A lot of people wonder what it takes so that they can be a millionaire. For the vast majority of the population, this will come down to the amount of money they can save. However, the numbers that are thrown out there are not really tied to being a millionaire. A lot of the time, it is, “save enough to get your 401k match.” Sometimes it is, “save $100 or $200 a month for your working life.” Other times it is, “save 15% of your income to replace your income during retirement.” These are all fantastic in their own right. Many of them will get you to millionaire status if you implement them. I do believe though that it is useful to look at what most people actually did to achieve millionaire status. For future millionaires one of the most important tools they have is to invert problems to find solutions.
If you Want to Be one of the Future Millionaires You Have to Save
When you go through the research, what the studies show is that most millionaires in the US saved 30% of their income. If you want to become a millionaire that is the number you need to focus on. For someone making $40,000 a year, your goal is to find a way to save $12,000 a year. If you make $60,000, your number is $18,000. A lot of people will say this is impossible, but Thomas Stanley of Millionaire Next Door fame found a substantial number of millionaires who never made more than $80,000 a year. That doesn’t help make the hoop easier to jump through, and it is a high hurdle to make, but start your focus there.
Go through the stories of the everyday millionaire. Having trouble? Start with a new source. This is why the book, The Millionaire Next Door, is so important. It slashes through the glamor of Hollywood and high fliers for the more common and attainable. What do you read? Well, the people you are trying to study don’t stick out. They live in houses that are worth less than $300,000. They don’t drive expensive cars. Heck, they like their Toyotas. Trying to find them based on fancy watches? Most get them for less than $200. The takeaway? They don’t spend a lot of money. By saving such a large amount of their income, they gained financial independence. In country terms, they have all cattle. That financial independence gives them the freedom to live almost any life they wish.
How Future Millionaires can Learn from the Past
It’s all fine to look at the spending habits of millionaires to learn, but how do they invest their savings? Look at the stories like the janitor Ronald Read. A guy who achieves an eight million dollar net worth has lessons that are at the very least worth examining. The guy had stock certificates. Those things are older than a lot of millennials. When you go through the work of Jeremy Siegel, somebody saving 30% of their income, and investing in businesses like Coca Cola or Royal Dutch Shell, would be a millionaire. Hell, only one $1,000 investment became more than a million dollars over the multiple time periods he studied. It doesn’t take a rocket scientist, it comes down to perseverance and a strong stomach when the dark clouds occasionally roll in.
For future millionaires the number to remember is to save 30% of your income. The lesson to remember is to invest for the long haul. The evidence is overwhelming that those who invest for the long haul generally have vastly better outcomes than the short term traders. For people who want to be millionaires those are the problems that you have to confront and solve to the best of your ability.