5 Biggest Myths About Millionaires That You Should Stop Believing
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Although the value and purchasing power of a dollar isn’t what it used to be, becoming a millionaire is still a monumental financial step. There is a stigma attached to reaching millionaire status that gives you a sense of financial security. But for a lot of people, they still see a million dollars as an unattainable goal to achieve.
A lot of this negative financial thinking has to do with a few myths about millionaires that people are holding on to. Myths that everyone needs to toss out the window. Because whether you think you’ll become a millionaire or think that you won’t become a millionaire, you’re right.
5 Myths About Millionaires That You Need To Stop Believing
Let’s debunk these millionaire myths once and for all, shall we?
Most Millionaire’s Wealth Comes From Inheritance
According to data compiled by personal finance expert, Chris Hogan, “Most millionaires are first-generation rich. That means they worked hard, made sacrifices, and lived on a plan.”
So what percentage of millionaires are first generation? It might come as a shock, but roughly 80% of millionaires in America are self-made millionaires and first generation in their family to be rich.
Conversely, how many millionaires inherited their wealth? According to Hogan’s findings, less than a quarter of all millionaires inherited their wealth. More specifically, 16% received $100,000 and only 3% received $1 million or more.
Millionaires Have A High Income
If you’re thinking “wait, wait, wait…how can this be a myth?”, you’re probably not alone.
But the truth is, the majority of millionaires studied, 61% never made more than an average of $100,000 per year.
In fact, 30% of them achieved millionaire status without ever making six figures.
What does this prove? It proves that it really isn’t how much you make, it’s how much you keep and invest.
Of course having a bigger salary can help you become a millionaire faster, but in order to take advantage of that, you need to avoid lifestyle inflation.
Millionaires Got Lucky
When Chris Hogan studied 10,000 millionaires (10,000!!!) you know what he found out? That almost all of them became wealthy from something other than luck.
That something, in more than 75% of the millionaires studied, was hard work and proper money management. Go figure!
Speaking of money management and luck, while most millionaires obviously haven’t won the lottery, they also haven’t grown their wealth through lucky stock picks.
In fact, a lot of millionaires have taken a long term strategy and Warren Buffett’s advice by investing in low cost index funds.
They Made Risky Investments
Although it may appear that millionaires make risky investments, the truth is that they are typically more conservative with their money.
Most millionaires tend to be diversified investors and often prefer to invest in low-risk, long-term investments. They also tend to invest in alternative investments that are not correlated to the stock market and are less exposed to market volatility.
They Live a Life of Leisure
Most millionaires are not what you see on TV or social media. Although Instagram wants you to think otherwise, not all millionaires live a life of leisure.
Truth be told, ninety-nine percent of millionaires are normal, hardworking people who have had to put in a lot of effort to achieve their wealth.
Many millionaires have 9-5 jobs or are entrepreneurs. These millionaires often have hectic schedules and often work long hours to maintain and grow their wealth.
So How Do You Become A Millionaire?
Now that we’ve debunked the biggest millionaire myths, just what does it take to become a millionaire? Honestly, if you’re playing the long game, not much.
Assuming an 8% average annual return, this is the math behind what you need to invest every year to become a millionaire in 10, 20, 30 and 40 years.
- To be a millionaire in 10 years, you need to invest $66,000/year
- To be a millionaire in 20 years, you need to invest $20,400/year
- To be a millionaire in 30 years, you need to invest $8,100/year
- To be a millionaire in 40 years, you need to invest $3,600/year
The math doesn’t lie. These myths about millionaires do.