"These people cannot be millionaires! They don't look like millionaires, they don't dress like millionaires, they don't eat like millionaires, they don't act like millionaires - the don't even have millionaire names. Where are the millionaires who look like millionaires?" Bank Trust Manager
Most people have it all wrong when it comes to how you become wealthy in America. The classic book, "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko outlines the common denominators of America's wealthy. For many, it's hard to believe it is seldom inheritance, advanced degrees or even intelligence that builds wealth, but rather hard work, diligent savings and the ability to live below your means.
The seven common denominators amongst the wealthy include:
- They live well below their means.
- The allocate their time, energy, and money efficiently, in ways conducive to building wealth.
- The believe that financial independence is more important than displaying high social status.
- Their parents did not provide economic outpatient care.
- Their children are economically self-sufficient.
- They are proficient in targeting market opportunities.
- They chose the right occupation.
Who is the typical American millionaire? Here are some facts:
- I am a 57 year old Male, married with 3 children. About 70 percent of us earn 80 percent or more of our household's income.
- About one in five of us is retired. About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20% of the workers in America, but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants.
- Many of the types of business we are in could be classified as dull-normal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers and paving contractors.
- About half of our wives do not work outside the home. The number one occupation for those wives who do work is teacher.
- Most of us us (97%) are homeowners. We live in homes currently valued at an average of $320,000. About half of us have occupied the same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes.
- We live below our means. We wear inexpensive suits and rive American-made cars. Only a minority of us drive the current-model-year automobile. Only a minority ever lease our motor vehicles.
- As a group, we believe that education is extremely important for ourselves, our children, and our grandchildren. We spend heavily for the educations of our offspring.
- We are fastidious investors. On average, we invest nearly 20 percent of our household realized income each year. Most of us invest at least 15 percent. Seventy-nine percent of us have at least one account with a brokerage company. But, we make our own decisions.
- We hold nearly 20 percent of our household's wealth in transaction securities such as publicly traded stocks and mutual funds. But we rarely sell our equity investments. We hold even more in our pension plans. On average, 21 percent of our household's wealth is in our private businesses.
- Most of us have never felt at a disadvantage because we did not receive any inheritance. About 80 percent of us are first-generation affluent.