How to be a millionaire? Here are the answers! - October 02, 2019
The easiest way to become a millionaire is to save and invest – at least according to the book “Rich habits”. The text is based on interviews with 233 wealthy individuals and reveals what they did to become richer than the avarege. We can all learn from their answers!
A new book, “Rich habits” is trying to find out how people become millionaires. The 233 wealthy individuals interviewed by author Tom Corley had at least a $160 thousand annual gross income and $3.2 million in net assets. What did they do to get there? Corley actually found four different ways.
|How much||At what age||% of all millionaires|
|Being a saver-investor||$3.3 million||By the Mid-50s||22%|
|Being a dreamer||$7.4 million||In 12 years||28%|
|Being a company climber||$3.4 million||In 22 years||31%|
|Being a virtuoso||$4 million||In 20 years||19%|
The easiest: save and invest
The easiest way to become a millionaire is to save and invest, at least according to Corley. He calls this the “Saver-Investors path”. He found that this is the “easiest way to build wealth”. What’s more, it’s not only the easiest, “but if you start early, it almost always guarantees a lot of money”. He also pointed out that this group reached $1 million by their mid-to-late 30s and had an average net worth of $3.3 million by their mid-50s.
There are some important traits in the members of this group. They are mostly middle-class, and they were very open to save instead of spending lavishly. Saving and investing were part of their everyday routine: they saved 20% or more of their income every month. (Not long ago we shared the 10% rule with you, but they simply overdid that to reach even higher wealth.)
This path needs long-term thinking and true discipline, but it’s the easiest and safest way to become wealthy.
The harder ways
There are other paths to become a millionaire, according to Corley, too. The “The Dreamers path” for example is the hardest. These are the people who follow their dreams no matter how hard that is. They are often artists, authors or entrepreneurs. They have far bigger wealth than the others ($7.4 million), but here’s the catch: people in this group “must be willing to work long hours and able to handle financial stress”. Before becoming successful they face financial uncertainty all the time.
The second hardest way is to become a “Company Climber”. What this means is that they “devote all of their energy into climbing the corporate ladder until they land a senior executive position”. This path also means long hours of work and sacrificed weekends. Members of this group accumulated $3.4 million or more in 22 years. But there’s a catch here, too. Most of this is from stock compensations, so if their company goes south, so does their wealth.
The fourth and last way is dubbed the “Virtuosos path”. These people are the best in their fields, and they are paid very well for being extraordinary in what they do. Most of the times they are in the medical field or in law. They gather $4 million in 20 years, which is a lot, but long years of studying and learning must be done before being so successful.
How we see it
The findings of this book prove one thing again: saving and investing is probably the best way to accumulate wealth for the everyday people. Of course, this needs long-term commitment and discipline, but it’s still an accessible path to everyone. Not with the same results, of course, as a lot depends on your initial financial status, but everyone can reach some sort of success with a good, actively managed portfolio.
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Another thing we believe is important to see is that these investments should start sooner than later. The graph above shows exactly why. Starting at an early time with smaller amounts is often better than jumping in later with higher amounts. Especially at a time when pension systems have serious problems around the world.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.