This post was written by Marie.
What makes millionaires different from the merely affluent or the middle-class? The Spectrum Group set out to understand this by sifting through their ongoing quarterly research.
The Spectrum Group publishes reports about the affluent and the retirement markets. They conduct survey based research each quarter with thousands of wealthy households – targeted to networth levels of:
- the mass affluent ($100,000 to $1 million networth households );
- the millionaires ($ 1 million to $5 million networth households );
- the ultra high net worth – UHNW – ($5 million to $25 million networth households);
- and above that (more than $25 million networth households)
They found eight factors that the millionaires had in common – factors we can apply to our own lives and finances. You can see the results in their own words at The Millionaire Corner where they have outlined the eight factors and are in the process of detailing each one individually.
What are the lessons we can draw from these things that millionaires do?
Get a college education and maybe even a post graduate degree – eighty-five to ninety percent of the millionaires have college degrees as opposed to only 66 percent of the non-millionaires. Of the younger millionaires (35 – 40 years old) 56% had advanced degrees.
Although a lot of American citizens are dis-enchanted with the collegiate educational experience these days and question its value, studies in the past have shown that on average, the college educated individuals earn half a million dollars more over their lifetime than those without post secondary education.
Put in the hours to get the job done right – sixty-three percent of the millionaires reported working more than 40 hours a week – at least ten percent more than the non-millionaires. The higher the networth of the household the higher the number of hours worked is reported.
Be smart about investing by:
Using a financial advisor – seventy percent of millionaire households used an advisor and of those thirty percent used a financial advisor (typically a full service broker). Most all levels (including the mass affluent) used an accountant.
- Keeping your portfolio diversified – eighty-five to eighty-eight percent of the millionaires thought diversification was import. In contrast, only seventy-six percent of the non-millionaires thought it was. The millionaires included alternative investments as well.
- Investing in real estate – most millionaires own their own homes, nearly half have a second home and many invest in rental or commercial real estate as well. They do so to benefit from tax savings, inflation protection and the ability to offset expenses
- Investing in soundly researched but new ideas.
Be willing to take on some degree of risk – millionaires on average were willing to take a risk six percent more of the time than non-millionaires.
Own your business or professional practice – the very wealthiest (upwards of $25 million in net worth) reported being business owners or high level executives. Next down were the professionals who have their own practices.
Other factors (included in the Spectrum study, but outside of the eight they are highlighting) that the millionaires and above reported in common were:
- Frugality – Living below their means was included by most as important.
- Being in the right place at the right time – As Louis Pasteur said, “Chance favors the prepared mind’!
- Luck – Although we don’t control luck, we can sometimes make our own and I suspect that these millionaires did just that.
- Making their own decisions – 64% of the millionaires and above made their own decisions as opposed to letting others decide for them.
Getting an inheritance and using family connections did NOT make the list. Only 27% of the UHNW and 29% of the millionaires reported an inheritance as a factor in their wealth. Only 12% of the UHNW and 9% of the millionaires said that connections from their family helped them achieve millionaire status.
Which of these characteristics do you exhibit? Are there others you feel are important?
Nice post Marie! While I don’t have any specific goals to become a millionaire in my lifetime, I somewhat assume it will happen. I’m making financially wise decisions with my property, investments, and daily spending.
My wife and I also own a couple of businesses besides our regular jobs that create a decent revenue.
It’s exciting to read about millionaires and realize that I might be one of them soon.
It sounds as if you and your wife are well on your way! Believe me, a lifetime of great money habits adds up.
I do all of the factors except I no longer own a business (except for this blog). I always embraced doing things right, but it is harder in education to achieve that and there is very little encouragement for it too.
Krantcents, if you do all the factors, you did better than I on sharing the common traits. But, we ended up ok anyway!
We grossly underpay our teachers in my opinion!
I really enjoyed reading this and hopefully someday I’ll fall in the millionaire category! However, as long as I have enough to enjoy life and retire in reasonable comfort I’ll be happy.
I found the family connections stat to be very interesting. I would have thought that might have been slightly higher.
It very likely IS higher. Keep in mind this is a survey of the wealthy individuals themselves, and they generally absolutely hate the idea that they’re ever seen as getting their money via luck, privilege during their youth, & inheritance. So, I’d imagine many of those surveyed would never acknowledge how much their privilege and inheritance or family monetary security in general helped them (via being able to take risks that most can’t, access to other wealthy connections, the best education and medical treatment, etc).
SavingMentor – I was surprised by that stat as well, I always thought that there is some truth to the saying that it is who you know more than what you know that can help you get ahead.
I love this stuff. Hopefully I’ll be a millionaire someday… that’d be fun!
I noticed the working over 40 hours a week. You really do have to work hard…nothing is handed to you.
@ Ashley – Being a millionaire does alleviate some of the anxieties about money – but can cause others. Good luck with your dreams!
@Super Frugalette – too true – working hard can also be satisfying – we have to just make sure to enjoy life’s journey along the way.
I’m frugal, work more than 40 hours a week, have a bachelors and am headed to get my MBA soon, and have a diversified portfolio. I’m thinking about starting in on some of the others you mentioned like starting a business and investing in real estate, but odds are it’ll wait until after I’ve finished my MBA and am a little more settled. In the meantime I’m focused on avoiding student loans!
NoDebtMBA – you are on the way! (Nice rhyme, ehh?).
Great list of traits. I found the alternative investments portion intriguing. I wonder what those assets were.
Me too, the research data I saw didn’t specify. I assume that things in the derivatives area, venture investing, direct investements in foreign countries and real estate and the like would be among those alternative investments.
Hmmm…I meet a lot of that! I hope I will be there some day!
Keep it up and you’ll have a great chance. Starting young as you are with goals and persistence really pays off.
Great post. I found that a lot of these attributes/ commonalities were the same as in the Millionaire Next Door 🙂 I hope I’ll be there someday too!
I noticed that as well. It seems that the habits of those becoming millionaires hasn’t changed in the past 15 years! Millionaire Next Door was copyrighted in 1996.
Nice compilation of traits!
I’m hoping to reach the millionaire mark in 8 to 9 years (if the stock market were my friend, I’d be a lot closer than I am now…)
@Money Reasons – Good luck on your millionaire quest. The market can really be fickle can’t it..
Eight Things Millionaires Have In Common With Each Other http://t.co/szGB3hh via @@prairieecothrif @DJZeeti
Interesting post. I think the most important trait of millionaires are that they are financially self aware. They know how much comes in and how much goes out. They remain wealthy because they want to stay wealthy. Many millionaires don’t drive Mercedes or BMW…etc, they drive late model Honda Accords and Toyota Camrys and keep them for many many years. They shops for clothes at Walmart. People who “act” rich seldom ever become rich. Good post!
Very good point. Millionaires are money wise and they aren’t wasteful. They appreciate value and they invest in things that are going to last. They also keep track of their money very well. These are all great lessons that we can learn from. We actually try to do these very things ourselves. We just haven’t reached millionaire status yet. One day, hopefully we will.
Good post and a great reminder, I definitely think it is all about doing those extra things that others don’t, finding the right people and resources and investing in yourself as much as possible.
Agreed. If we keep our eyes open for opportunity, then we are bound to see them. And yes, investing in yourself is one of the best ways to ensure success. You have control over that investment which is great security.
I wish my high school students understood the implications of this article! By the time kids turn 16 or 17, it seems like they have concluded that wealthy people have something they don’t, and their dreams begin to shrink and die. That we think wealth is available only to “others” has a far-reaching impact on our society, I believe.
If everyone knew, from an early age, that wealth is the result of habits and attitudes, we could start to imagine a society of wise money managers and wealth builders, instead of blamers and victims.
This conviction of mine fuels my mission to educate parents of teens to teach their teens great money habits and attitudes BEFORE they become adults.
Thanks for this post and for keeping my fire burning!
You have a point Jill. I have seen young teens with this attitude. They think there is no hope for them an in turn the often act out with self destructive behavious. If only people knew they had a choice and that with good habits and hard work anything is possible.
While it is certainly a good idea for this type of thing to be taught more, and at younger ages, than it is… I’d be careful with the “anything is possible” platitude.
Keep in mind the vast majority of people that practice good money habits and frugal living are not be any means wealthy, but maybe more comfortable overall throughout their lives. People set up with the expectation that they’ll be wealthy someday are setup for disappointment, statistically, even WITH good money habits and lots of hard work. It’s an important aspiration maybe, but shouldn’t be an expectation or anywhere near one. People always leave that major factor, luck, out of the equation when they describe how they became wealthy… because it is mostly luck COMBINED with good practice that allows most to be wealthy (as in, multi-millionaire or more type of wealthy).
I guess if you worked in a field that you were really passionate about, working over 40 hours a week might not be horrific, but I think I’d rather spend my life building good memories and relationships than copious amounts of wealth. I’d like to do the money thing, too. But not if it costs me everything else.
I think that is a balanced approach. We need to set our priorities how we want to set them. Only we know what is important to us and we have to be true to that.