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There are 22 million millionaires in the U.S., more than the population of Florida. The number of millionaires rose by nearly 10% from 2019 to 2020. This trend is expected to continue. While many may think becoming a millionaire is out of reach, by studying the habits of millionaires, you too can put yourself on the path to become one.
According to one of the largest studies of millionaires ever conducted, millionaires did not build a net worth of a million dollars or more through inheritance. Only 2% of millionaires said they came from an upper-income family. It took hard work, discipline, and following these four simple steps to reach millionaire status.
1. Invest in a 401(k)
According to the survey, 8 out of 10 millionaires invested in their company's 401(k) plan. This simple step was one of the primary keys to their financial success. In addition to taking advantage of their workplace retirement plan, 3 out of 4 of those surveyed also invested in an IRA and separate brokerage account.
2. Invest regularly
Becoming a millionaire doesn't happen overnight. Only 5% attained that feat in less than 10 years. It took the vast majority 28 years to become one and the average age they hit that milestone was 49. What's more, 3 out of 4 millionaires stated that they invested a regular and consistent amount of money over a long period of time.
By taking advantage of "compound interest," they were able to build their wealth over time. If you were to invest $350 a month and gained a 12% annual return, in 30 years you will become a millionaire. But, only $100 a month in the same scenario will result in close to $300,000. It doesn't take much to become a millionaire as long as you are disciplined and save regularly.
3. Stick to a budget
Millionaires are careful with how they spend their money. Becoming a millionaire isn't necessarily about how much money you make, but how much you are able to save. A whopping 94% of millionaires live on less than they make by using a budget and close to 75% have never carried a credit card balance.
When grocery shopping, 85% of millionaires used a list with 94% using coupons. One of the biggest expenses is eating out. The study found that the millionaires spent less than $200 a month at restaurants.
4. Focus on investing in yourself
The study found that while the type of school millionaires attended wasn't a big factor in their success, the degree itself is. In fact, 62% of millionaires graduated from public state schools while 8% graduated from a prestigious university.
Almost 9 out of 10 millionaires graduated from college compared to 38% of the general population. Not surprisingly, more than half (52%) of millionaires had a Master's or doctoral degree, compared to 13% of the rest of the population. Millionaires invested in themselves knowing that more jobs require advanced education.
Plus, 8 out of 10 millionaires did not receive a dime in inheritance. Only 31% averaged more than $100,000 in salary earnings and one-third didn't make six figures in any working year at all. You don't have to come from a rich family or make lots of money to become a millionaire. The millionaires in the study focused on their own education, stayed out of debt, and watched how much they spent. By spending less than they earned, they were able to invest and build the foundation of their wealth.
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