I spent 5 years meeting 225 millionaires.  Here are the four types of rich people and their most important habits

I spent 5 years meeting 225 millionaires. Here are the four types of rich people and their most important habits

In 2004, I embarked on a five-year study, Rich Habits, to explore how the world’s richest people think about their money. Each of the 225 millionaires I interviewed fell into one of four categories:

  1. Savings InvestorsNo matter what their day job is, they make saving and investing a part of their daily routine. They are constantly thinking of smart ways to grow their fortune.
  2. Company climbersClimbers work for a large company and dedicate all their time and energy to climb the corporate ladder until they reach a senior executive position – with a very high salary.
  3. the talented: They are among the best at what they do, and receive a high premium for their knowledge and experience. Formal education, such as advanced degrees (eg, in law or medicine) is usually a requirement.
  4. dreamers: All the individuals in this group pursue a dream, such as starting their own business, becoming a successful actor, musician or a famous author. Dreamers love what they do for a living, and their passion shows in their bank accounts.

The Saver-Investor path 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 12 to 32 years to accumulate Net worth is anywhere from $3 million to $7 million.

Here are their three most common habits that a person can adopt:

1. Automate, save 20% of net salary.

Every savings investor in my studies consistently saved 20% or more of their net worth, every paycheck.

Many have achieved this by automating withdrawing a fixed percentage of their net pay. Typically, 10% went to employer-sponsored retirement accounts and the other 10% was automatically directed to a separate savings account.

Once a month, savings investors then transfer their accumulated 10% monthly savings to an investment account, such as a brokerage account.

Even if the 20% is steeper at the moment, saving a lower percentage consistently can help you achieve your financial goals in the future.

2. They regularly invested a portion of their savings.

Since Saver-Investors continually invested their savings, their money doubled over time. When they started, this compound interest wasn’t very important. But after 10 years, they began to accumulate a large fortune. In the last years of their working lives, Saver-Investors’ fortune grew to an average of $3.3 million.

Millionaires who pursued a dream and started a business (also known as Dreamer-Entrepreneurs) did not have the ability to invest their savings, especially in the early stages of realizing their dreams. Whatever savings they made was used as working capital in order to fund their dream.

It is interesting, however, that once most dreamy entrepreneurs achieved success in the form of available cash flow, they immediately converted and began investing their profits.

3. They were very frugal.

One common denominator among the Saver-Investors, Big Company Climbers, and Virtuoso self-made millionaires in my study was the frugal economy.

For these millionaires, the economy kicked in the moment they got their first paycheck. For Dreamer-Entrepreneurs, it started the moment their dream created enough cash flow to enable them to save and invest.

Being frugal requires three things:

  1. consciousness: Be aware of how you spend your money.
  2. Focus on quality: Spend your money on quality products and services.
  3. Shopping deal: Spend the least amount possible by shopping for the lowest price.

Being frugal in and of itself will not make you rich. It’s just one piece in the Rich Habits puzzle, and there are many pieces out there. But it will allow you to save a larger amount of money. The more savings you have, the more money you can invest.

Tom Corley Accountant, financial planner and author Rich Kids: How to Raise Our Kids to Be Happy and Successful in Life And the “Rich Habits: The Daily Success Habits of Wealthy Individuals.

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