Becoming a millionaire is the epitome of the American Dream. In our great nation, which essentially is run (with a few exceptions) as a meritocracy, anyone can reach millionaire status, especially if they are willing to work hard enough. While it’s great to inherit money from wealthy relatives, it is usually not the path to wealth as this statistic indicates.

Most millionaires didn’t inherit their wealth.

According to a 2023 Ramsey Solutions study of 10,000 millionaires, only 21% received an inheritance from their family, with only 3% receiving an inheritance of $1 million or more. 79% of millionaires in the US did not receive any inheritance at all. Most millionaires didn’t grow up around a lot of money, with 8 out of 10 coming from families at or below middle-income level.

The math is easy

A remarkable 79% of U.S. millionaires didn’t inherit a dime from their relatives. The vast majority worked and likely worked hard for their wealth. Most importantly, they made their wealth work for them.

So, what’s the absolute path to becoming a millionaire?

Tons of books have been written on the subject over the years, and one of the very best is “The Millionaire Next Door” by Thomas Stanley and William Danko, published in 1996. It studied the habits and traits of many of the nation’s millionaires. One of the most amazing facts cited in the book summary was this:

The millionaires in this book could maintain their lifestyles for years without a paycheck; they are financially independent. They didn’t inherit their wealth from their families. More than 80% of them accumulated it over their lifetime. They’re self-made businesspeople who have lived in the same town most of their adult lives. They own a business and live in a modest neighborhood. The key to their success is living a lifestyle that allows them to build wealth.

I read the book when I was in my 40s and working for major Wall Street firms, and it profoundly affected my habits, money management, and lifestyle. My mother was a huge influence, as she helped guide me to successful investing. Even more importantly, she had grown up during the Depression and World War II, when everything was precious and nothing was wasted. Items as simple as sugar and gasoline were rationed during the war, and during the Depression, she wore hand-me-down clothes. The cost-conscious reality stayed with her for all of her days.

Here are the five critical items for those seeking to become the next U.S. millionaire to start considering today, which I gleaned from the book and have followed myself.

Live beneath your means

We often read stories of Gen Z workers making $250,000 a year and more but living paycheck to paycheck. Most see this as incomprehensible. But overspending on cars, jewelry, vacations, expensive dinners at posh restaurants, and other expenses leads to this waste of resources. Live in a nice but affordable home, don’t drive a luxury car, and maintain a simple and reasonable lifestyle.

Make your time and money work for you

Self-made millionaires value time and put it to good use. By maintaining a reasonable lifestyle, they can use their saved money to start investing early in life. When you are young and starting a career, work hard and work extra hours if it will advance your career. Sure, your friends may be on a Hawaii vacation, but there will be plenty of time to do that when you are older.

Make financial independence more important than social status

 

Season tickets to your favorite NFL team and an expensive Country Club membership are excellent. But opt to go to, say, one game a season and play golf at your local municipal course. The ultimate status symbol will be joining the ranks of U.S. millionaires, which is a very exclusive club. In fact, just 5% of the wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current wealth definition.

Hone your skills at identifying investment opportunities

Whether you’re investing in the stock and bond markets, buying passive income-generating real estate, buying and trading collectibles or any other investment avenue, or a combination of all of them, it’s important to be disciplined and set long-term investment goals that are fully intended to be achieved.

Choose the right career path

Whether you become a stockbroker or a master electrician, pick a field where you can make the kind of money that will support a reasonable lifestyle and still allow you to invest in the future. Building long-term wealth is a marathon, not a sprint. As we have written many times here at 24/7 Wall St., Amazon.c0m Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), Netflix Inc. (NASDAQ: NFLX), and even Nvidia Corp. (NASDAQ: NVDA) all traded at less than $10 for long periods.

More Millionaire Next Door summary items include these traits:

• They didn’t inherit their wealth; they built it—80% are first-generation millionaires
• Many are self-employed. They’re entrepreneurs or professionals in unexciting fields—for instance, they may be welding or paving contractors, factory owners, accountants, or auctioneers
• They’re incredibly frugal and budget their expenses. Their total annual realized (taxable) income is less than 7% of their wealth, meaning they spend less than 7% yearly
• They invest an average of 20% of their realized household income a year. They accumulate wealth by investing in assets that will grow while reducing their taxable income.

While these are great starting points and tips for ambitious Americans, an acquisition of the book or audiobook is a great way to learn the habits and qualities that it takes to join this very exclusive club. Then, you can be the one handing down some legacy wealth to your loved ones.

∴

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.