How To Become a Millionaire

Posted on 09. Nov, 2011 by in Business Wealth, Creating Wealth

become a millionaire

I was reading a post over at Prairie Eco Thrifter the other day, they had reported on a study comparing things millionaires have in common and it really got me thinking about the things that I am doing and if I am on the right track.

What you may or may not find surprising is that the main things that millionaires have in common aren’t over the top, super top secret strategies that are only available to the rich.  The key things identified in the report were really basic, but they do take some focused effort to achieve.  Personally I feel that anyone can use them as principles to further their own financial position, you just need the right attitude.  I’d encourage you to go and read the post over at Prairie Eco Thrifter, but here is my take on the study data about how to become a millionaire.

Get a College Education

According to the report, 85-90% of millionaires have college degrees.  I have one of these, but I wouldn’t necessarily say that it is going to make me wealthy.  Some areas of study are very targeted and traditionally used to correlate with a better chance of financial success, for example doctor, lawyer or accountant (if you practice what you preach).  These days however, the traditional route to money is not always the most effective, or the most satisfying.

My personal experience has shown that higher education generally offers someone more choices or opportunities and encourages people to think about the bigger picture.  If you don’t have a college education, don’t sweat it you can more than make up for this by taking adult learning classes, reading widely about financial and business topics and experimenting with different ideas and resources.  I think the key thing here is to keep your brain active and remain open to learning and trying new things as much as you can rather than getting bogged down in the day to day aspects of life and blocking out other possibilities.

Here is my top tip; If you want to test out some higher learning, a lot of universities (including some of the big names) offer free online courses that you can just sign up for.  Go check out your university of choice for more details, or try this post at Life Hacker to get started.

Put in The Hours

Higher net worth households work a higher number of hours (40+ according to the report).  I guess this kind of makes sense, more work equals more money, but I’d like to challenge you a little here.  I think you should work hard at work, but I also think that you need to put in the hours after work too.

Work on your finances, streamline your personal systems, negotiate the best deal on your bills and investigate investment or business strategies.  The time you put in outside your normal working hours is crucial to your success and doing this alone will set you apart from a lot of other people.  Finding the time to do these things can be difficult, see if my post on how to find more time and be super productive helps.

Be a Smart Investor

70 percent of millionaires use an adviser, but only 30 percent use a financial adviser.  This is good news for anyone that is not a millionaire because it means that most financially successful people look after their own finances.  I think that this is really important to your own success, you need to understand your finances.  Don’t give this job away to someone else, find the right advice and then make the decisions yourself, you will learn a whole lot more as a result.

According to the report, one thing that pretty well all millionaires do use is an accountant.  I completely agree with this strategy, accounting and more specifically your taxes should not be a DIY exercise.  Pay the small amount of money it costs to have someone do this for you, not matter how simple or complex your finances are.  I guarantee they will make the money back for you in the process, after all it’s their business, so they should be good at it.

Be Willing to Take Risks

I’m an advocate of risk taking. I’m a really crap gambler though, so I don’t do things on a whim or roll of the dice, I do my homework first and make informed decisions. There is almost always an element of risk in a financial transaction that has the potential to make you money, but if you are a smart investor the chances aren’t usually too high.  Take calculated risks and know your limits.

Own You Own Business

A great number of wealthy people own their own business.  Aside from other benefits, like tax perks, it can be a lot more lucrative to be the owner of the business rather than the employee.  There is usually also a trade off though, owning your own business is hard work, it requires a lot of time and often many sacrifices.  If you do not have a burning desire to own a business, then stick to being an employee and practice being a smart investor.

If you do have the entrepreneurial bug, then spend (a lot of) time thinking about what it is you want to achieve.  Businesses come in all shapes and sizes, including micro business (or side businesses) which generally don’t make huge amounts of money, but then they don’t need to cost a lot of money or time to run either.  Find ways to test your ideas while enjoying the comforts of being an employee for someone else first if you can.  Decide if the idea really does suit you in practice and most importantly if it is viable.

Important reminder; Solo entrepreneurs may want to consider their future plans for investments and loans before venturing off too quickly. Although low doc and no doc loans are available, many financial institutions don’t like lending money to small businesses or sole traders, so keep this in mind for the early stages of business ownership.

What do you think the key things are in order to become a millionaire and what are you doing about them?

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16 Responses to “How To Become a Millionaire”

  1. Aaron Hung

    15. Nov, 2011

    Taking risks is the only way to get somewhere in life. especially when deciding to own your own business, If you don’t take the risk to take out the loan to buy that business, you end up with no business. you will win some and you will lose some. Great site MC 😀

    • Money Cactus

      15. Nov, 2011

      Thanks Aaron,

      I think you are right about taking risks, inaction is usually a lot more destructive in the long run.

  2. Name (required)

    15. Nov, 2011

    I think becoming a millionaire is fairly easy. I say.. spend half your income to live the other the invest the wait 🙂

    • Money Cactus

      15. Nov, 2011

      Being smart with your personal finances really can be that simple sometimes can’t it? For many people it can take some work though because they are often already well and truly over committed.

  3. 101 Centavos

    15. Nov, 2011

    All of these and more… living below your means, paying attention to financial planning, and staying married. The “Millionaire Next Door” covered many of these attributes. And my favorite: buying your car by the pound.

    • Money Cactus

      15. Nov, 2011

      Staying married… yep definitely want to try doing that 🙂

  4. krantcents

    15. Nov, 2011

    I was in my own business for years and that is where I achieved success. I stated investing in income property while still employed and eventually growing my business by adding a restaurant, started a studio catering company and finally became a consultant.

    • Money Cactus

      15. Nov, 2011

      I think it is great if you can take a staggered approach. It can be tough to juggle things, but the added security is helpful until things really start falling into place.

  5. UltimateSmartMoney

    16. Nov, 2011

    I think investing early really helps. Use your company 401K + company match as a starting point. The sooner you start 401K, the better position you will be in reaching $1 million goal. I don’t really know any other way to reach $1 million without getting lucky besides long-term investing. It will be a very slow and steady pace so you have to be diligent about it.

    • Shaun

      18. Nov, 2011

      Completely agree, starting as early as you can (even with the smallest amount) and being consistent are probably the best wealth creation strategies going around.

  6. The Jenny Pincher

    18. Nov, 2011

    I agree, putting in the hours and taking risks can pay off big time in the long run. Another quality I would think they would have is the “never give up” mindset. If you fail once, well then you’ve learned one way not to do it so you just keep trying until you are successful! With the work, it will come.

    • Shaun

      18. Nov, 2011

      Having the right attitude is so important.

  7. Great post and good comments. I watched a programme the other night where someone talked to two very different entrepreneurs who have bunt multiple million businesses from mornings. They shared only one thing – never took no for an answer.

  8. The Saved Quarter

    20. Nov, 2011

    I had no idea that the percentage was so high for millionaires to have their college diploma! I’ll keep plugging away at mine – just one more incentive, right?

    I recently read The Millionaire Next Door and found it an interesting read. I wonder if the authors plan on updating it or if much has changed in the past decade since it was published.

  9. Marissa

    21. Nov, 2011

    Although i have my degree, i am finding that lately it is not so much what education you have but what type of risks you are willing to take to be successful.