The money habits of millionaires might surprise you. They have to watch their money too because it doesn’t grow on trees. Most millionaires have to earn it like everyone else. Therefore, that is the reason we decided to write this article. We want to share with you how the approach and the decisions of millionaires to make and keep their wealth differ from those of us who often run out of money by month’s end. We also intend to shed light on the short-lived illusive hope of instant riches that seems to mesmerize some decent and hard working individuals, and instead bring them to the reality of lifestyle awareness and how they can set and manage their own future financial goals.
According to a recent American Express and Harrison Group survey, only 3% of millionaires have inherited their wealth. Yet, the same source tells us that 50% of millionaires run their own businesses, and 33% are professional practitioners. That simply means that most millionaires and above had to earn it.
Do Millionaires Think Differently?
Well, as you might imagine, those individuals who are wealthy and manage to maintain that wealth, are a little different from the average person. They are different in the way they think about money. They also act in a different way from those who have never been wealthy or have suddenly become wealthy. When disaster happens, those who have succeeded to earn it in the past usually will succeed again because they know they can overcome obstacles one by one. It may take some time but the same underlying principles that they followed to attain their wealth will help them to regain it.
Some say that the wealthy are ruthless and uncaring people. Although that may be the case for some of them in business, the majority of millionaires have the same values as the rest of us. They just manage their money differently.
Of course, the great majority of the millionaires who feel truly rich, the ones with a net worth of $23 million and above (according to Fidelity), have on retainer many financial experts to help them manage, invest, and grow their wealth for them. The fact remains, though, that these self-made millionaires have to start, on their own, the process of becoming millionaires in the first place.
One important factor in the money management process of millionaires is quite intriguing to us. The wealthy, who have held on to their wealth, think kind of backwards. Backwards in the sense that they first set their goals, but then work in reverse (backwards) from the goal achievement point to the goal setting point in order to identify and determine all the different stage processes leading back to the initial goal setting point.
Now, in case of any confusion, let us use an illustration to clarify this point. Have you heard of “Reverse Engineering?” Well, to put it simply, it is the process of taking something that is already made and then taking it apart to find out how it was made. The same principle applies to millionaires and their lives. In this case you would observe someone who has attained and maintained wealth, then analyze the processes and stages that they go through. We can in this way, if we choose to, study and examine how some individuals have amassed their fortunes. There are a great number of books and videos available on the biography of those who have made their millions and billions through what we like to call “reverse wealth engineering.”
Where Millionaires Put Their Money
A survey conducted by the investment management firm of Legg Mason of 2,164 millionaires shows that millionaires, with an investment portfolio of over $1 million, prefer the following asset allocation:
- Cash accounts… 25%
- Equities… 21.5%
- bonds… 19.6%
- Real estate… 18.7%
- So-called non-traditional investments… 9.1%
The survey also reflects a very surprising point among those surveyed millionaires – they were more interested about growing their assets than they were in protecting their assets. It seems that 70.9% of those millionaires surveyed stated that they indeed wanted to grow their assets.
Many people live from paycheck to paycheck and don’t really think that there is any way for them to ever invest or become wealthy. They figure out in their head how much they can spend and somehow, by the end of the month, they have managed to spend all their money to pay some or all of their bills. Such a struggle will usually go on month after month and without ever the possibility of creating any kind of savings being put aside. Sometimes, it is definitely a matter of living above one’s means. Well, there is a cure for that, and it is called a simple budget. A budget that will often reveal whether you can afford things that you want or not. the most elementary lesson we have to learn can be said in one sentence… “Is what we want something that we really need?” Sure, we have the power of choice, but we sometimes have to sacrifice in the short term in order to attain long term financial security.
Isn’t it best to do whatever you can to live within your means? Sometimes some short term sacrifices may mean downsizing your lifestyle to make room in your budget for savings and investments. Look into what you and your family might be willing to sacrifice now in order to bring a better financial picture later on. It is important that you come into agreement or you will not be able to follow through with a happy home and family. With your spouse and children all working together for the same goal, it will be much easier to achieve. You also may be surprised at the ingenuity of your children when they become a part of the plan. Many children grow up in this world without any idea of the value of the dollar and what it takes to earn it and grow it. All that they know is to spend it.
Instant gratification seems to be the norm for most people all around us… We want instant food, instant entertainment, instant happiness, instant relationships, instant family, instant health, and of course instant wealth. We want nice homes, furnishings, clothing, cars and we want them now. When we think of the money habits of millionaires, most of us think of all the fast cars and fancy homes that we think all millionaires possess. That is not always the case. Many of the wealthy skimp on luxuries in order to have more to be able to invest. They are more concerned with “growing their wealth” instead of merely holding on to it… there is that little culprit called inflation that eats away at your money if it is just sitting there and collecting dust.
Millionaires Give Away Money
It is true that millionaires do give away some of their money to charitable organizations on a regular basis. Una Osili, professor of economics and philanthropy at Indiana University, who also co-authored a Bank of America study on charitable donations by millionaires, states that charitable donations are becoming more and more strategic and impact-driven in recent years. It was also mentioned in the Bank of America study that American millionaires give 9% of their income to charity.
You may be completely surprised to learn that simply having wealth does not equate to living a large and lavish lifestyle. Let us take a look at a couple extremely wealthy individuals below to illustrate this point…
- Warren Buffett is an ultra wealthy person (a billionaire) and yet he has chosen to live a simple life. The home he lives in is one he purchased in 1948 for $31,500. Quite interesting to know that he could very well be living in a $31 million home instead. We ask ‘Why would he do that?’
- The founder of Duty-free Shoppers is another person who lives frugally despite his huge wealth. Chuck Feeney is reported to live to work hard and riches do not impress him. Now, well up in years, Mr. Feeney owns neither a car nor a house. Even so, charitable organizations have benefited from more than six billion dollars of his donations. That is quite a feat. It was his goal to give away most of his fortune while he was still living. Warren Buffett stated that Mr. Feeney was a hero to both him and Bill Gates because of the lifestyle of philanthropy that Mr. Feeney lives.
We could mention hundreds of other ultra wealthy people who have similar lifestyles or give away millions of dollars, but we just wanted to show you that we believe it should not be the wealth of a person that defines that person’s character and innerself. Rather, it is the deep traits of an individual, such as modesty, humility, caring, compassion, integrity, and a giving attitude that defines the person. The individuals in the above examples definitely have all that. Could their philanthropy actually be part of their success?
Does Sudden Wealth Last?
We all dream of suddenly becoming an instant millionaire. We just don’t know when and how! Some of us put our hopes on playing the Lotto or other forms of gambling, which can cost a big fortune in itself over time. Others hope that they may become a Publishers Clearing House winner, or inherit a large fortune left to them by some unknown relative. Well, have you heard that there is a bigger chance to get hit by lightning than there is to have such hopes come through?
Now, let us just imagine that you actually beat the odds and became an instant millionaire – for the first time in your life. Do you have any idea what you are going to do with all that money? the most obvious answer may be that you are going to spend it. After all, isn’t that what money is for? As a matter of fact, nothing is further from the practical truth!
Once the initial realization and the acceptance of having come into such a large fortune has set in, you will probably begin to overspend and think (with some element of truth) that everyone is out to take your money. You may start to withdraw from others. More than likely, you will also begin making bad to terrible financial decisions. And, eventually, you will deplete your entire sudden wealth in a relatively short period of time. You will not even know what happened to it all because you thought there was plenty and did not know how to preserve it.
Psychologist, Stephen Goldbart, coined the term Sudden Wealth Syndrome, to describe “the stress, guilt, social isolation and confusion that often accompanies a giant windfall.”
People who accumulate their wealth slowly stand a much better chance of keeping it than those who become suddenly rich. That is because the ones who have made their money gradually by working hard, have already made their mistakes and bad financial decisions, when the stakes were not that high, and have learned from those mistakes. Such lessons learned puts them in a much greater position to be more careful in making their future financial moves, as well as curbing their personal behavior. The most important and valuable lesson, though, that they learn is… protecting their wealth and ensuring that they have the right expert financial and legal team to help them grow their precious wealth.
As you can see, It takes a lot of planning, hard work, and sacrifice to have your cake and eat it too, if you will. In addition, you MUST have the support of your immediate family – your startup team – if you ever want to stand a chance of gaining and maintaining your wealth. Your best chance of financial success is to simply follow the money habits of millionaires. You always have to start right where you are.
Begin to adopt some smart strategies and live below your means; get some good financial counseling to avoid foolish investments; let your money start working for you instead of you working for it; make certain you know by heart… what you want is not most often what you need. Bear in mind that forms of addiction also include overspending. Unless your money grows, you are in for a lot of disappointments in your journey to being financially successful.
Self Limiting Beliefs
What we have shared with you so far pertain to a group of people that you may not be able to identify with. Maybe you have been unable to find or qualify for a decent paying job. Maybe your opportunity for a good education did not exist. This can cause you to feel trapped. However, you are not trapped so much by your circumstances as you are by your self limiting beliefs. If you will quickly look at the top right under the photo of the guy who has climbed his mountain and succeeded, you will see the phrase that if you think you can, then indeed you can. But if you think you can’t, then you really can’t. Your belief system must be in place within you before you are enabled to accomplish much in life. Those people who seem to always win are self confident people. They are like the “little engine who could.”
How can you develop self confidence when you seem to have everything against you? It starts with small things and being very observant of those around you. That is a whole other post all by itself but it can be done. Read, for example, a good book on the success secrets of millionaires; Watch those who are successful; learn how they did it. You can always find a way to further your education, improve your skills, and even build your confidence… so that you can learn to truly believe in yourself.
You have two choices if you find yourself lacking financially… You can either find a way to increase your income, or you can reduce your spending. Actually, you may want to find a way to do both. Millionaires use credit and equity to be able to make wise investments that increase their income. Ordinary people tend to use credit, usually in the form of credit cards, to buy what they cannot afford. That right there is one of the main differences.
Hard work, education, perseverance, self discipline, and respect for others are listed as things that have helped the wealthy to become and stay wealthy. These are all things that any one of us can do if we choose to. If fact, this is ingrained in the lives of many who are not wealthy. Then what is the difference? Here are some things to consider:
- Learn to believe in yourself
- Careful goal setting that creates a plan of action
- Make saving and investing a habit
- Keep prioritized to do lists and work through them rather than procrastinating
- Network with successful people
- Be willing to make changes that will help your future
There is a principle of sowing and reaping that also must be considered. When you give, it is given back to you. That is more than money, for it also includes many other things in our lives… kindness, love, help, encouragement, and also everything else you give. The opposite is true too. When you are stingy with your time and resources, you find that the world does not treat you very well.
This is also a law in nature that you just cannot deny. The Bible tells us that we will reap what we sow, later than we sow and more than we sow. How we deal with our finances follows the same principle. We must be careful to handle our finances wisely. If we sow seeds that lead to debt then we will reap more debt. If we sow seeds that bring an income stream, then we reap more seeds that can be sown.
When trying to help the natives in a time of famine, a missionary had to caution them not to eat the seed corn. The missionaries were trying to help the natives be able to feed themselves. If they ate the seed corn then there would be nothing to plant. Without anything to plant there would be no harvest.
Ordinary people tend to eat their seed corn. Millionaires sow it in order to reap more. No matter what your income, without self discipline, you may eat your seed corn too. Instead of waiting to save – when you can afford it – plan on finding ways to put back a little each paycheck. Then start to wisely invest in your future.
Can You Develop the Money Habits of Millionaires?
We believe that you can. The money habits of millionaires can help you and your family to get ahead and secure your own financial future. Study the habits of wealthy people and compare that with what you would do. Are you content to stay in your current position for the rest of your life? Do you have the mindset that only the lucky and the privileged can own their own businesses? Some of the biggest businesses started very small. Remember Apple? It was started in a garage. Remember FaceBook? It was started in a dorm room.
Do you have a plan of action? Some people we know who do are using affiliate marketing as a means to improve their financial situation. If you would like to know how to start in affiliate marketing then read that article on this site.
Everything starts with an idea and the belief that, yes, you can… you can do it! We do believe that you can too and encourage you to change your way of thinking and make use of some of these truths to change your life for the better. Your comments and ideas are always welcome.
Your friends who dare to care,
Jay and Glenda