7 Characteristics Millionaires Share5 min read

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What do millionaires have in common? This question really is key to understanding wealth building. If we want to become wealthy we should study the habits of those who have achieved financial freedom.

How do we do this?

We turn to the experts who have studied the habits of millionaires and share with us how to build wealth. Which brings me to this book The Millionaire Next Door which is a great read. It is also available as an audiobook.

the-millionaire-next-door
In The Millionaire Next Door, by Thomas Stanley and William Danko, we read that the authors spent 20 years interviewing millionaires. The authors define millionaires as those who have at least $1 million as their net worth. Throughout the book, there is the theme that anyone can accumulate wealth, if they are determined, disciplined enough, live below their means, and a stroke of good luck.

Here are the 7 characteristics that the authors found millionaires to have in common with each other:


1. They live well below their means.

Millionaires spend less than they make but develop over time an identity that is synonymous with being frugal. They pay for quality, but not for image. Typically, millionaires don’t spend more than $399 to buy a suit. About half of the surveyed millionaires spent $140 or more in buying a pair of shoes.

If you’re not wealthy and want to be wealthy someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.


2. They allocate their time, energy, and money efficiently in ways that are conducive to building wealth. 

Millionaires plan their investments and budget. They keep money on hand for a rainy day (read: an emergency fund). They invest early in life. Millionaires spend more time or about 8.4 hours per week planning and managing their investments than non-millionaires who spend about 4.6 hours per month planning theirs.

 

3. They believe that financial independence is more important that displaying high social status.

The authors point out on multiple occasions that millionaires don’t have fancy cars. Millionaires drive the same vehicle for years.

“There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future.”

Of interest…

  • Over 80% of millionaires purchase their vehicle while the rest lease.
  • Only 23.5% of millionaires interviewed owned a brand new car.
  • A typical millionaire only spends on average $24,800 for his or her most recent car purchase.
  • About half of the millionaires surveyed never spent more than $29,00 for a single vehicle.
  • Most American millionaires like to buy American-made vehicles such as Ford, Chrysler, Chevrolet, and Cadillac.

 

4. Their parents didn’t support them financially.

The correlation was: the more dollars an adult child received from their parents, the fewer they accumulate. On the other hand, those who were given fewer dollars accumulated more.  Perhaps this has to do with understanding the value of money when one earns a dollar verses when one gets a dollar. Goes back to the whole give a fish or teach a person to fish type thing.

Those who received help from their parents tend to manage their money in a poor manner, invest less, and spend more. 

Giving a child a cash gift or financial assistance is not always the best solution to helping that child have a better financial life. Sometimes, parents enable the very behavior they are trying to correct by gift-giving to particularly irresponsible kids.

 

5. Their adult children are economically self-sufficient.

The authors clearly indicated millionaires believed that giving money to adult children damages their ability to succeed. Of interest is that the sons and daughters of millionaires are more likely to become doctors and lawyers in society than those who had non-millionaire parents.

Here are some of the guidelines of those who are wealthy on how they raised their children:

  • Never tell your children their parents are wealthy.
  • No matter how wealthy you are, teach your children discipline and frugality.
  • Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession.
  • Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.
  • Never give cash or other significant gifts to your adult children as part of a negotiation strategy.

 

6. They are proficient in targeting market opportunities.

The authors discuss how one of the best ways to make money is to sell products needed or desired by those who already had money.  Those who provide accounting, tax, and legal services fall into this category. 

What kind of services do you provide? Are you targeting successful people that are trying to do better or are you feeding off of people that can’t get a leg up.

 

7. They chose the right occupation.

There is not magical list of businesses from which those interviewed became wealthy.

Among the list: those who build cabinets, sell shoes, make boxes, become dentists, plastic surgeons, dermatologists, psychologists, chiropractors, etc. The book notes that self-employed individuals are four times more likely to become millionaires than those who are working for others.

“Most of the affluent in America are business owners.”

If you are interested in discussing this book further, we’ll be going through this book chapter by chapter in the Facebook group Book Worms – Book Club.

Are you interested in the habits on millionaires on your journey to financial freedom? Have you read or are you interested in reading the book? Do you agree or disagree with the authors of the book? Leave a comment!

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My name is Jonathan and I currently live in Fort Worth, Tx. I grew up in Brazil and came to the U.S. when I was 18. I am currently 33 and am happily married to my wife of about 5.5 years and have two little ones. I work for a contractor buying specialized tools. I'm very passionate about personal finance and helping people find financial freedom!

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61 Comments

  1. Jonathan,

    Great post. I love this book! I think these characteristics are very true and when we look at how this generation is going, it’s alarming. It feels like there are more children living at home longer these days before getting out into the world and being forced to “leave the cave and kill something to drag home”.

    Thanks for spreading the word, I am looking forward to your book discussion group!

  2. This is really valuable. I’m trying to practice many of these things. Even though my parents weren’t millionaires or even classified as wealthy, they practiced many of these principles: no debt, living below their means, saving, making us earn our own money and instilling a good work ethic. I hope I’m doing the same with my children!

  3. I definitely think having to earn their money themselves helps them be able to manage their money better.

    • Yes, we have a problem with this generation thinking that they are “entitled” to everything and that they shouldn’t have to work to get it. I think we are very close to a generation that could be worse off then the previous one if we don’t start teaching our children to stay out of debt and live below their means better!

  4. Very cool post. I think it’s really interesting to see most millionaires buy and not lease. My husband and I finally realized that was the wisest decision and bought our most recent car.

    • So many people throw away a LOT of money when they buy new vehicles due to the depreciation of the vehicle that they are buying. We have always purchased used and the last 3 vehicles we have purchased have all been paid for in cash and not financed!

  5. seems like somewhere along the way, my parents taught me well. They practiced the same principles. If i show them this post, it validates that they’ve done well. Similarly, it is a way for me to check into my lifestyle now and make sure that I am practicing the same theories. My parents always stressed the importance of being able to live within your means. I used to think it was unfair when my friends were given all the gadgets they ever wanted. In the long run, I realized, I appreciated my things more because I worked hard for them. I realize the value of things. This is a good post by the way 🙂

    • Thanks so much for sharing your life story! I really appreciate your insight. Yes, I agree, when you have to actually earn something, you will treasure and take care of it much more than if it’s just given to you.

    • Angie, when money is tight, the best thing to do is look at your budget and make sure that you are not overspending or underearning. When times are tight, focusing on living below your means should be a top priority so that you don’t end up incurring debt as well. Thanks for stopping by and commenting! If there’s any questions you have about budgeting or need any kind of help, please don’t hesitate to reach out!

    • Liz, yes. I think it’s important to learn from people that are where you are setting goals to get to. The book is a great read and breaks down much more information. It was a real eye opener!

  6. I totally LOVE this book. I read it years ago before I was married. Now I want to read it again with my hubby. I especially love the principle that “They believe that financial independence is more important that displaying high social status.”

    • Living below your means is a must if you want to truly build wealth. The more margin you can create by keeping a sustainable budget, the more you will be able to save and grow your wealth. If you have questions, I’d be happy to help!

  7. What an awesome post. This just proves that not all millionaires spends a lot of money for themselves. They are just busy making more money 🙂

  8. I’m going to have to read this book. They are very smart. I really wan to teach my children discipline when it comes to money because no one every taught me.

  9. I live in a very wealthy area and I agree with this list! The people with the true wealth are the most unassuming people who have very nice things and live a nice life but never overdo or flaunt what they have!!
    Cathy

    • So true Cathy! Yes, sometimes the Millionaire Next Door is our neighbor. People are always writing about the secrets of the rich… Well they work hard, budget, save money, and typically live more frugal life styles than the media would care to admit. Thanks for stopping by!

  10. This is a great post. I haven’t read the book , but agree with everything you said. I don’t believe in keeping up with the “Joneses” and instead focus on leaving below my means so we can travel and create lifelong memories as a family.

  11. I will never be a millionaire at $15 an hour but these are interesting points. Even if I won the lottery tomorrow I would never buy an expensive luxury car.

    • Wendy, thanks for stopping by and reading the article. I think at $15/hour you could start to, with a budget, create margin in your expenses vs your income and start saving/investing the rest to start to create wealth. My family started to do this around 2011 and our net worth has consistently grown since we made it a priority to live frugally and save a portion of our income. Just have to live within percentages of your income when possible! No one said it would be easy, but it is worth it.

    • Hi Melandria, thanks for stopping by and reading! I would agree with you that yes it does take a bit of effort, but if you make a plan and stick to it, you should be able to make it. I don’t think it has to do with luck. Create a budget, live on less then you make and save/invest the difference.

    • That’s great that your kids are thinking that way Rosey! Hopefully, they are willing to do the work required to get there! Thanks for stopping by and reading/commenting. Also, thanks for sharing!

  12. I always laugh at that first one. Of course they live well below their means. Try doing that when you can barely make ends meet. Interesting list though.

    • Thanks for stopping by. I have been in your situation (I’m assuming) where there is more going out then coming in. It’s a tough road. However, as long as you are keeping a good budget, if ends still aren’t meeting, you might have an income crisis where you need to see about ways to increase your income. If you have questions, I would be happy to talk. Please contact me at steve@myfamilyonabudget.com

    • Wow, you guys have a big debt snowball, but I’m assuming you have a big shovel to use to clean it up with! I mean, at least one of you must be a doctor or a lawyer, right? Hope you will keep us updated along your way!

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