Several years ago my wife and I decided to dramatically change our lifestyle and stop living paycheck-to-paycheck. It’s taken us just under three years but we now 100% have our financial life in order. Our retirement accounts are hefty for our age and we have an emergency fund with 5+ months of expenses. We are now living well within our means, which provides us with a lot left over to throw at retirement and our home mortgage.
The purpose of my personal finance blog for Millennials was to show others that you don’t need a finance degree to get out of debt and become financially independent. I read money, finance, investing, and personal development articles and books like crazy. I listen to podcasts and audio books on money as well to continue to grow my knowledge on investing and personal finances.
I recall reading an article about the traits found in self-made millionaires. I read the article and felt great at every turn because I thought to myself, “that’s what I do!” It’s a great feeling. I wanted to share those traits with my fellow Millennial readers to inspire them to think differently about money, investing, and retirement so you and I both can one day (very soon, hopefully) be Millennial Millionaires!
But first, to put the idea of becoming a “Millionaire” into perspective, that examine how much money, or lack thereof, that really is. If you retired with one million dollars today and used the 4% withdraw rule that would leave you with $40,000 annually to live on. Not so great, huh? Us Millennials have time and compound interest on our side so we need to think bigger. I want to be a Millennial Millionaire with $3 million to retire on. That would leave my wife and I with $120,000 annually to live on. That sure sounds like financial independence to me! So what is it going to take to become a Millennial Millionaire?
Traits of Self-Made Retirement Millionaires
Millionaires are often well-educated
Graduating college is not required, obviously, to become a millionaire, but getting that degree does better your chances of accomplishing this feat. In the book The Education of Millionaires: Everything You Won’t Learn in College About How to Be Successful, author Michael Ellsberg cites the fact that 80% of all millionaires have graduated from college.
I am a college graduate and my wife is not. I feel like we’re in a great spot and on the right trajectory. So goes to show that any education level makes it possible, but a college degree may help more. However, I would argue that work ethic trumps the degree.
Millionaires understand the power of compounding interest
From the day I graduated college and started my first full-time job I began saving for retirement. I was only 22 at the time. I had lots of debt (student loans and credit card) and wasn’t making a ton. But I knew I needed to save for retirement and save as much as I could. Any little bit at that early age would help. I did the same for my wife (who was only my girlfriend at the time) and forced her to open an account with a brokerage firm since she was independent. Compounding interest is amazing and can virtually double your investment every 7 years.
Self-made millionaires live within their means
One of the biggest traits of self-made millionaires is that they tend to live within their means and operate within the parameters of a budget. This certainly wasn’t me until a few years ago. I didn’t get on a written budget until my late 20’s, but I can’t stress enough just how much money that saved me. It really shines a light on where your money is going and where you can cutback to save, and ultimately increase your take-home pay without actually getting a raise.
We swear by our budget now and monitor it very closely. We also live within our means and save habitually. We actually challenge ourselves each year to save more and more. I keep increasing the percentage of pay towards my Roth 401(k). Every bit of extra money we come across now we save. That was not what we did in our early 20’s though…but we do now and will continue to do so until we are financially independent.
Millionaire’s typically have multiple income streams
A great deal of millionaire’s are well diversified with their income streams. No shock there. This is probably my biggest weakness right now as I don’t have any other source of income other than my job. Same goes for my wife. I have obviously created this personal finance blog for Millennial’s to track and note my journey. I plan on buying a rental property at some point down the road when I have enough money, but right now I live in a really, really hot real estate market where it just doesn’t even make sense right now. Hopefully at some point in a few years that changes a bit and I can dip my toe in the rental market.
Self-made millionaires usually have a mentor
Another common trait a number of self-made millionaires share is that they’ve found a career or wealth mentor along the way who has helped shape their path to prosperity. I would have to say my “wealth mentor” right now is Dave Ramsey. I follow his podcast regularly to keep me straight on my budgeting and personal finances. He regularly refers to himself as a “finance coach” too. I look at his that way without ever have meeting him. I have a couple bosses at work I really look up to professionally speaking. I follow their lead when it comes to advancing my career and increasing my income. But financially I do follow Dave Ramsey, The Motley Fool podcasts (see my post on the best podcast for Millennials), as well as a number of other great personal finance and retirement authors and bloggers out there. I try and keep my money knowledge as diversified as possible so I know all of my options.
Millionaires have defined plans and measurable goals
Finally, not only do self-made millionaires have goals they want to reach and the drive to reach them, but they ensure their progress is measurable. To become a millionaire you obviously have to make money, save well, invest diligently, and live below your means. However, without goals we have absolutely nothing to aim for. I once read if you aim at nothing you’ll hit it every single time. You have to set challenging, yet realistic goals for yourself and track your progress.
If you read through my Millennial Millionaire page you’ll see I’ve set a number of goals for myself.
- My goal for 2017 is to increase my net worth by $60,000 up to $440,000, which would be a 15% increase
- By 2018 I will have a net worth of half of one million dollars
- I should be a Millennial Millionaire and have a net worth of $1,000,000 before the age of 40 (my estimate is sometime between 2024 or 2025)
- I hope to retire with a portfolio worth $3 million dollars
- I plan to retire by age 55