Updated: Feb 18
There are certain characteristics that millionaires share. While there is no one-size-fits-all answer, most millionaires have some things in common. From the book "The millionaire next door" by Thomas J Stanley and William Danko, to be successful, we need to know what we can do. Wondering on how to be a millionaire, here are 10 characteristics of a millionaire from this book.
1. Income More than Expenses
Do you spend more than you earn? This is a problem faced by most people. If you are spending more than you can earn, you are most likely getting deeper into debt. If you want to be a millionaire, the first thing is to live below or at least within your means. Millionaires never spend more than they earn.
They know where their money is going and make sure they spend within their budget. They eliminate the expenses which do not bring any value to them and prioritize their needs and wants.
2. 2x More Time Spend on Financial Planning Than Others
The more you know about money, the better. Millionaires take their time out to learn about financial planning and spend at least 2 times more time than others on this activity. They believe in always learning something new from every situation they face in life, especially the financial aspect of it.
In the book, they shared a story of an accountant and stockbroker. The stockbroker went on holiday for 3 weeks and left his wife with all the financial planning to do for him. The accountant had not been investing much time studying finances, but as soon as she heard that her husband would be leaving the city, she read 4 books about financial planning before he left.
3. Freedom Over Luxurious Materials
Most millionaires are not interested in luxurious materials, such as cars, watches, or homes.
They are more financially savvy and can stretch their money by investing it into income-generating assets that let them live the life they want without having to own all these expensive things. For example, they often rent rather than buy. They would rather own their properties than rent because of the tax benefits.
They would rather have freedom than be a slave to luxurious materials.
4. No Cash Gifts From Parents
This is not something that they will tell you when teaching you how to be a millionaire, but it is one of the secrets behind why most millionaires are self-made. There are certain things in life that we cannot choose, such as the family we are born into. The millionaires in the book were raised by average-income parents, who tried to give them the best material things they could afford at that time.
But most of these millionaires did not appreciate these gifts and felt robbed for not getting anything money can't buy. They appreciated their parent's efforts but would rather make their own money and buy the things they want and need.
They cultivate their own motivation to have financial freedom.
5. They Are Self-Employed
The majority of women and men become millionaires by being self-employed. Being your own boss is rewarding in many ways, because you have control over how much you earn, without having to worry about a manager or supervisor telling you what needs to be done all the time.
They started their own business or side projects as soon as they can.
6. Most Are More Than 50 Years Old
"Life begins after 50" - Unknown
Most millionaires are usually more than 50 years of age because it simply takes them that long to become wealthy. And they keep on learning new things along their journey of building wealth so that they do not lose their fortune in future years. They may not all start off as millionaires, but most of them do not let go of their wealth and maintain it through the years. In the book, they revealed that there were more than 70 million millionaires in America alone and most of them are more than 50 years old.
7. Well Educated
Millionaires are well educated from the experiences they have been through in life, not from courses they have completed or degrees they have earned. They usually take their time to learn about everything that is related to finance and tend to read a lot of books when it comes to learning new things. The more they read about finance, the more prepared they can be before making any financial decision.
They keep learning.
8. Invest 20% of Income
Most millionaires will advise you to invest 20 percent of your income into various money-making assets that are long-term investments. If you have a good understanding of money and how it works, then it is possible for you to become financially free later on in life. Even if you do not want to work for the rest of your life, you will still be able to live a good quality lifestyle without worrying about money every day.
If you spend all your money on material possessions and do not invest any of it, you will most likely end up becoming a slave to your lifestyle. In the book, they revealed that most millionaires are retired by age 65 or earlier because they have been building their wealth for many years. If you study the history of these people's lives, you will see that most of them invested their money over a long period of time to become financially independent.
9. Invest In Long Term
Most millionaires invest in assets that have a long-term plan, such as homes or other properties that could generate an income for their family several years down the road. If you buy a home and plan to live in it for the rest of your life, you become an investor because you pay all cash and fix up the property to make it look new again.
Even if they do not buy their properties with cash, most millionaires will try and lower their interest rate and monthly payments by refinancing their homes whenever they can. This makes it easier for them to save up money each month and invest in other income-producing assets that will make their family become wealthy over the long term.
10. Optimize Living Costs
Most millionaires know how to save money on a monthly basis, by buying discounted things or finding ways to reduce their monthly costs. At the same time, they will invest this money into assets that will generate an income for them in the future. They do not like to spend their hard-earned cash on unneeded items and usually get rid of these things very quickly if they are not adding value to their lives.
"A 5-dollar watch and a 50,000-dollar one tells the same time"
Rather than spending $50 each month on lunch during work, most millionaires would rather invest this money into an income-producing asset. If you save $600 each month by not buying lunch at work, then you could put that money into a business or some other kind of investment that will generate more income later on.
The key to being a millionaire is not in the amount of money you have, but rather in how much time and effort you put into building wealth.
Remember one rule: save first and spend what is left.