In my Millionaire Series you’ve learned just what it take to become a millionaire (How To Become A Millionaire in 9 Simple Steps), and you know how long it will take you to reach millionaire status (This Is How Long It Will Take You To Save $1 Million).
But have you ever wondered just what the average millionaire looks like? What are the spending habits of millionaires? You’d be surprised, the habits of the wealthy are probably not what you thought.
Thankfully, the daily habits that millionaires follow are actually quite ordinary. Which means, they are super simple to adopt. These are the top 9 everyday traits of the common millionaire, and how you can add them to your life, too.
Contents and Quick Links
- 1 Millionaires have a clearly defined budget
- 2 Millionaires are frugal
- 3 The millionaire next door (to you)
- 4 Millionaires focus a lot of time, energy and money on wealth building
- 5 Millionaires believe financial independence is more important than looking the part
- 6 The wealthy focus on education
- 7 Millionaires marry someone more frugal than themselves
- 8 Millionaires have clearly defined goals
- 9 The wealthy teach their kids to be financially self-sufficient
- 10 The Millionaire Next Door
- 11 Recap
Millionaires have a clearly defined budget
The average millionaire has a clearly defined household budget and knows exactly how much money they spend within each of their expense categories.
Do you know how much was spent on clothing for each member of your household last year?
When asked the question most millionaires will quickly answer yes.
If you want to become a millionaire, the first thing to work on is creating your budget and building the habit of sticking to it.
Be sure to also visit the FREE Resource Library and download the monthly budget worksheet so you can easily track your finances and discover the top spending categories where you can cut back and save more money.
Millionaires are frugal
If there is one word that summarizes the ONE thing that millionaires have in common it would be frugal.
This is probably the most common misconception of what the average millionaire is really like. When you picture someone wealthy, you picture the fancy sports car, expensive designer clothing, high-end flashy watch and custom made suits. However, this is rarely the case.
Frugality is what allowed self-made millionaires to acquire their wealth and frugality is what allows them to maintain it.
In general, millionaires don’t buy expensive consumer goods. They have that budget and they stick to it. Clothing is nice, but often purchased at a discount. Just like the rest of us, they typically drive Honda, Toyota or Ford cars, which they hold onto for many years.
The millionaire next door (to you)
The wealthy are not only frugal in their consumer spending, they also purchase less home than the average American. A common rule that millionaires live by: Never buy a home if your mortgage is more than twice your total household annual income.
The median annual American household income was $59,000 in 2017. This means that the typical American should only purchase a home with a mortgage of $118,000 (or total purchase price of $141,600 with a 20% down payment). What was the actual median home price? $335,400, which is more than twice the recommended amount.
While this is still considered affordable, meaning banks were approving these loans, this mortgage is high enough to prevent wealth building. You simply can’t save very much if a large percentage of your household income goes to your monthly mortgage.
Millionaires focus a lot of time, energy and money on wealth building
According to a 2017 GOBankingRates Life and Money Survey, the average American spends 2.6 hours a week on financial planning, or 11.3 hours each month. They also spend double this amount of time on social media.
The average millionaire however spends more than twice this time on planning and budgeting.
According to The Millionaire Next Door, the result of over a decade of survey data analysis and interviews with millionaires, wealth accumulators spend 83% more hours on financial planning and managing investments than those that aren’t building wealth.
Millionaires believe financial independence is more important than looking the part
How important is it to keep up with the Joneses? For millionaires, not important at all. In fact, the children of many millionaires don’t even know that their parents have accumulated wealth.
This goes back to frugality. Wealth accumulators are thrifty. They don’t actually drive the fancy sports car, they don’t have the giant mansion, or even the nicest home in the neighborhood. They buy their clothes on sale and wear them until they are worn out, rather than simply out of style.
The wealthy focus on education
Continuing financial education that is. The average millionaire was not the highly specialized doctor or attorney. They are often self-employed and hold a 4 year degree. However, they believe in educating their children and continually furthering their own financial education.
According to the Millionaire Foundry’s 42 Best Millionaire Statistics, Facts and Resources for 2019, 88% of millionaires spend at least 30 minutes reading a day, with a focus on self-education. They also spend less than an hour a day watching tv or surfing the internet.
Millionaires marry someone more frugal than themselves
Most millionaires are married, in their first marriage. And their spouses are even more frugal than they are. Wives of millionaires (yes, most millionaires are men in their 50’s) typically stay home and manage the budget.
One interview in the Millionaire Next Door depicts a husband and wife at the kitchen table. The husband tells his wife that he is gifting her with a few million in stock from a company he recently took public. She casually replies how nice this is, while she continues to cut grocery coupons from the weekly paper.
Simply put, a couple can’t accumulate wealth if one spouse is an over-consumer.
Millionaires have clearly defined goals
It isn’t surprising that a large factor in successfully saving money and building wealth is an emphasis in goal setting.
For millionaires, this means daily, weekly, monthly, annual and lifetime goals.
To quote Thomas J. Stanley, PhD, author of The Millionaire Next Door:
Countless millionaires have told me that the journey to wealth is much more satisfying than the destination. When they look back over their history of building wealth, they recall constantly setting economic goals and the great happiness gained from achieving them.
The wealthy teach their kids to be financially self-sufficient
There are some clear commonalities of millionaires who have successfully raised financially self-sufficient children. They raise their children with a clear set of rules:
They don’t tell their kids they are wealthy
At least until they are mature, hold a secure profession, and demonstrate an ability to manage their finances.
Many children of middle and upper-middle class parents go on to earn high incomes as well. But they also learn to live the “wealthy” lifestyle. One of high consumption. It takes that high income to sustain the high level of spending.
Conversely, children of wealthy parents that lived the typical frugal lifestyle of the average millionaire, were more likely to become wealth accumulators themselves.
They teach discipline and frugality
Teaching by example is highly effective. The majority of millionaires are frugal, disciplined and hardworking. Children that are raised with the same discipline and the ability to take responsibility for their actions are more likely to end up like their parents. Rich.
On the other hand, the common “do as I say, not as I do” parenting style of over consuming parents is not likely to result in children that learn to accumulate wealth.
Actions speak louder than rules that are just words, not actions.
-The Millionaire Next Door
It’s more satisfying to achieve than it is to accumulate and consume. Teach your children the value of hard work, setting goals and the joy of achieving them, regardless of how small.
To quote another millionaire from the Millionaire Next Door:
“I am not impressed with what people own. But I’m impressed with what they achieve….Always strive to be the best in your field…Don’t chase money. If you are the best in your field, money will find you.”
Teach the lesson that there are many things in life more valuable than money
What is more important than money?
How about family, relationships, time, hard work, ethics, good health and achievement, to name a few.
In comparison, “money is icing on the cake”.
The Millionaire Next Door
The average millionaire may very will live right next door to you. And you’d probably never know it. The Millionaire Next Door is the accumulation of over a decade of survey data and interviews of over 200 millionaires in the US, conducted between 1982 to 1996. The key findings of the “millionaire-next-door” population from 30 years ago is still consistent with the findings of today.
This book is important in that it highlights the misconceptions of what it means to be rich. Financial independence and life satisfaction are the key elements to a wealthy life. Not over consumption, as the media likes to portray.
Around 85% of millionaires are self-made. They didn’t become wealthy by acquiring a large mortgage and car payment. They set goals and systematically set about achieving them. As such, there are a number of common habits and traits they share, and by learning from them, we can adopt the same habits and begin accumulating wealth as well.
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I was happy to learn that so many of the lessons I write about and teach my son are in line with what I have learned about wealth accumulation from the real millionaires of America. Anyone, of any income level, can become a wealth accumulator. All it takes is discipline, a saving mentality, self-education and dedication to managing personal finance.
Lastly, it takes time. Similar to diet and exercise for a healthy lifestyle, which can’t be accomplished overnight with a single workout or skipped meal. Getting rich does not happen quickly. Wealth building begins and continues with the basic foundations, consistently applied over the long term. Living below your means, saving and investing.
How many of these millionaire habits do you already follow?