Physicians who are tired of long hours, increasing administrative work, and the ever-changing healthcare landscape might find themselves desperate to become financially independent.
There are approximately 9.6 million households worth at least $1 million, and many of them got there without winning the lottery, landing a large inheritance, signing a professional sport contract, or winning a Grammy.
In fact, many millionaires are average Americans who live frugally.
(No, despite the date at the top of this article, this is not an April Fool’s Day prank.)
Many financial advisors have made the observation that with the right plan, just about anyone can become a millionaire. In particular, Thomas Stanley spent years interviewing millionaires to determine the common traits they share and he published his findings in a book called The Millionaire Next Door.
The results of Stanley’s 30-year study revealed that most millionaires are ordinary people working low-key jobs or owning equally unglamorous companies in paving or pest control.
More importantly, American’s millionaires do, indeed, have common traits that led to their fortunes. And these are all habits and rules that anyone can stick to with enough commitment.
Similar to Stanley’s research, Steve Siebold interviewed more than 1,200 millionaires and billionaires in his own 30-year study. The findings were published in his book entitled How Rich People Think.
Siebold told LearnVest that becoming rich was about psychology, not money. In a Q&A he said:
“After being around wealthy people for so many years, I’ve learned that they’re no smarter than the rest of us. They’re just ordinary people with extraordinary focus and drive who are looking for gaps or what’s missing in the marketplace—for what can be filled.”
If you’re one of the people stuck on the cusp of being a millionaire, but just haven’t made it over the hump yet, these tips could be the push you need. After all, Fidelity Investments recently found that of those with an average of $800,000 in total assets and an average household income of $150,000, more than three-quarters do not have a written financial plan, which is likely what’s holding them back.
Here are some common traits of America’s everyday millionaires.
5. Live below your means
One of the most common pieces of advice from financial advisors is to live below your means. Quite simply, don’t spend more than you earn or even as much as you earn. Saving is a huge part of becoming a millionaire, and you can only do it if you live frugally—even if you have money to spare.
Being frugal may not sound like a lot of fun, but even Warren Buffett is cost-conscious. He’s so sparing with his money, that his frugality is legendary. Buffett lives in the same Omaha house he bought for roughly $30,000 more than 50 years ago and he doesn’t bother with luxury cars or the newest technology.
And if there’s anyone who can afford to splurge on big purchases, then it’s the man who is worth $58.5 billion.
According to Stanley’s research, the majority of millionaires in the US are equally frugal. They live in a house that costs less than $400,000. They are more likely to drive a Nissan than a BMW and own a used car rather than a new one.
True millionaires are not big spenders. Investment U pointed out that the people who spend big to look rich are the “wanna-be’s,” people with higher-than-average incomes, but not much net worth. They are the ones buying expensive clothes, top-shelf liquors, large houses, and luxury cars.
By trying to look rich, they prevent themselves from actually ever becoming rich.
“Rich people get quietly rich every day,” Siebold told Daily Finance.
4. Be around the rich
This doesn’t mean trying to keep up with the rich. Instead, some advisors recommend spending time with other successful people partly to network, but that’s not the only reason. If you want to learn how to be rich and successful, you should spend time with those who can best pass on the knowledge.
Siebold went to the extreme and moved into a neighborhood he couldn’t afford before he was wealthy—something he doesn’t recommend. Instead, he now says that going to places where the rich congregate, like charity auctions and seminars, is useful.
“Listen to how they talk about money and opportunity,” he told LearnVest. “Compare their mindset to yours—and then consider adjustments.”
On the flip side, if aspirational millionaires should learn from other millionaires, then they shouldn’t take advice from the wrong people. You wouldn’t take fitness advice from someone out of shape, and you shouldn’t take money advice from someone who hasn’t been able to successfully increase their net worth.
3. Pay yourself first
No one is going to hand you millions of dollars—you need to do the work. Start by removing your debt, particularly high interest debt, otherwise the money you earn will simply go to someone else.
Methodically save your money. If possible, set up an automatic account that puts the money away as soon as a paycheck comes in. Instead of viewing money as something to spend, look at it as something to free you. Only people who financially sound have the luxury of being their own boss, doing what interests them, and making decisions that will benefit them most.
While saving is all well and good, Siebold points out that the rich understand earning power is more important. Saving 10% of an $80,000 salary is just $8,000 a year. At that rate, without interest, it will take more than 100 years to become a millionaire. However, if you can increase earning to $210,000, then 10% will make you a millionaire in less than 50 years, without including interest. At 15%, you’ll become a millionaire in roughly 30 years.
The average millionaire does better than 10%, though. Typically, millionaires spend 50% on necessary expenses (housing, auto, etc.) and just 30% on discretionary items (clothes, vacation, etc.). The remaining 20% is saved or invested.
2. Stick to your goals/budget
Possibly the simplest advice, but also the most important. According to Stanley, millionaires diligently attend to their bank accounts, even once they have accumulated wealth. The people who create a hard goal and stick to it are the ones who successfully become millionaires.
The difference between the middle class and the wealthy, according to Siebold, is that the middle class has loosely defined goals with flexible deadlines, while the wealthy have firm goals and they focus wholeheartedly on one at a time.
And when you have a financial or investment plan that you stick to no matter what, it prevents you from making emotionally driven decisions that could undermine all the work you’ve done and, ultimately, lose thousands of dollars.
Decide what it is that you want and focus only on reaching that goal.
1. Work for yourself
Not sure how to get earning power up any higher than it already is? The entrepreneurial drive of millionaires is what gets them from middle class to wealthy. Half of the world’s millionaires own their own business, according to the Economist, and two-thirds of American millionaires are entrepreneurs, Nerd Wallet adds.
The middle class views starting a business as a risky proposition. The wealthy do not. Siebold told Daily Finance that the millionaires he interviewed took well-researched risks to start a business because they say it as the road to wealth.
“Rich people look for ideas that can solve problems for other people and they make money from those ideas," he said.
Some people have that inner drive more than others. Physicians who are tired of working for their organizations, of increasing administrative paperwork, or of the changing landscape of healthcare might just find the strong need to become financially independent.