If you want to stop living paycheck to paycheck and start building real wealth, you should look at these 7 characteristics that most millionaires have and you probably do not.
In their classic 1996 book The Millionaire Next Door, Thomas Stanley and William Danko share their findings about the factors that determine who becomes wealthy in America. You might be surprised when you read their description of the average millionaire as many of the common perceptions we have of the wealthy are dead wrong.
According to their research, there are seven characteristics that are common to millionaires. I’ll list each of them below along with a few thoughts of my own.
- They live well below their means. That’s not really surprising is it? Common sense should tell you that if you want to build wealth you need to spend less than you earn. If you spend every dollar you earn (or even more than you earn thanks to those dreaded credit cards) then you’ll have nothing left over to save or invest for your future.
- They allocate their time, energy, and money efficiently, in ways conducive to building wealth. That’s right…millionaires work hard to be successful. They spend their time building businesses or planning and monitoring their investments. They don’t just cross their fingers and hope for the best. If you want to be wealthy you have to actually take steps to make it happen. Remember that the next time you spend countless hours sitting in front of the TV or stalking people on Facebook.
- They believe that financial independence is more important than displaying high social status. They’d rather invest $1,000 in dividend stocks than use it to buy a new flat screen TV or a bunch of fancy new outfits because they don’t worry about how others perceive them and they don’t waste time trying to keep up with the Joneses. They’re less concerned with looking wealthy than they are with actually being wealthy.
- Their parents did not provide economic outpatient care. In other words, their parents didn’t support them forever. They were taught how to fish for themselves rather than being handed a package of fresh fish every day. That taught them how to take care of themselves financially instead of always relying on handouts.
- Their adult children are economically self-sufficient. Just as the wealthy didn’t receive handouts from their own parents, they are less likely to provide financial handouts to their own children. They understand that handouts will only increase their children’s dependence on them while at the same time depleting their own financial cushion.
- They are proficient in targeting market opportunities. Even in turbulent economic times, there are always opportunities for those who have the insight to see them. Certainly having wealth opens up many doors. But grit and determination can open many doors too. Remember, self-made millionaires didn’t just get lucky. They probably worked their tails to the bone to create the opportunity that led to their success. We make our own luck.
- They chose the right occupation. There is something to be said for following your dreams and pursuing a career that you really love and find rewarding. But you have to be realistic and and accept the trade offs that come with having your dream job. If your passionate about a field that just doesn’t pay well you’re going to have an uphill battle.
So there you have it. Studies show that most millionaires have these seven qualities in common.
Even if becoming a millionaire isn’t one of your goals, developing these habits and qualities in yourself will help you take control of your own finances.