With inflation on the rise, interest rates at recent historical highs, and income stagnation in many industries, it may seem impossible to create an investment portfolio and become a millionaire in today’s economy. Here we highlight five myths about millionaires to help you separate fact from fiction.
Myth #1 – Millionaires inherit their wealth.
Many people view all millionaires as trust fund babies born into a life of luxury. However, a recent survey found that 79 percent of millionaires didn’t receive any type of inheritance. In fact, the only characteristics shared by most millionaires are determination and work ethic.
Truth – Most millionaires come from families with average or below-average income and built their wealth independently.
Myth #2 – It’s easy to spot a millionaire.
If your mind produces an image of millionaires living in big houses, driving fancy cars, and vacationing in exotic locations, you may be surprised to learn that most millionaires live relatively modest lifestyles. Consider the following data points:
- The most popular car brands among millionaires are Toyota, Honda, and Ford, with nearly 61 percent of millionaires driving one of the three.
- The average American millionaire spends $117 per month on clothes, while the average American (across all income levels) spends $161 per month on clothes.
- The average American millionaire spends less than $200 per month at restaurants, while the average American spends $303.25 per month eating out.
- 93 percent of millionaires use coupons some of the time when shopping.
The fact is that most millionaires don’t look wealthy. Millionaires tend to live comfortably within their means and avoid taking on unnecessary debt. They tend to purchase homes they can afford then work to pay them off early.
Truth – Most millionaires accumulate their wealth through a combination of hard work and smart financial decisions, and their relatively frugal lifestyles can make them difficult to spot.
Myth #3 – You need a high salary to become a millionaire.
When asked, many Americans guess that most millionaires are doctors, senior corporate executives, or business owners because these careers typically offer the highest salaries. In reality, the top five careers held by millionaires include:
- Engineer
- Teacher
- Accountant (CPA)
- Manager
- Attorney
Are you surprised to see teachers on the list, given that they’re notoriously underpaid? Their inclusion shows a high salary doesn’t necessarily equate to financial success. In fact, 69 percent of millionaires averaged less than $100,000 in household income per year, and 33 percent of millionaires never reached a six-figure income throughout their entire careers.
Truth – Millionaires don’t always have high salaries. Even those in lower-paying careers can build wealth over time. Ultimately, one of the greatest indicators of whether you can become a millionaire isn’t how much you earn but rather how much you consistently save.
Myth #4 – Millionaires have degrees from prestigious universities.
While it’s true 88 percent of millionaires hold a bachelor’s degree, 62 percent of them obtained their degrees from public state universities — and one out of 10 millionaires never obtained a college degree. Only 8 percent of surveyed millionaires attended Ivy League schools.
Truth – Education is important, but the degree matters more than where it’s from.
Myth #5 – Millionaires are savvy investors who know how to manage their finances.
Most millionaires understand they don’t know what they don’t know. They tend to spend a lot of time reading and learning about how they can reach their financial goals. Very few attempt to save and invest on their own. In fact, 68 percent of millionaires work with a financial advisor, and most began doing so before they achieved millionaire status.
Truth – You don’t need to manage your finances on your own. A qualified fiduciary wealth advisor can help you make smart financial decisions and build your wealth over time.
Gene Gard, CFA, CFP, CFT-I, is a Partner and Private Wealth Manager with Creative Planning. Creative Planning is one of the nation’s largest Registered Investment Advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.