are debt free in almost all cases and that includes personally financing their small businesses.
- Millionaires understand that it takes years and decades of consistent investing and using the power of dividends and compounding interest to build wealth.
- Having adequate emergency funds (3-6 months of expenses) and considering the outcomes of purchases on the budget are key actions.
- Financial decisions are based on the budget and the impact of future plans and goals.
- Start saving and investing early, live on less than you make and use the power of compounding interest.
- Establishing conscientiousness, discipline and self-control with all spending, saving, investing, budgeting and tracking cash flow is key.
- 97% of millionaires build their wealth through retirement plans.
- Not getting too fearful or greedy with the ups and downs of the markets -and as Warren Buffett says, “Be fearful when others are greedy and greedy when others are fearful” (ie. don’t panic and know your risk acceptance and tolerance).
That’s all for now. I’ll discuss some investing strategies, building an emergency fund and provide a tax prep checklist in my next post.
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