The One Thing (Most) Millionaires Have in Common
There's an enormous amount of personal finance information in the world today. Everyone claims to know the secret to success, but what works for one person might not work for you. To get ahead with your money, you're better off taking advice from experts who have attained millionaire status by turning their meager finances into a mountain of cash. While many common characteristics exist among the wealthy, there's one thing that all of America's self-made millionaires have in common.
Common Characteristics of Millionaires
One of the best personal finance books ever published is "The Millionaire Next Door" because it speaks to the everyday habits of millionaires. If you're wondering which practices are most effective at helping you become a millionaire, this book is where it's at.
The authors, Thomas J. Stanley, Ph.D., and William D. Danko, Ph.D., were professors who devoted their careers to studying the habits of people who became millionaires through their own efforts and without the help of an inheritance. Their book exposes several common habits that millionaires share, including:
- Frugal living
- Driving used cars
- Never leasing a car
- Buying a house that's below their budget
- Marrying partners who share their frugal values
- Owning a business that they run full-time or have a side hustle
- Focusing on business potential rather than fads
The Biggest Lesson From Self-Made Millionaires
It might surprise you to learn that the one thing most self-made millionaires do is make a budget, but it's true. The majority of self-made millionaires budget and track every penny. They know how much they spend on groceries, gas, and every other household line-item.
The authors say, "Planning and controlling consumption are key factors underlying wealth accumulation… Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction."
In the book, the authors share one particularly compelling story about a husband who, after reviewing his net worth, announced to his wife that they were officially millionaires. The wife nodded, then went back to clipping coupons
How to Become a Millionaire
As you can see, self-made millionaires understand the value of money. They don't spend too much on a house and tend to avoid having car payments. When you keep expenses to a minimum, you'll have more to save and invest in your financial goals.
Millionaires start with a big-picture goal that represents what they want to achieve and why they want it, and that's where you should start, too. Make a list of your financial goals and the reasons behind them. To make them a reality, you'll need to create a budget and track your expenses.
Most self-made millionaires will agree that budgeting and monitoring the outflow of money is the best way to see if their spending aligns with their big-picture goals.
Becoming a self-made millionaire often means clipping coupons, wearing inexpensive clothes, and finding other ways to live below your means. Or, as the authors put it, "[Millionaires] often live in self-designed environments of relative scarcity."
Like a millionaire, you should make budgets, track your money, and figure out how to cut spending so you can invest more. If knowing that budgeting and frugal living is how millionaires accumulated their wealth isn't enough motivation for making a budget, I don't know what is.