Editor's Note: This story originally appeared on Living on the Cheap.
The best way to become a self-made millionaire is to learn from people who are already there. And as you can see from the list below, these habits of self-made millionaires are pretty easy to follow in your daily life. Because becoming a millionaire isn’t about spending like you are rich, it’s about saving money and investing it like you are rich.
Becoming a self-made millionaire takes hard work, but thanks to this list, you will definitely be on the right way to seven digits.
1. Self-made millionaires start small
According to the 2010 best-seller “The Millionaire Next Door” by Thomas J. Stanley and William Danko: “Twenty percent of the affluent households in America are headed by retirees. Of the remaining 80%, more than two-thirds are headed by self-employed owners of businesses. In America, fewer than 1 in 5 households, or about 18%, are headed by a self-employed business owner or professional. But these self-employed people are four times more likely to be millionaires than those who work for others.”
Pauline Paquin of the Investment Zen blog adds that a self-made millionaire is generally a humble person who is realistic about the future: To get from zero to millions, it will take a lot of time and hard work. They put a lot of sweat into their business and try to keep debt at bay. Some self-made millionaires didn’t pay themselves a salary until their business was well afloat.
Most people who succeed will have started with a small operation, then expanded their fleet or franchises. Don’t be too ambitious too quickly. Yes, you need a little seed money to make more money, but hold back on the shiny offices and other recurrent expenses that will cripple your bottom line early on.
2. They aren’t afraid to live frugally
To be sure, there would be no market for luxury goods without millionaires and billionaires to buy yachts and Bentleys. But in “The Next Millionaire Next Door,” a 2018 update to the original book, co-author Sarah Stanley Fallaw writes “Most millionaires we interviewed highlighted the great freedom that comes from spending below their means.”
For example, billionaire Warren Buffett is still living in the modest Omaha house he bought in 1958 for $31,500. (At the urging of his first wife, Buffett also bought a California beach home in 1971 for $150,000, which he sold in 2018 for $7.5 million.)
“How would I improve my life by having 10 houses around the globe?” he asked the BBC’s Evan Davis in an interview. “I’m warm in the winter, I’m cool in the summer, it’s convenient for me,” he said in the interview. “I can’t imagine having a better house.” (Buffett also buys cars with repaired hail damage to save money.)
3. They save aggressively
Paquin of Investment Zen asserts that self-made millionaires know every dollar saved is a dollar you don’t have to work for. Even better, it is a dollar that will start earning interest and grow into more dollars. Make sure you get your company match and max out your 401(k) and other tax deferred accounts before anything else for maximum returns.
Want to start investing? Here is our guide to getting started.
4. They keep learning
Thomas Corley interviewed 177 self-made millionaires for his book “Change Your Habits, Change Your Life.” Almost 9 out of 10 millionaires he interviewed said they read every day to increase their knowledge about their job and their industry. More than three-quarters, 85%, reported that they read a minimum of two books a month, and 63% reported listening to audiobooks or podcasts.
5. They know building wealth takes time
In this blog post, author Corley writes that “millionaires fell into four different categories when it came to their approach to their money: Saver-Investors, Big Company Climbers, Virtuosos, and Entrepreneurs.”
“More than three-quarters, 80%, of the participants in my study were 50 or older, and they accumulated their wealth over time,” he says. “For Saver-Investors, it took them an average of 32 years to become millionaires. For the Big Company Climbers, it took them 22 years. And it took 21 years for Virtuosos and 12 years for the Entrepreneurs.”
6. They network smartly
Paquin states that millionaires will always tell you they owe their success to other successful people who have inspired and helped them along the way. As a result, they value their contacts and stay in touch regularly to keep their valuable network strong.
7. They practice ‘dream setting’
More than 80% of the millionaires that Corley surveyed spent at least an hour a day in what Corley calls “dream setting.” In a post for CNBC, Corley identifies four parts to the dream-setting process.
- Define your ideal, future life, via a script of 1,000 words or more. In this script, you go out into the future five or more years and paint a picture with words of every facet of your ideal, future life. The home you own, the neighborhood you live in, the income you earn, the money you accumulate, the car you drive, the amazing people who are your closest friends, the places in the world you travel to, etc.
- Bullet-point each dream within your script.
- Build goals around each dream.
- Pursue each goal until it is achieved.
8. They get up early
If you’re going to realize your dreams, you need to set your alarm. There’s an adage that “what gets done first, gets done.” Nearly 50% of the self-made millionaires in Corley’s study said they woke up at least three hours before their workday actually began. “Getting up at five in the morning to tackle the top three things you want to accomplish in your day allows you to regain control of your life,” Corley writes.
9. They prioritize their health
A healthy mind is a healthy body. Over three-quarters of the millionaires that Corley surveyed said they exercised at least 30 minutes a day, four days a week. And 93% shared that they slept at least seven hours a night.
You can make the most of your workout time by listening to a podcast or an audiobook.
10. Happy millionaires give generously
Danko, a co-author of “The Millionaire Next Door,” followed up that book with “Richer Than a Millionaire: A Pathway to True Prosperity.” It turns out that money alone can’t buy happiness. According to Danko’s book, satisfied millionaires had strong connections to both family and faith and were charitable.
Harvard Business School researchers Grant E. Donnelly and Michael Norton looked into the question of how wealth is related to happiness, and they agreed that giving money away makes rich people — and their heirs — happier.
“Andrew Carnegie came up with one solution: He donated the vast majority of his fortune to charities, foundations and universities during the last few years of his life, keeping it from his heirs in an apparent effort to lead them to useful, worthy lives. And his solution has greater wisdom as well: Because research shows that giving to others leads to greater happiness than spending on oneself, Carnegie was also employing his wealth in a manner likely to maximize his own happiness.”
11. Millionaires see opportunities everywhere
According to Paquin, millionaires are curious and see opportunities where you wouldn’t. Every problem-solving situation is a potential money-making idea. As we discussed above, many will not even be considered, many will fail, but some may succeed.
12. They have multiple streams of income
“Self-made millionaires do not rely on one singular source of income,” Corley said, reporting that 65% “had at least three streams of income that they created prior to making their first million dollars.”
This helps millionaires navigate through life safely. While they invest a vast part of their net worth, they also keep cash reserves in case of an emergency. Cash emergencies can kill your business in its early stages; millionaires know that and plan accordingly. Here is our guide to four steps to build your emergency fund.
13. They don’t give up
Millionaires aren’t afraid of failure. Like normal people, they have likely tried and failed, but unlike many, they just shrugged it off, got back on their feet, analyzed the failure as to not make the same mistakes again, and tried again. Eventually, they succeeded. As Corley writes: “Almost two-thirds, 63%, of the millionaires in my study shared with me that they took calculated risks as they built their wealth. And 27% said that they had failed at least once in business.”
You just have to keep going.
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