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?
Image by ModernDope