What behaviors do millionaires have in common? Author Tom Corley interviewed 225 millionaires for five years to find the answer to this question.
Corley, author of the books “Rich Habits: The Everyday Success Habits of Rich People” and “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life,” shared in a column he wrote for CNBC about the three main financial behaviors he gleaned from his many interviews with wealthy people .
1. They transferred 20% of the salary to savings automatically
Every “investor-saver” in the study consistently saved 20% or more of their net pay, every paycheck. “Investor-saver” is the nickname Curley gave to millionaires who, regardless of their day job, make saving and investing part of their daily routine. They are constantly thinking of clever ways to increase their wealth.
Many of them have achieved this by automating the withdrawal of a fixed percentage of their net pay into savings. Typically, 10% went into employer-sponsored retirement accounts and the remaining 10% into a separate savings account. Once a month, the investor-savers would transfer 10% of the accumulated monthly savings to an investment account.
If 20% is too steep a rate at this point for many, consistently, even saving a smaller percentage can help meet future financial goals.
2. They regularly invested part of their savings
Because the investor-savers consistently invested their savings, their money accumulated over time. When they started, compound interest was not very significant. But after 10 years, they began to accumulate significant wealth. Towards the final years of their working lives, the wealth of investor-savers grew to an average of $3.3 million.
Millionaires who chased a dream and started a business, whom Curley called “the dreamer-entrepreneurs”, did not have the ability to invest their savings, especially in the early stages of realizing their dreams. All the savings they had were used as working capital to finance their dream.
However, interestingly, once most dream entrepreneurs achieved success in the form of available cash flow, they immediately turned to investing their profits.
3. They were extremely thrifty
One of the common denominators of the “saving-investors”, “company-climbers” and “outstanding-independent-millionaires” who participated in the study was savings. “Corporate-climbers” is the nickname Corley gave to millionaires who started their careers as junior employees in a large company, and since then devoted all their time and energy to climbing the corporate ladder, until they reached a senior management position – with an extremely high salary. “Superb millionaires,” according to Corley, are among the best people in their field, and are paid highly for their knowledge and expertise. To become one, formal education is usually required, such as advanced degrees (for example, in law or medicine).
For these millionaires, saving started as soon as they received their first paycheck. For the “dreamer-entrepreneurs”, however, it started once their dream had generated enough cash flow to allow them to save and invest.
Being thrifty requires three things:
● awareness: Be aware of how you spend your money.
● Focus on quality: spend money on quality products and services.
● search for “reality”: Spend the minimum possible amount by searching for the lowest price.
“By itself, saving will not make you rich. It is only one piece of the ‘wealthy habits’ puzzle,” and it has many pieces, Corley writes, “but it is a tool that can help save a larger amount of money. And the more you have in savings, the more you can invest More money.”