After sharing Millionaire Facts, I ran into this piece from Yahoo Finance titled Wealth Is What You Save, Not What You Spend that talks about how millionaires became millionaires. How could I not post on something with this title? ;-)
Some of the quotes from the piece I just have to share (with my thoughts added in):
Most of those folks with a net worth of $1 million or more have earned it themselves.
Many people mistakenly think that most millionaires have their wealth handed to them from either their relatives or some stroke of luck (like winning the lottery, being gifted with amazing abilities/talent, etc.) This is completely false. Most people with over seven-figure wealth got it the old-fashioned way, they earned it.
Most of those with big bucks live well under their means and they put their money instead toward investments that help them stockpile more wealth.
This is why spending less than you earn is my best piece of financial advice. It's also the reason that over-spending is the worst money mistake anyone can make.
"It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes," the authors wrote. "Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self discipline."
Some related FMF posts that you might like to read that support these claims:
- The Wealth of Farmers
- Intelligence Still Linked to Income, Not Wealth
- How Most Millionaires Become Wealthy
Income alone does not make one rich. It helps, of course, to build wealth, but the financially independent look to their salaries as a means to an end, which is that pile of cash.
Simple math tells us all that it's easier to become wealthy with higher incomes (that's why I recommend growing your career and offer other money making suggestions as well.) But those who make more often spend more -- either treading water or even going backwards financially.
Among the biggest differences between those flush with cash and those wishing they were is in how they pay for things. Millionaires tend to use cash for most of their purchases, including cars, homes and boats.
We paid for our last car with cash (and several before that), our last home with cash (from the sale of our previous home), and we don't want/need/have a boat. Of course I prefer to pay for anything by credit card, get the cash back, and pay it off immediately. ;-)
And they're patient, willing to invest in the long term and wait it out. "They stick with their investments and are more likely to have a financial plan," said Sanjiv Mirchandani, president of National Financial, a subsidiary of Fidelity Investments. Many take the long-term approach to investing because they're working at being financial independent.
They "just so happen" to take advantage of the #1 way to grow their investments: time.
Anyone working on this plan? I know you're out there. ;-)