7 Things Millionaires Do Differently
melaniedj • 13 November 2017
To many, being a millionaire sounds like a pipe-dream , but there are some simple steps you can follow from my below analysis of things millionaires do differently from the rest!
If I asked you what you think the typical millionaires lifestyle looks like, what would you say? Fancy cars? Lavish homes?
I think you'd be surprised to find that is typically not the case.
Most millionaires don't fit the part.
Take for example Warren Buffet, a man who Forbes estimates has a $75.6 billion net worth. He lives in a quiet Omaha neighborhood in a home he bought in 1958 for a grand total of $31,500. Yes, you read that right. Granted, his home is worth a lot more now, but for a man who could buy in cash any home he wanted, that is pretty modest.
We often see others who appear (key word) to be millionaires and think that could never be me.
Nothing could be so far from the truth. I used to think the same, and I probably still would think the same if I kept the financial habits that I see many Americans blindly following.
You CAN build wealth if you are willing to discipline yourself and mimmick the habits of the rich. So, what exactly are those habits? They are actually quite simple!
7 Things Millionaires Do Differently
1) They Invest First
You could also say they make their money invisible.
How? They immediately invest a fixed percentage of their income before they are tempted to spend it. In fact, according to Nerd Wallet , the average millionaire saves or invests 20% of his/her income.
Warning: This requires a tremendous amount of discipline!
As we try to build wealth ourselves, Joe and I commit to saving and investing every month. We do two things right away when we get paid- we tithe, and then we take whatever amount we had decided to invest, save, or pay off debt and immediately invest it, put it in our savings, or make the debt payment.
Make sure you have saving and investing in your budget every month (If you don't know how to budget, here is a brief tutorial ) .
Only spend what is left over AFTER saving and investing (or paying off debt). Here's how you can do that even if it feels like you don't have any money left over at the end of every month.
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2)They are Frugal & Live Below Their Means
High net worth individuals do not increase their standard of living to match their income.
Most millionaire households play great offense , meaning they generate a significant amount of income. They also play great defense, meaning they are frugal when it comes to consumer spending.
You might be wondering if they are so wealthy, why are they so concerned with frugality? Why do they clip coupons? Why do they buy used vehicles?
Frugality is important to them because they believe that financial freedom is more important than displaying a high social status, and that their purpose in life is not to look wealthy. Being frugal provides them with more dollars to invest.
Some of the most affluent neighborhoods in America are also some of the most high consumption neighborhoods and low net worth neighborhoods.
On the other hand, high net worth individuals know that they are not defined by where they live, what they drive, or what they wear.
In fact, the typical millionaire paid approximately $25,000 in cash for their most recent vehicle. I think we all know broke people who have paid a lot more than that- which is probably part of the reason they are broke!
Don't be fooled by appearance.
Related: 11 Habits of a Frugal Millennial
3)They Have Clear, Well-Defined Goals
Another misconception is that most wealthy individuals got where they are because they inherited their wealth or were afforded more opportunity to become wealthy because they came from a wealthy family.
Statistics prove otherwise. According to recent data, 80% of America's millionaires are first-generation, self-made millionaires.
No trust fund, no wealth from an estate, no gift of ownership of the family business, nothing.
They made themselves millionaires.
They did this by having clear, well-defined goals.
Not only do wealthy individuals have monthly and annual goals, more than half of them put those goals in writing.
Make sure you have your goals clearly laid out. If you are married, make sure that you and your spouse set goals together (see Money & Marriage: The Survival Guide ).
(4) They See Debt As a Danger
I'm not going to claim that all millionaires are debt-free, but I will claim that most are. This is a key ingredient to building wealth.
I have dedicated quite a bit of time to learning and researching the habits of millionaires and what they do to be financially successful. One belief I find consistently among millionaires is that they do not see debt as a tool.
This is why Joe and I don't have any credits cards (see my detailed explanation of why you shouldn't have any credit cards here ), and we cash-flow everything!
When you don't have any monthly payments, it's a lot easier to set aside money every month for investing. However, if all your money is tied up in monthly payments, you'll feel like a slave to the lender.
If you have debt, I'd highly recommend starting a debt snowball! We used this method to pay off over $20k of student loan debt in 12 months while living on one income!
(5)They Invest In Learning/Understanding Finances
Those who are driven to reach financial success have a constant desire to learn. Complacency is their worst enemy.
I think that many people are scared of investing because they don't know enough about it and they are scared that they will make the wrong decision. Don't hold yourself back!
Invest in learning and understanding- you can't afford not to!
Use your free time wisely! I've made it a goal to watch less Say Yes to the Dress and read more instead!
(6)They Have A Budget & Stick To It
In his book The Millionaire Next Door, Thomas Stanley says it best:
"The foundation stone of wealth accumulation is good defense, and this defense should be anchored by budgeting and planning."
Millionaires have someone in their household who does the budgeting and planning. It is a MUST if you are pursuing financial success.
You don't accidentally build millions of dollars of net worth. You do so by having a PLAN.
You have to tell your money where to go. It's a pretty basic concept, anyone can make a budget.
The average millionaire knows how much money is coming in and how much money is coming out. They know that budgeting is an important step towards learning to win with money.
Budgeting is one of the KEY things millionaires do differently, and I'd encourage you if you've never budgeted before, to start today!
Snag my free monthly budget templates and figure out where your money is going and how you can make it work for you!
(7)They Give
Lastly, and probably most importantly, the average millionaire knows how to give.
Whether it be to their favorite charity, their church, or family and friends, they leave a legacy with their money.
As a Christian, I know that our money is not really ours, but rather God is entrusting His money to us. That is why I choose to be a cheerful giver. I want to earn more so that I can save & invest more, so that I can give more.
Roth IRA's are a great investment vehicle that boast many benefits, but if you're ineligible to contribute to one you might feel stuck. The backdoor Roth conversion option allows you to essentially convert your Traditional IRA funds to a Roth and enjoy all the tax benefits! Here's how to do it and who needs to consider it!
According to a survey by Nationwide , the average age American workers start to begin saving for retirement is 31 years old. The issue is most Americans don't realize how much of a difference time (starting earlier) makes in investing.
These smart money goals will help you reset your spending habits so you save money and achieve financial freedom, not matter your income.
At the end of the year, we start to think about our habits, including our money management habits. If you're reading this and thinking next year you need to start doing things better, I'd challenge you to keep reading and start today .
Investing jargon can be downright confusing, so I'd like to share the differences in mutual funds vs stocks investing portfolios. This is important to understand because how you invest will have a direct effect on how much money you have in retirement.
If you're self employed, retirement planning can fall on the back burner. However, it's crucial you take advantage of the various investing options available to you as a small business owner! You don't want to miss out on tax-advantaged retirement savings and business deductions!
When it comes to retirement planning, some key knowledge you need to know is the differences between a Roth IRA vs Traditional IRA.
It's no secret that financial hardship either has come right now or will come for many people at some point in their life.
ON A FINAL NOTE
I encourage you to live a simpler lifestyle even if you are experiencing a growing net worth (hopefully some of my posts have helped reiterate that)! If you are trying to keep up with the Joneses, you are fighting a losing battle.
For those of you who have been encouraged to get intense about getting out of debt and pursuing financial freedom, take heart that even the super-rich are doing the same things that you are.
The super rich have common sense habits when it comes to money if you discipline yourself and mimmick their habits, there's a good chance you can join that category one day!
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