5 Habits That Will Help You Stay A Millionaire

The Federal Reserve releases its Survey of Consumer Finances every three years. It’s one of the most detailed datasets collected on household wealth; the last report looked at 4,602 households between 2019 and 2022. The Fed questionnaire calculated real estate, stocks, bonds, bank and retirement accounts, cryptocurrencies and more. It then subtracted liabilities—mortgages, auto loans, credit card debt, student loans—to determine net worth.

Such a thorough examination led to many revelations, but a particularly eye-catching one was that in 2022, the average (mean) net worth of American families topped $1 million for the first time, up 42% from $749,000 in 2019. One might argue that the mega-wealth of billionaires overly influenced the data set or that inflation juiced the numbers. Both concerns have some merit, but neither cancels out the fact that plain and simple, there are a lot of millionaires in the United States.

According to the book’s survey, about 16 million American families, a tick more than 12%, enjoyed a net worth above $1 million in 2022. This was up from 9.8 million families in 2019. Furthermore, almost eight million families landed above $2 million in 2022, a staggering increase from 4.7 million in 2019.

It’s not difficult to imagine why these new millionaires, or mini-millionaires as the Wall Street Journal called them, emerged. During those three years, two major categories increased. First, the Case-Shiller Home Price Index, which measures the aggregate home values across the United States, went up nearly 40%. Second, the S&P 500 was up almost 20% from the end of 2019 through 2022. That means home values and most other inflation-combating assets were on the rise.

Here are some other characteristics worth mentioning about the mini-millionaires:

1. Their income was generally $150,000 to $250,000 per year.
2. They saw bigger wealth gains from 2019 to 2022 than the top 10% of families.
3. From 2019 to 2022, their median wealth jumped 69%, adjusted for inflation.
4. While assets went up, low interest rates decreased their debt payments. (Debt consumed a 19% share of their income in 2007 vs. 12.9% in 2022.)
5. More than 90% reported owning stocks directly or through retirement accounts.
6. 87% of them owned their homes.
7. By ages 55 to 64, 21% of families were millionaires in 2022. That percentage more than doubled to 45% among college graduates.

The Millionaire Next Door

So, what are the habits of the emerging millionaires? Think back to the best-selling 1996 book, The Millionaire Next Door, by Thomas Stanley and Bill Danko. It changed the paradigm and perception of wealthy Americans, revealing that many didn’t live flashy lives or look like the millionaire clichés. More significantly, it identified traits that commonly appeared among those prosperous folks. In this analysis, the focus is on these:

1. They live below their means.
2. They focus time and energy on wealth-building activities.
3. They seek independence and financial freedom rather than status.
4. They raise independent children.
5. They work hard.

Live Below Your Means

A substantial proportion of millionaires surveyed in The Millionaire Next Door were self-employed business owners or had some type of revenue-sharing or sales position without much of a cap on the upside. But not all of them were. The list also included teachers, accountants, engineers and managers. They reached the mark by living well below their earnings. Now, this is all relative. According to their survey, the higher the earnings, the less frugal a family needs to be. The key is for spending to be moderate compared to earnings.

Focus On Wealth-Building Activities

The millionaires next door are thoughtful about listening to investment professionals regarding the market and to certified public accountants about tax strategies. They take the time to understand what investments could outpace inflation over time. Rather than asking, “Where will my money be safest?” they might ask, “Where can my money be working and compounding for me?” When combined with patience and time, thoughtful investment planning can increase the odds of wealth accumulation.

Seek Independence And Freedom Instead Of Status

It’s not unusual to desire status from a purchase, but there is a spectrum. Some folks buy a home in a specific neighborhood to feel a certain status, and that’s not necessarily counterproductive. But, to varying degrees, many people could probably live in a less expensive house and still enjoy a delightful homeownership experience. That doesn’t mean relocating to an unsafe area or feeling guilty about buying a new home is necessary. It just means status shouldn’t be the driving force.

What about cars? In The Millionaire Next Door, Stanley and Danko revealed that 81% of their millionaires purchased vehicles while only about 20% leased them. Leasing may not necessarily be unwise, but it is far less bang for your buck in many cases. The owner mentality may also be at play.

In terms of added costs, the millionaire next door would probably not spend extra money to Uber across town or pay a $15 delivery fee for food that could easily be picked up.

Raise Independent Children

Supporting adult children can be a massive strain on retirement earnings and savings. Research for my book, What The Happiest Retirees Know, found that the happiest retirees give their grown children less than $500 per month on average, whereas the unhappy ones shelled out $700 per month or more. Retirees were four times more likely to be unhappy if they were supporting their kids with $2,000 per month.

The more money diverted to adult children, the less there is to fund a happy and healthy retirement. One way the millionaire next door accomplishes this goal is to emphasize education. That can include a college education but could also mean teaching kids the value of saving, investing, and entrepreneurship. Giving children too much financial support can hinder this growth and lead to problems down the road.

Work Hard

These folks aren’t millionaires because they won the lottery or became overnight social media super influencers. There was typically no unexpected inheritance windfall from a long-lost relative. Those occurrences are rare, but the good news is that you don’t need them. If you work hard, so many other pieces can fall into place.

Bottom Line

There is no magic potion for financial success, but there is a recipe that typically leads in the right direction. It’s a lifelong journey that includes hard work, sound choices, and having the patience and discipline to let your money work for you over time. That doesn’t mean you can’t ever splurge; it just means spending needs to be moderate compared to earnings.

The emerging and growing cohort of mini-millionaires in the United States can inspire anyone looking to reach or remain at that financial level. Most people can’t rely on generational wealth or a winning slot machine. Educate yourself and be encouraged that there is a path to becoming the millionaire next door and, perhaps, even retiring sooner than you ever thought possible.

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