The 5 Habits of Millionaires

I stewed on this concept for a while. What are THE five habits of millionaires? After all, countless experts and personalities will offer advice across the Twitterverse and Podcast universe, and while common themes exist, they come with different emphases. I want to give you the “secrets” that will get you there, but what is essential? How can I boil it down?

If you didn’t know, I’m a Ramsey Solutions Certified Financial Master Coach, which means I fully support Ramsey’s methodology for personal finance (prioritizing debt elimination and gaining financial self-control) and wealth building. In 2022, Ramsey Solutions completed a study in which they interviewed 10,000 millionaires and distilled the findings into the significant habits they practice and their top careers. I offer this so you know where I’m coming from.

If I boil the universe of ideas down, two keys rise to the top: intentionality (being aware of what is going on and making deliberate choices) and planning (having a course of action you follow). If you happen to have a different view of credit card usage and life insurance or have general animosity towards the Ramsey cult of action, at least come away with the idea that if you are intentional and if you have a well-constructed plan, you can become a millionaire. That’s meant to give you hope and gusto to pursue becoming a millionaire. But why?

I hate this goal (becoming a millionaire) in a vacuum. I mean, what for? Is it to be an accumulator of stuff? That seems to be the way of the world. Is it because money equals happiness? Reaching millionaire status won’t fill that happiness hole. Is it driven by wanting what you see from friends on social media? I can relate to that temptation.

Honestly, what I’m going to suggest is hard to stick to over time without a meaningful reason, so have your “why” clearly defined. Do you want to do good in the world, like providing clean drinking water for a whole village? Do you want to leave a legacy for your children and your grandchildren so they are better off than how you grew up? Have you always felt like you worked yourself to the bone, only to be left struggling and want the freedom to chart your own course by owing no man anything except a debt of love?

I want to take the ideas of intentionality and having a plan to a more practical level, so here are THE five habits of millionaires and some common misconceptions to boot from your line of thinking.

Five Habits

1. Live on Less Than You Make: Whatever comes in each month, spend less than that, so you have leftovers for the other habits. That means don’t buy things you can’t afford. You can’t afford something if you need to use debt to buy it. That includes student loans and hamburgers.

2. Avoid Putting Too Much Into Depreciating Assets: If you’re putting money into something that goes down in value, that money is lost for good. The more you do that, the more your income is diverted and wealth-building stymied. The biggest culprit here is cars (it doesn’t even have to be a fancy one these days). We all need one, so it’s easy to give ourselves a reason to direct our income energy here. I remember this financial advisor who hung around the mission organization we worked for, testifying to us young people that he always paid cash for cars and advocating we do the same. Wealthy guy, too. Too bad I didn’t listen back then. It took me years to operate according to this principle.

   Once my family got ahold of these first two concepts, we started to make financial progress. I’m just sayin’.

3. Increase Your Income: Work hard and be goal-oriented. Work harder than the average person. Be reliable and skilled with your primary expected responsibilities, then go above and beyond. Take ownership. Have a career target you aim for that has a path that consistently increases your income.

4. Invest & Save Consistently: Here’s the habit that juices your journey. As a Ramsey guy, saving 15% of your household income in tax-advantaged accounts is the target. Your other savings goals, like a vacation, a new car, or a home renovation, are goals to plan for above that. Automate your saving and investing as much as possible with payroll deductions and scheduled monthly transfers. This sounds like a tall order to some. If you’ve put habits one, two, and three into action, it is well within your reach.

5. Work with a Financial Planner: We all have blind spots that cause leakage along the way and benefit, even at an early stage, from wise financial advice. As your financial situation becomes more complex, it’s easy to find a good idea in principle and mis-execute it due to nuance. A case in point is Roth IRA conversions. I worked with a couple recently who had executed one on their own but converted an amount that unknowingly caused them to pay more in Medicare premiums. Decisions like this compound over time, and the drag on your millionaire goal is amplified. I’ll offer this final set of research that posits the value of a financial advisor.

Millionaire Myths

One roadblock to your goal could be mindset and belief, so I want to close here with some ideas that challenge the status quo.

• Millionaires aren’t liars, cheaters, or thieves. This is a tough one nowadays because many prominent leaders portrayed in the media aren’t setting shining examples, and some are trumpeting tropes that reinforce this caustic idea. The millionaires I know are unassuming, conscientious, and commonly generous people. They expand businesses and share prosperity with their employees. Often, the person next door driving an eighteen-year-old Honda Accord is a millionaire.

• You don’t need an inheritance to become a millionaire. The vast majority of millionaires received nothing, became millionaires before receiving an inheritance, or received a small amount that didn’t cause them to become a millionaire. Your hard work is the secret ingredient.

• You don’t have to make $1 million to be a millionaire. Being a millionaire is a mathematical equation that takes the total of your assets (bank accounts, savings, retirement, home, cars, etc.) and subtracts what you owe (mortgage, credit cards, and other debt) to arrive at your net worth. If your net worth is greater than $1 million, you are, by definition, a millionaire.

• You don’t have to have a high salary like a doctor. The top careers for millionaires are engineer, accountant, teacher, manager, and attorney and only 31% earned a six-figure salary average over the length of their career.

I hope you have belief in your mind and the “why” to propel you if this is your goal. If it’s not your goal, but you live out the habits anyhow because they are simply sound and wise, you may find yourself at the destination anyway! If you want a partner for your climb, contact The Dala Group today.