10 Things You Must Know About Becoming a Millionaire

Being a millionaire is no longer a ticket to mansions, yachts, and caviar, but the goal is more attainable than ever. According to 2020 data from Phoenix Marketing International, a firm that tracks the affluent market, 6.71% of U.S. households (or 8,386,508 out of 125,018,808 total U.S. households) have investable assets of $1 million or more.

Note well that to be considered a millionaire by the standards of wealth research, a household must have investable assets of $1 million or more, excluding the value of real estate, employer-sponsored retirement plans, and business partnerships, among other select assets.

That’s only one way to measure if someone’s a millionaire, of course. A net worth of $1 million also qualifies; subtract liabilities, including mortgages and car loans, from assets, including home equity and retirement savings, to determine your net worth.

Either way, hitting the million-dollar mark is no small feat.  Keep reading to see if you have what it takes to become a millionaire.

1. Most Millionaires Are Made, Not Born: —

Some folks figure that if they didn’t summer on Martha’s Vineyard or attend boarding school as children, they have no chance of becoming millionaires. But you don’t need rich parents to become a millionaire yourself.

Just like Oprah Winfrey and the protagonists of virtually every Horatio Alger novel, the vast majority of Americans with a net worth of at least $1 million were not born rich.  In fact, just 1 in 5 millionaires received money from a trust fund or an estate, according to The Millionaire Next Door by Thomas J. Stanley and William D. Danko.

During his 30 years researching the wealthy, Stanley says he consistently found that between 80% and 85% of all millionaires are self-made.  In 2017, Fidelity Investments did a survey and found that 88% of millionaires made their money on their own.

Among our favorite rags-to-riches millionaires are Radio One founder Catherine Hughes, a teenage mom and college dropout; Tastefully Simple CEO Jill Blashack Strahan, who grew up on a farm; and entrepreneur Ali Brown, who had less than $20 in her bank account when she launched her first marketing company in 1998.

2. You Don’t Need a High-Powered Graduate Degree:

With condolences to those with grad school debt, an advanced degree does improve your chances of higher lifetime income, but it doesn’t necessarily improve your chances of joining the millionaires’ club.

Only 18% of those with a net worth of $1 million or more hold a master’s degree, while 8% have law degrees, and 6% went to medical school, according to The Millionaire Next Door.

Seventy-four percent of millionaires do have an undergraduate degree, even if they didn’t stick around for their master’s or PhD, according to Spectrem Group, a consulting firm that specializes in wealth research and management. That number is 70.1% among the billionaire set, according to a 2015 Wealth-X census.

Don’t get us wrong: Many graduate degrees are worth the effort. The median annual salary of someone with a professional degree is $98,436 a year, according to the U.S. Bureau of Labor Statistics, versus $67,860 for the typical four-year college graduate. A high school grad earns just $40,612 annually.

3. Behold the Magic of Compounding:—

Which of the following savings strategies, assuming 8% annualized returns, will get you to $1 million in the bank by the age of 65:Save $200 a month starting at age 20 or $800 a month starting at 40?

Wealth creation lies in compounding. Each year, your money can earn interest on both the original amount and the interest earned from the year before. More years equals more interest, and more interest means faster asset growth and an easier path to $1 million.

Thanks to the magic of compounding, a 20-year-old who saves $200 a month until retirement would have around $1,055,000 at age 65. That’s not bad for less than the cost of a monthly pizza tab in some households.

If you wait until age 30 and kick in $400 a month, that number drops to about $918,000. A 50-year-old contributing $1,500 a month would have only $519,000 by retirement.

4. You Don’t Have to Be a Stock Market Master:

When it comes to investing, most millionaires still have a lot to learn.

You don’t have to study finance or memorize stock tables to make a million. In fact, 58% of millionaires say they have a “great deal” to learn about investing, according to Spectrem Group, and 19% admit to knowing little to nothing about investments. This should give some comfort to those of us with index funds and Investing for Dummies books.

Despite that lack of expertise, millionaires do invest. Individual U.S. stocks and U.S. stock mutual funds are the favored investments. And the wealthy aren’t shy about soliciting professional advice: About two-thirds of millionaires report consulting with financial advisers at least to some degree.

5. Even the Great Recession couldn’t knock millionaires off course. —

There are more households in the U.S. with $1 million in investable assets now than there were in 2006, before the Great Recession hit.

Millionaires have fared well over the past decade-plus since the housing bubble burst and financial markets cratered.  Indeed, the number of millionaires in America has risen for the 11th year in a row.

Today, there are 8.4 million U.S. households with at least $1 million in investable assets, up 56% from before the Great Recession, according to Phoenix Marketing International.

6. You Don’t Need to Have a High-Paying Job to Become a Millionaire: —

You have a good but not high-paying job. Let’s say, for instance, that you write about millionaires on the Internet. You should forget about ever becoming a millionaire, right?

Actually, you should stick to your savings goals no matter what you do for a living. True, 13% of people with a net worth of $1 million-plus are managers, but 11% work in education, according to Spectrem Group. The Millionaire Next Door says that about two-thirds of millionaires are self-employed. Most of the time, they work in common jobs like pest control or property management.

No matter where you work or how much you make, what’s important is starting to save early and continuing to save over time. Take the case of Paul Navone, who never earned more than $11 an hour as a quality-control inspector at a glass plant.

Still, the retiree had more than $3 million because he saved every month and made smart investments.

7. The Sooner You Start Saving, the Better: — 

It’s in no way too late to make a million, but it takes extra money as you age. If you are forty-five and haven’t made any financial savings, you’ll want to set aside $1,700 every month with the intention to retire at sixty-five with a cool million.

In other words, the longer you wait, the steeper the climb. Compare our 45-year-old, who will need to save $20,400 over the next 12 months to reach $1 million by the age of 65, to our 25-year-old, who will need to save $3,445 over the same time period.

Try Kiplinger’s retirement financial savings calculator to figure out how much cash you want to save.

8. You Can Find Millionaires in Some Surprising Locations: —    Although the New York metro area has the most millionaire families, followed by L.A. and Chicago, Silicon Valley (particularly the San Jose-Sunnyvale-Santa Clara metro area) has the highest per capita awareness of millionaires.

According to Phoenix Marketing International, 13.6% of families have investable property worth $1 million or more.

But huge towns do not have a monopoly on millionaires. Small cities are magnets for rich residents, too. Topping the listing of tiny millionaire towns is Los Alamos, New Mexico.

The tiny metropolis, located approximately 35 miles northwest of Santa Fe, is home to a central authority nuclear weapons laboratory and some chemists, engineers, and physicists who pull down hefty paychecks. In general, 13.2% of the Los Alamos micropolitan area’s 7,567 general families are millionaires.

Even millionaires must save for retirement:

Millionaires worry about IRAs, 401(k)s, and retirement plans in general, just like everyone else. Indeed, according to Spectrem, 30% of millionaires are concerned they may not be able to retire when they want.

Even supersavers who already have more than a million saved in just their 401(k) plans continue to squirrel more money away, contributing an average of 14.9% to their accounts, according to Fidelity.

10. Money Can’t Buy Happiness:

The cliches happen to be true. Money can’t buy love, and it can’t buy contentment either.

A 2018 study out of Purdue University found that people generally get happier as they make more money, with an “optimal” range falling between $65,000 to $95,000.   After that, at least as far as happiness is concerned, it doesn’t really get better.

Certainly, making more money than that will provide satisfaction and additional security.   Instead, the study merely suggests that, say, a nurse making $95,000 a year is likely to feel just as happy as a higher-paid surgeon.

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