Even with a rise in incomes and investments, it’s no easy feat to reach millionaire status. But, if becoming a millionaire is a top goal for you, there are a few things you need to know before you start your journey. And what better way to learn than from current millionaires? Here are the top 15 secrets of self-made millionaires, so you can work towards being one too.
Are there any self-made millionaires?
You may be surprised to learn that slightly more than two-thirds of America’s current millionaires are self-made.
Now, it’s important to note that this does not mean that these people weren’t privileged in some way. Certain schooling, locations, and even parenting can affect a person’s earning potential and financial literacy.
But, this statistic shows that these people still built their fortunes on their own and didn’t receive an inheritance to build their investments. So, if you thought it impossible to become a millionaire without a rich family, you’re in luck, because many didn’t!
Related Podcast: How Steven Stack Became a Debt Free Millionaire By Age 31
How many millionaires were self-made?
According to the 2021 Global Wealth Report, there are currently 21,951,000 millionaires in the U.S. Almost 88% percent of those millionaires are considered “self-made”. This means about 19,316,880 of the current millionaires are self-made.
How are self-made millionaires made?
Self-made millionaires are made simply by budgeting, saving, and investing their money smartly. Many self-made millionaires don’t even make 6-figures or more a year! There are millionaires from various backgrounds and industries, like entrepreneurs, teachers, and house cleaners.
Don’t let your job or your background make you think that you can’t become a millionaire too. In fact, we share 15 self-made millionaires’ secrets below to help you get started!
Related Video: Financial Freedom | 4 Steps to Financial Freedom
What job do most millionaires have?
While anyone can become a millionaire, regardless of their job or salary, there are a few popular career choices for people who want to be millionaires.
These include:
- Engineering
- Accounting
- Teaching
- Management
- Law
Again, this does not mean you can’t become a millionaire if you don’t have a job in one of these industries. But, it goes to show that anyone across any field can do it!
Related Article: How to Invest in an IRA
15 secrets of self-made millionaires
Now that you know how many millionaires are made and what they do, let’s talk about their secrets that you can use to focus on your own millionaire journey.
Pay yourself first
What does paying yourself first mean? Basically, it means that whenever you’re paid (either via your full-time job or as a freelancer), some of those funds are automatically saved in a savings account or invested.
But why should you pay yourself first? For many people, it’s easier to do because they don’t have to think about it, and it keeps their money safe and “out of sight, out of mind.”
But also, it holds you accountable and helps you save more and consistently. If you’re only saving what’s left after spending, there may be months where you don’t save or invest as much as you could. By paying yourself first, you know that you’re automatically putting money into an account for your future self, without the stress.
Related Video: 10 Money Habits That Will Keep You Broke
Start investing as early as possible
Did you know that investing earlier in life can make you more money by retirement, even if you don’t invest thousands of dollars each year?
For example, the U.S. News shows a chart showcasing how early investing can increase your investments 5x-8x more by the time you retire at 65.
Their example is that “Jack” invests $200 a month starting at age 25, and Joey invests $200 a month starting at age 45. By retirement age, Jack will have almost $600,000, while Joey will only have $100,000. That’s a HUGE difference.
Of course, sometimes life doesn’t always pan out the way we want it to, so if you’re investing later in life, that’s okay too! You may just need to play catch up and invest more upfront and month-to-month. But if you can, investing earlier can mean more money in your pocket without having to invest as much. Let compound interest work in your favor.
Related Podcast: The True Path to Financial Independence
Be frugal, not cheap
There is a huge difference between being frugal and being cheap. Cheap people refuse to buy even needed items, only care about price, and save money for the sake of saving money. And while that may seem okay at first, it isn’t always!
Think about it this way — a cheap person will only buy $5 t-shirts because they’re cheap but will have to replace them every 2-3 months because they don’t last. A frugal person may spend $40 for a high-quality t-shirt, but if it lasts 2-3 years, they’ve actually saved $20-$30 over the lifetime of the shirt.
The same goes for saving and investing. Cheap people are less likely to invest because they aren’t getting their “prize” for years to come. But a frugal person focuses on their future and plans accordingly.
Related Article: 5 Traps Preventing You from Building Wealth
Have a budget
Without a budget, you have no idea what you’re bringing in and what you’re spending regularly. This can cause you to miss out on saving and investing opportunities or make you spend more money than you need.
If you don’t have one yet, now is the time to create a budget. It may not be perfect at first, but that’s okay. It’s important to write everything down and know where you stand financially. From there, you can tweak your budget to fit your lifestyle and help you save and invest more.
Related Article: Top 5 Tools to Organize Your Money This Year
Keep your spending under control
Are you a spender by nature? Self-made millionaires tend to keep their spending under control, so they can keep their fortune. If you tend to buy things you don’t need often or overspend on certain items in your budget (like groceries or vacations), now is the time to figure out 1. why you do that and 2. how to manage your spending better.
Getting control of your spending is not an easy task. But once it becomes a regular habit, it’s much easier to do.
Related Article: How To Stop Spending Money (And Save Hundreds Each Month!)
Avoid debt
Debt, especially higher amounts of high-interest debt, can keep you from being a self-made millionaire and reaching financial freedom. So the best way to keep more money in your pocket, and have a chance of becoming a millionaire, is to avoid debt as much as possible.
For many people, student loans and a mortgage are normal. And while these debts aren’t as bad, it’s essential to try to pay them off as fast as you can (or at least have a budget for them). But credit cards, personal loans, and car loans shouldn’t be avoided as often as possible since many of these come with long payment terms and high-interest rates.
Related Video: Baby Steps Millionaires with Dave Ramsey
Make more money
No, you don’t need to make six or seven figures to become a self-made millionaire. But, the bigger the difference between your income and your expenses, the more you can save and invest. This is why it’s important to make more money, or at least make more money than you spend.
For example, if your yearly expenses are $40,000 a year, try to have an income of at least $50k-$60k in order to save the extra. And of course, the higher your expenses, the more you should try to earn.
Have multiple income streams
Along with earning more money, you should also focus on having multiple income streams. Gone are the days of being able to work the same job for 40+ years and retire with a decent pension.
So the best thing you can do is be loyal to yourself and have multiple ways of earning money. That way, if one income stream dries up (like losing a job), you aren’t sacrificing your savings and investing goals until you find another option.
Related Podcast: How Erica Built A Mini Side Hustle Empire To Help Her Pay Down Debt
Avoid lifestyle creep
Have you ever gotten a raise or a new job that makes you more money? If you’re like most people, you may get excited to spend more money, move into a better place, or any other increase.
But when you increase your spending to match your income, you subject yourself to lifestyle creep. This is why many people still live paycheck to paycheck even when they make more money.
The best way to fix this is by increasing your savings rate and focusing on spending your increase in income on future items like retirement investments.
Have savings
An emergency or savings fund can keep you from going into debt or getting a loan from your investments. This can then help you from living paycheck to paycheck and be able to pay for emergencies or large purchases without stress.
Over time, having a proper savings account can keep you from going through a continuous debt cycle, which means more money in your pocket and more opportunities for investing.
Related Article: 11 Ways To Build Up Your Emergency Fund
Surround yourself with fellow investors
While this secret isn’t the most necessary, it can be helpful, especially when you’re first starting out. If you know the phrase “you are the company you keep”, this includes hanging out with fellow investors! They can help you make better investing decisions, help encourage you, and hold you accountable when needed.
Related Video: 7 Steps To Create a Millionaire Mindset
Keep it simple
To start investing, you don’t need 20+ accounts or knowledge of all stock options available. Keep it simple and focus on options that offer you long-term wealth and are lower risk so you have less chance of losing money during bear markets or economic downturns.
But don’t be afraid to take risks
Once you’re comfortable investing, you can start to take more short-term or long-term investing risks.
Of course, riskier investments shouldn’t make up a majority of your portfolio (balance is a good thing, don’t put all of your eggs in one basket). But, they can earn you more money in a shorter amount of time if you play your cards right.
If you aren’t sure about the sort of risks you should take, work with a robo-advisor or financial advisor. They can help you make informed decisions.
Related Article: Investing In A Bear Market: Is It A Good Idea?
Get help when you need it
Even if you never take a large risk in your investments, it’s okay to get help in understanding how much you’ll need, how you want your portfolio to grow, and other steps you may need to take.
This is where a financial advisor comes in. They can help you make better decisions about where to put your money so it can best serve you, especially when you’re ready to retire!
However, keep in mind that financial advisors usually charge certain fees, and never work with one unless they’re credible and come highly recommended.
Think about the future
How do you plan on retiring, and when? Self-made millionaires think ahead, and many make choices now that will serve them well in the future.
For example, many of them purchase cheaper used cars, so they won’t have a car note, even if that means they aren’t driving “the best of the best.” Others live in smaller homes to pay off their mortgage faster and won’t have to move after they retire. Whatever the case may be, they think about the future and plan accordingly.
If you want to be a self-made millionaire, you should do the same. What do you want your life to look like when you can no longer work or when you’re ready to settle down? Use those future ideas to create goals and plans that will aid you when the time comes.
Related Podcast: How To Win The Wealth Game
Self-made millionaires: you can be one too!
As you can see, being a self-made millionaire is not hard. In fact, these secrets have been around for years! But, becoming a millionaire does take dedication and persistence, so the earlier you start and the more consistent you are, the better.
