Is Becoming a Millionaire in My Future?

Let’s start with real-world facts: most people like the sound and appeal of being a millionaire. The simple definition of a millionaire is having a net worth (assets – liabilities) that is at least $1,000,000. The most recent data from the Federal Reserve revealed that 23.7M households in the United States are millionaires. On a percentage basis, this is 18% of Americans. Including the entire globe, the USA has about 39% of the world’s millionaires based on US dollars. In the last 20 years, millionaires have more than doubled in America and globally.

Inflation has made it easier to hit that seven-figure net worth. However, it is still a desired level that usually signifies security and comfort when entering retirement. With obtaining this status becoming more common and doable, how do we start from scratch or even have a negative net worth and still make it happen?

Have the Millionaire Mindset

Having a millionaire mindset does not necessarily mean it is your main passion and all you think about. Like many topics or segments of our lives, it is having a “winning” versus a “losing” mentality. A big-picture example is how you define “a lot” of money.

A “winning” mindset emphasizes saving and investing more than spending. Spending $50 feels like a lot to them, but investing $500 is not that much. The reoccurring thought is, “I can do this.”

A person with a “losing” mentality doesn’t want to invest that $500 because they don’t see an immediate return on investment and must wait it out. They feel spending $50 right here isn’t as big a deal because it’s a small amount and can be covered by their bank account.

Phrased differently, a “winning” mindset with money says, “I can get ahead by investing in small increments even if my cash flow is not in a big surplus because it all adds up.” A “losing” mindset says spending in small increments is not a big deal; it's not like investing a few dollars will get me anywhere.

Staying Consistent

Now that we have established the general idea of a “winner” versus “loser” mentality with money, the next step is making it an ingrained habit so that you are consistently winning with money. Having the right mindset will get you started on the right path, but it's vital that you stay on track so that the setbacks are few and far between. Many people are debt-free, open an emergency account, and enroll in a retirement account at some point, but somewhere along the line, they get derailed and lose the positive momentum that they started with.

Much like physical and mental health can ebb and flow, our financial health often does as well. Just like people who never get out of shape or “fall off the wagon,” as the saying goes, will usually have the best overall physical health, so too will the people who rarely deviate from winning financial thinking and avoid binge spending be in the best overall financial health.

Delayed Gratification and Living Below Your Means

Housing and transportation are two large categories that most people think of and are essential pieces of the puzzle in building your net worth.

With housing, whether you rent or pay a mortgage, Ramsey Solutions recommends not going over 25% of your take-home pay on that part of your budget. If you own your home, this would include your mortgage, taxes, insurance, and any HOA fee, if applicable, not all of your utilities. Those “ordinary” millionaires who live in our neighborhoods and whom we are surprised when we learn of their financial status have applied this principle well. They save and invest better than those who live above their means; they are also much more likely to endure those surprise emergencies that happen to all of us without derailing their plan.

On to transportation. Ramsey Solutions' research of over 10,000 millionaires revealed that 31% drove a Honda and/or a Toyota car and usually owned them for several years. The first “luxury” car brand on the list was Lexus, at only 8%.

In both the housing and vehicle categories, wise consumers are disciplined enough to avoid overspending on these items, mainly because they acknowledge that they can’t afford them. Once they reach millionaire status and increase in years, they can afford both a bigger house and a fancier car. However, they usually still abstain from taking the plunge in upgrading because they have fully embraced the mindset of living below their means. Those status symbols are less of a desire than they once were at earlier stages in their lives.

Looking at other budget categories, such as eating out or grocery shopping, there will be fewer savings in buying generic brands or ordering water at a restaurant. However, if you lump all of the additional categories together, there are significant improvements that a household can make and significantly contribute to their ability to achieve millionaire status. Meaning don’t just stop at living below your means when it comes to the car and house, but also keep yourself in check by not eating out too often (or extravagantly) or overbuying on clothing or unnecessary household items.

Also, be careful and mindful about mental accounting and thinking that because you saved here and there, you can now splurge on expensive hobbies that eat up your savings. This is why having a separate emergency fund is vital, and you are consistently saving 15% toward retirement, plus saving to pay cash for other high-dollar expenditures.

Get educated and apply what you learn

Being willing and eager to learn and seek out ways to improve are traits that only some have. A quote from Harry Truman addresses the topic: “Not all readers are leaders, but all leaders are readers.”

Finding new ways to save and make money can seem overwhelming, but thinking outside the box can open many doors. Those constantly seeking ways to better their family’s financial strength are necessary for those who do not make a large salary, so they must be efficient and innovative with the dollars they have or ways to make more.

For some people, this may mean buying a few rental properties, or others may start a side business. Still, most modest-income millionaires spend efficiently and get creative with finding hidden savings. To have these savings or multiple sources of extra income to add up and make a difference in the march toward millionaire status, they cannot be occasional one-offs you fall into, but a daily proactive mindset. Most people like and want to save money, so a common thought or sentiment when someone shares a money-saving tip, or extra income option is “great, good to know, I’ll check into that,” but then the follow-through is lacking, and getting ahead remains more of a wish than reality.

Remember, extraordinary people are ordinary people who do ordinary things; they just do them more often than most people. Intelligent, friendly, and curious people have a bit of a head start in bettering their financial position. However, they still have to have the discipline and effort to apply the helpful money-winning information they have learned.

Keep good company

A Bible verse my mother often quoted to me was 1 Corinthians 15:33, which says, “We should not be deceived because bad company corrupts good character.”

This could be interpreted as if most friends and those we interact with have poor money and life habits, our ability to make sound financial choices will be strained and murky. On the opposite end of the spectrum, if the circles you run in are people who are highly disciplined and wealthier than you, then you naturally are more likely to pick up money-winning habits from them. This concept is heavily correlated with the previous attribute of constant learning. The advantage is that rather than seeking out and broadly applying concepts by trial and error, you can constantly be in learning mode and have built-in coaches and teachers who want to help you. Also, this form of education is more fun because it involves simply having friendly and informal conversations. Even if the “tips” or life lessons you are learning are not directly money-related, having highly effective people speaking into your life and motivating you to improve yourself and become more disciplined, the effect will likely carry over into your money habits.

Avoid Debt

The only debt that makes sense in most cases to incur for virtually every family is a mortgage. So, as long as you are buying a house within your means (payments, 25% or less of your take-home pay), then it makes sense to start building equity so that by retirement, you have paid for an asset that you have enjoyed years of use and necessary function out of.

Other debts that sometimes make sense for some people are starting a business or some real estate transactions. These can carry some risk but generally incur a relatively low borrowing cost for an appreciating asset. That said, do extensive homework and proceed with caution.

Consumer debt is the debt category that NEVER makes financial sense. If there is any value at all, it is a depreciating asset, and it usually has a very high borrowing rate. A millionaire built on a modest salary rarely, if ever, has a credit card balance.

There are two primary keys to avoiding consumer debt. The first is to build and maintain an emergency fund. No matter how much someone plans and prepares, life throws curveballs at everyone, and a financial winner will be ready for the unexpected to occur with their emergency fund. The surprise ER visit, or blown transmission, is more of an annoyance than a catastrophic event that blows up your financial goals. Making and sticking to a budget is the second primary key to avoiding debt. You need to confirm that your spending in all categories aligns with your income, and you predetermine where every dollar will go. The Ramsey Solutions team calls this the zero-based budget, where every dollar is assigned a category.

Summary

Proverbs 13:11 says: Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time. So our grandpa, who told us that it is a process and takes a lot of time and sacrifice, was not lying to us; he was just agreeing with our Creator. Even when an intelligent person knows the time it takes to become a millionaire, many will look for a secret shortcut or try to take an easier path. Still, God reminds us in Proverbs 28:20 that a person who wants quick riches will get into trouble.

So yes, an instant millionaire does happen for pro athletes or the musician who catches lightning in a bottle with a hit song, but this is not the reality for over 99% of us. So, approaching your finances with humility, knowing that it is not easy, yet with some confidence that you can do it over time, is good clear-eyed thinking. Few get-rich-quick-schemes pan out, but get-rich-slow plans are often successful if you apply the principles we discussed. The earlier you start using these principles, the sooner and easier it will be to become a millionaire. But it is a mistake to think it is too late to work on the millionaire mindset and benefit from good money habits, even if you don’t quite hit that nice round of $1,000,000 net worth.

If you would like to talk to a financial advisor but do not have one yet, we have a team of advisors at Whitaker-Myers Wealth Managers with the heart of a teacher who can answer your questions about investing and put together a plan to help you achieve your financial goals.