It's currently estimated that there are about 3,000,000 millionaires in the United States today. And given that there are about 300,000,000 Americans according to the latest Census data, that means about 1 in 100 are millionaires.
Even more startling is that means that you probably know someone who is a millionaire, and you probably live within a stone's throw of other millionaires that you don't know.
The truth is that a lot of millionaires have very specific habits. Traits that make them successful - whether personally or professionally.
Beyond the inspirational, here are five fundamental habits that your millionaire neighbor has but probably isn't telling you.
1. Start Young and Don't Mess Up
Many millionaires start young. It's so much easier to start young rather than older. You just have more time - it's simple math.
Plus, the younger you start, the longer you have to see your money compound over time. Just think about this - the amount you need to invest per year to reach $1,000,000 by age 62:
If you start at 25, you have 10 more years than starting at 35. You can debate the rate of return all you want, but younger is always better than older.
However, part two is to not mess up. This means avoiding student loan debt, credit card debt, and not getting into financial trouble. Some of the most common causes of debt and financial trouble include: increased expenses with reduced income, unemployment, gambling, poor money management, no money communication skills, and banking on a windfall.
If you stick to a balanced budget and start early, you're already on par with your millionaire neighbor. Remember, focus on front loading your financial life.
2. Don't Move and Don't Get Divorced
There's messing up, and then there are avoiding big expenses that could possibly be avoided. Two of the biggest life expenses are moving and divorce.
First, moving may be necessary, and it doesn't have to be expensive. However, for many people, it is. Just the cost of paying movers can add up into the $1,000s of dollars, so the more you do it, the costlier it is. Second, if you have to sell a home, the transaction costs are enormous. The more you do it, the more profits you eat into.
Now, moving can be a good thing - getting a better, higher paying job. Or maybe you're moving closer to work to minimize expenses. You can even use inexpensive movers to mitigate costs if you're moving farther away. Just remember, constant moving is a constant budget buster.
Plus, if you own a home, moving is REALLY expensive. In fact, the math puts renting on par with owning a home unless you move too often - then it makes sense to rent.
Next, we have to address divorce. Divorce is one of the leading wealth destroyers in America. Now, can it be avoided? Not always. But there are genuine things that you can do to minimize the likelihood of it and the financial costs that come with it.
First is communication. Communication about money is essential, as finances are the leading cause of divorce. And divorce never stems from lack of money - it comes from failure to work together with money. You need to put systems in place that allow you to work as a team with the money you have to better your future. Common goals and common understanding are key.
There are much better resources than this when it comes to money and family, but realize that divorce destroys wealth. That's why your millionaire neighbor has probably been married for years.
3. Invest Slowly Over Time
Beyond just starting young, you should also invest slowly over time. I'm not saying that you have to dollar cost average when you invest, but you should start investing early, and continue to invest throughout your life.
This is the power of compound interest. The later you start, as mentioned in #1, the more you have to invest to get the same return.
Your millionaire neighbor probably started investing in their 401k at their first job and just continued to contribute to it at every job. He or she also probably maxed out the IRA contribution each year.
These simple investing steps over time allow you to build real wealth. For most Americans, their wealth is in the homes, which they paid off over time, or in their retirement accounts, which they built up slowly over time.
So, if you want to join your millionaire neighbor, start investing now, and continue to do so regularly.
4. Create Multiple Income Streams
Your millionaire neighbor also probably didn't do it just working their job. Maybe if they are over 65, but even then, there was likely more to it that working the nine to five. Most millionaires had a side hustle or combined income streams. It's very rare for a single income family to make it to millionaire status. If they are a couple and both worked, that is probable. If they didn't have kids, it is even more likely.
But the better way to make it to a million is to not only work a salaried job, but also to side hustle or have some type of entrepreneurial project.
By developing multiple income streams, not only do you create a safety net for yourself as you work towards you goals, but you also can reap the benefit of multiple income streams, especially if some are more passive than others.
If want some passive income ideas, here's a list of 30 different passive income streams.
Your millionaire neighbor may have a secret business besides the nine to five - just look at most bloggers out there!
5. Live Below Your Means
Finally, most millionaires live well below their means - so much so that you may not even believe that they are millionaires. I know a large handful of millionaires that are beyond frugal - driving the same car since the 1980s, shopping at thrift stores, never eating out. I even know young millionaires that look for frugal deals online, and use coupons to pay for everything online and offline.
Check out this post on how to save $500 per month by using simple tricks.
But it makes sense - many millionaires didn't get rich by spending their money. They got rich by saving their money and making smart money decisions. And those are habits they developed over a long period of time, so they don't change even when there is plenty of money to spend.
Myths About Millionaires Holding You Back
The fact is, a lot of people aspire to have wealth, be a millionaire, or be rich - however you define it. But for many, myths about millionaires, their money, and their mindset is holding you back.
Here are some common myths about millionaires you need to stop worrying about on your path to wealth:
Myth #1 - Most Millionaires Inherited Their Money
Only 20% of millionaires are believed to have inherited their money. That means 80% of millionaires made it themselves, and most are first-generation millionaires. This comes from research done by Thomas J. Stanley in his book, The Millionaire Next Door.
So, the next time you find yourself believing that it's impossible to get to that $1 million dollar level, remind yourself 80% of people who've made it did it on their own (yes, you could argue there are a lot of socio-economic factors that helped, from how they were raised to where they were born, but just because a path is more difficult doesn't make it impossible).
Myth #2 - Millionaires Drive Fancy Cars
One of my favorite TikTok channels right now is Daniel Mac, where he stalks high-end luxury car drivers at a mall and asks them "what do you do for a living". It's awesome to hear the responses, but it might also give you a false sense that millionaires drive fancy cars.
The statistics just don't back that up. In fact, according to researchers, 61% of people who earn over $250,000 per year drive Toyotas, Hondas, and Fords.
The 10 most popular car brands for millionaires (in order) is:
Myth #3 - Higher Taxes Prevent Millionaires
When people think about taxes on the rich, many people struggle with it because 1) they don't like paying taxes in general, and 2) they don't want to see their aspirations dashed.
But the fact is simple - taxes don't prevent anyone from becoming a millionaire. Yes, it's true that NOBODY likes paying more in taxes (even though some millionaires and billionaires are asking to be taxed higher).
But taxes are not a big factor for most millionaires, especially in the wealth building phases of their life. Remember, taxes are paid on net income - and most millionaires are simply focused on growing that number. Once you have your income, it's yours.
Furthermore, after you've hit the million dollar mark, you still focus on goals and objectives. Yes, you can hack tax strategies, figure out mega backdoor Roth IRAs, and more - but that's secondary for most wealthy individuals. Primary is earning more, spending less, and living a life they find value in.
If you want to match your millionaire neighbor, mimic them and don't let them even know you have money.
Live frugally, make smart money choices, and live below your means. You'll get the joy of being a millionaire without the hassles of maintaining an exuberant lifestyle.
It's how your millionaire neighbor is doing it, and you probably didn't even realize it.
What other secrets to success do you think your millionaire neighbor has?
The post 5 Things Your Millionaire Neighbor Isn’t Telling You appeared first on The College Investor.
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