Back in 1996, Thomas Stanley released the book, The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. We're big fans of this book in the Wela office because it gives a great overview of the keys to financial success. While we don’t believe you need to be a millionaire to be financially successful (wealth is about more than just money), we do believe that people who follow the habits of their millionaire neighbors are much more likely to be comfortable with their financial situation and more likely to reach their financial goals.
We topped the scales in with over 10 million households in the U.S. with $1 million or more in investable assets, excluding the value of their primary residence. While there was likely a variety of factors that helped push these families to seven-figures, we’re sure it was due in no small part to these families' good financial habits. Good news, you can also build these habits.
Let’s look at seven common habits of these self-made millionaires.
- They pay themselves first. Self-made millionaires understand that to build wealth they first have to invest in themselves. The average millionaire actually saves 20% of their income which falls in line with our TSL budget.
- They live below their means. They understand that it’s better to be anonymously rich rather than deceptively poor. They also know that they can’t save 20% of their income if they’re spending it every month.
- They’ve been with the same company for a very long time. Which is typically in a vocation that they love, and it’s rewarded them with a nice ending salary, a significant pension benefit and/or a hefty 401K balance.
- They don’t buy fancy cars. Very few millionaires are driving around in BMWs or Mercedes. Instead, they’re happy to give you a lift in their 10-year-old economy sedan.
- They’re not trying to impress the Joneses. Sure, the Joneses are nice people, but do they really need another new SUV?
- They are comfortable with taking some risk. They understand that without risk there can be little to no reward, so they take sensible risks like investing in the stock market.
- They set financial goals, but they’re different from yours. The millionaire next door understands that not planning is the same as planning to fail. They’re not saving up for things, though; instead, they’re saving for financial freedom.
If you’re ready to get started building these habits in your life, create your free Wela account. We’ll help hold you accountable as you get started on your path to becoming a millionaire next door.