In 2004, I set out to conduct a five-year “Rich Habits” study to explore how the world’s wealthiest people think about their money. Each of the 225 millionaires I interviewed fell into one of four categories:
- Saver-Investors: No matter what their day job is, they make saving and investing part of their daily routine. They are constantly thinking about smart ways to grow their wealth.
- Company Climbers: Climbers work for a large company and devote all of their time and energy to climbing the corporate ladder until they land a senior executive position — with an extremely high salary.
- Virtuosos: They are among the best at what they do, and they’re paid a high premium for their knowledge and expertise. Formal education, such as advanced degrees (e.g., in law or medicine), is usually a requirement.
- Dreamers: The individuals in this group are all in pursuit of a dream, such starting their own business, becoming a successful actor, musician or best-selling author. Dreamers love what they do for a living, and their passion shows up in their bank accounts.
The Saver-Investor route requires the least amount of risk — at least compared to pursuing an entrepreneurial dream or artistic passion. But 88% of the millionaires I interviewed said that saving in particular was critical to their long-term financial success.
It took the average millionaire in my study between 12 to 32 years to accumulate a net worth of anywhere from $3 million to $7 million.
Below are their three most common habits that anyone can adopt:
Every Saver-Investor in my study consistently saved 20% or more of their net pay, each paycheck.
Many accomplished this by automating the withdrawal of a fixed percentage of their net pay. Typically, 10% went into employer-sponsored retirement accounts and the other 10% was automatically directed into a separate savings account.
Once a month, the Saver-Investors would then transfer their accumulated 10% monthly savings into an investment account, such as a brokerage account.
Even if 20% is too steep at the moment, saving a smaller percentage consistently can still help you meet your financial goals for the future.
Because Saver-Investors consistently invested their savings, their money compounded over time. When they started, this compound interest was not very significant. But after 10 years, they began to accumulate significant wealth. Towards the final…