The Personal Finance Podcast - This Millionaire Study Will Blow Your Mind!

Starting point is 00:00:00 Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news. Choose news, not noise.

Starting point is 00:00:27 CBC News. Okay, when I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my out of office has a forever setting. An IG Private Wealth advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center.

Starting point is 00:00:56 Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, we're going to talk about the millionaire study that's going to blow your mind. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew founder of mastermoney.com. And so today on the Personal Finance Podcast, we're going to be talking about a millionaire study that's going to blow your mind. If you have any questions, hit me up on Instagram or TikTok at Master Money, and follow us on Spotify, Apple Podcasts, or whatever podcast player you love listening to this podcast to.

Starting point is 00:01:52 And if you want to help out the show, leave a five-star rating and review on Apple Podcasts or Spotify. And don't forget to check us out on YouTube as well at Master Money on YouTube. Now, today we're going to be talking about an updated millionaire study that Ramsey's Solutions did. Now, you hear me talk about the millionaire next door all the time. It's one of my favorite books that I've ever read, and I read it really early on when I was getting into my personal finance journey. And what that book taught me was how millionaires act and how millionaires actually think, how they spend their money, how they're disciplined, all of these various things. And understanding how millionaires act is something that will absolutely change your life once you get it.

Starting point is 00:02:37 Once you have that light bulb moment. And that light bulb moment for me was the millionaire next door. Well, Ramsey's Solutions, which is Dave Ramsey's, company did a survey to look at millionaires in a more modern age because the millionaire next door, the problem with that is it was written in the 90s. So now we're coming to a age where this needs to be redone and the study needs to be redone. So Ramsey Solutions did it and they had more millionaires interviewed than ever before. And the cool thing about this is, as you're going to see, there are a lot of similarities between the millionaire next door and this Ramsey solution study.

Starting point is 00:03:09 And this is going to tell you a lot of things. But one of which is the path to becoming a millionaire is the same no matter what decade you're in. And that is why this is so cool to see the differences between the two, because it's a process that is all about consistency and discipline. That's what it's about. And having that baseline knowledge to understand how this works. Now, I want you to use this as a baseline. This is the minimal thing you need to be doing to start building wealth.

Starting point is 00:03:35 Because what we talk about on this podcast all the time is we want you to build generational wealth. And what that means is your wealth is going to be passed down for decades to your kids, And there's a lot of things surrounding that from teaching your kids how to manage their money. And in addition, teaching them to teach their kids how to manage their money so that that wealth can be passed out for generations. It could be utilized for a long period of time. And that's why we do this thing. That's why we do all of this hard work is so that we can build a life that we want, build a life for fulfillment, do what we want with our money and have everything that we want in this life. Now is money the solution to all of it?

Starting point is 00:04:10 Absolutely none. But what we want to do is at least show you the baseline. And then as we progress through this podcast, because early on in this podcast, there's a lot of basics that we've talked about. And as we progress, we're going to get more and more advanced as time goes on. And that is intentional.

Starting point is 00:04:24 We intentionally did this in this specific order so that you can figure out, hey, here's the early on things I need to do. Here's the minimal things I need to do to still become a millionaire. Because we believe anybody in this world can become a millionaire, no matter what your salary is.

Starting point is 00:04:38 And we're going to talk about that today. It's very important to understand that. It doesn't matter if you make $30,000 to $40,000 a year or if you make $500,000 a year. What matters is how much of that money you keep and which we'll talk about here in a second as well. But we want you to utilize this as a baseline. And the baseline is I'm going to at least become a millionaire as my wealth building journey. And then over time, what's going to happen here is we're going to give you accelerators, ways to accelerate your wealth so that you can become way beyond just $1 million net worth.

Starting point is 00:05:08 Because we all know this. A million dollars isn't what it used. to be. So if you have a million dollars in retirement, based on the 4% rule that we talk about all the time, you can draw down $40,000 a year. That means one million dollars means that you can live off $40,000 a year in retirement and still preserve that capital and preserve some of that wealth. But over time, you're going to have to increase that number as inflation rises and things like that. So we're going to teach you exactly how to do that. So this is a baseline. So you understand how millionaires act and the minimal things that you need to be doing so that you can get to that

Starting point is 00:05:38 millionaire status. And the other thing, I want you to take away from this is you're going to see a lot of these things are habits and they're habitual. And if you mimic the habits of millionaires, then you can't help but become wealthy. And so what you want to do is at least set yourself up for that. And then we'll talk about in future podcast episodes, faster ways to get wealthy as well. So if that's something you're into, let's get into it. So the first thing they found is that eight out of 10 millionaires invested in their company's 401k plan. And that was a big contributor to becoming a millionaire. So this is really, really cool because you're going to hear a lot of people talk about now that the 401k is dead.

Starting point is 00:06:17 I see all these TikTok gurus who have no idea what they're talking about. Be very careful who you're listening to on TikTok and Instagram. Let me tell you that right now. Because I see all these TikTok gurus saying that the 401k is dead. Now, we've talked about a number of strategies, how you can utilize your 401k, how you can draw it down and utilize it to actually access your retirement funds early within a backdrop. Roth IRA and various things like that. But it's all about the numbers here.

Starting point is 00:06:42 Eight out of 10 millionaires invested in their company's 401K. Now, when I say 401K, really what that means is they're investing in a retirement account. So if you have a Roth 401K, even better. Because a Roth 401K is one of my favorite accounts that are out there. If you have a traditional 401k at your company, that's amazing as well. And if you don't know what a 401k is, it's a retirement plan where you can utilize tax-free money, putting your money into that account. You don't get taxing that money.

Starting point is 00:07:10 The money grows. And then when you pull the money out, you get taxed in the money when you pull out. But eight out of 10 millionaires said they invested in their 401k. And in addition, they didn't just buy single stocks. They invested in low cost, mutual funds, index funds, things like that. And three out of four millionaires said that regular, consistent investing over a long period of time is the reason for their success. So we talk about this all the time.

Starting point is 00:07:37 Your time horizon is the biggest wealth factor that you have at your disposal. If you're in your early 20s, you are a time millionaire. What that means is if you have a very long time horizon, you can really build a lot of wealth with a minimal amount of money invested. In fact, if you're in your early 20s, you can be investing $95 a month to get to millionaire status. Now, this is incredibly powerful because once you have this at your disposal, imagine once you start to invest two, three, four, five, six, and then start to invest $1,000, $2,000, $3,000 a month,

Starting point is 00:08:13 you are really going to be building a massive pile of wealth. But you have to start very early on. Starting as early as you possibly can is one of the biggest factors in building wealth. Now, if you started investing late, it doesn't matter, you can catch up. It's never over. And what you have to do is if you started late, it's time to fight back and invest as much money as possible because you too can build wealth. Now you're going to have to work a lot harder than somebody who started really early,

Starting point is 00:08:38 but it's all worth it in the end. Why? Because you're going to have that comfort and you're going to have that money to back you up in retirement so that you have a stress-free retirement. Because a lot of people who are setting up new accounts and they're starting to just invest, yeah, you can start by putting $2,000 in and then figuring out what to do next. But the key is consistently investing over time, consistently over time. Because most new beginners, they just want to put $1,000 or $2,000 in,

Starting point is 00:09:04 and they just want to let it ride. They don't want to let it sit there. But investing consistently over time is how you build the real wealth. That is how you really get that snowball moving. So then the question becomes, okay, we understand that they invest, but is the 401K the only thing they invest in? Well, a lot of millionaires also invest in real estate. Now, we have a number of episodes talking about real estate.

Starting point is 00:09:22 But real estate is where a lot of millionaires are coming from now. Because real estate, if you hold it for long enough, can make you a millionaire very quickly. You can see the rising price of housing right now. there's a lot of millionaires being made every single day because they've had properties for the last 10 years. And because of that, that appreciation is coming into play. Now, there are a bunch of factors to become a millionaire when you're investing in real estate. But that is the next step is starting off investing in your investment accounts, in your retirement accounts, and then going into real estate.

Starting point is 00:09:51 Because that is how you're going to get to the next level of accelerating. Now, the question then becomes, well, how do millionaires spend their money? Well, the key here is, I can make this really simple for you. Because spending money is very simple. But there's a lot of complex and psychological things that come into play. But you have to live on less than you make because it's all about how much money you keep. And 94% of millionaires, even when they hit millionaire status, said they live on less than they make. They don't spend everything that comes in.

Starting point is 00:10:20 They live on less than they make so they can continue to grow their pile of wealth over time. Now, living on less than you make, if you have never done it before, is a major discipline at the beginning. But once you start doing it, it becomes easier and easier. over time. Because habitually, most people, when money comes in, they spend that money. And this is a habit. It's not something that you have to do. It's a habit. When money comes in, you need to save a portion of it. And we want you to get to that 25% range, but you want to save a portion of it and then invest that portion into things like low cost index funds, into your IRA, into your Roth IRA, whatever you're looking at doing. But making sure that you're investing money consistently over time is

Starting point is 00:11:01 the only way to retire. You have to invest your dollars and there's a number of factors, but the number one reason is so that you can grow your money over time. You've seen these inflation rates that have come up as of late. Every dollar that you make is worth 10% less than it was last year. Every $100 is now worth $90 in today's dollars. So making sure that you invest those dollars over time is incredibly important. Another cool stat. Nearly three quarters of millionaires have never carried a credit card balance in their life. Credit card debt is an absolute wealth. killer. And if you do not get rid of credit card debt, it's the first thing that you need to be doing because typically credit card debt is high interest debt. And high interest debt, we want you to

Starting point is 00:11:42 eliminate as fast as humanly possible because what's happening is high interest debt is working against you instead of for you. You want that interest to be working for you by investing your dollars. But it's taking away from your wealth freedom. It's taking away those dollars that you could be investing and you're having to pay it into interest of the credit card companies. So getting rid of that as fast as humanly possible is incredibly important. Now, we have a free course coming out talking about how to do this. And this course is going to be simple strategies that are going to show you exactly how to do it. It's like seven or eight videos. And each video is like three minutes long so that it's incredibly simple for you to put a plan together, an action plan together,

Starting point is 00:12:21 on how to get rid of your high interest debt. So watch out for that. We'll link it up in the show notes when it's ready so that you can check that out as well. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in. When it comes to hiring, Indeed is all you need. Instead of struggling to get your job post noticed, Indeed's sponsor jobs help you stand out and hire faster. Your post jumps up to the top of the page, making sure it reaches the right candidates.

Starting point is 00:12:54 And it makes a huge difference. Sponsored jobs on Indeed get 45% more applications. then non-sponsored ones. And there's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash personal finance. Just go to Indeed.com slash personal finance right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash personal finance. Terms and conditions apply. Hiring, Indeed is all you need. So lately, I've been noticing how fast things are changing at home.

Starting point is 00:13:32 The kids are growing like crazy, clothes don't fit anymore, and routines are changing. And it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring, making sure the safety net we have in place actually matches the life that we're building. And that's where PolicyGenius comes in. PolicyGenius is an insurance company. They're an online marketplace that helps you compare life insurance quotes.

Starting point is 00:13:57 from some of the top insurers in America, all in one place for free. And their licensed team works for you, not the insurance companies. So they help you find the right coverage for your situation, without all the guesswork. And they walk you through everything. Answer your questions, handle the paperwork, and help you get the coverage that actually fits your life today and where it's going. So protect your family with a policy that grows with your life. With policy genius, you can see if you can find 20-year life insurance policies starting at just $276 a year, for $1 million of coverage. Head to PolicyGenius.com to compare life insurance quotes from top companies and see how much

Starting point is 00:14:34 you can save. That's policygenius.com. The next stat, and this is one of my favorite stats of all. And you've heard me talk about it before if you've been listening to this podcast for a long time. But this is one of the most reassuring stats that are out there. An overwhelming majority, 79% of millionaires in the U.S. did not receive any inheritance at all from their parents or other family members. 79% of millionaires did not receive an inheritance.

Starting point is 00:15:01 So a lot of people who are new to investing, new to this personal finance game, think that millionaires are made because they inherited their money or they just make a ton of money. But 79% of them are self-made. Why is that reassuring? Because that means you can do it too,

Starting point is 00:15:17 because 79% of them did it on their own. So building wealth is something that you take the responsibility for, and if you take that responsibility and you're disciplined over time, you can absolutely build well. And that's why this is so incredibly reassuring. And the cool thing about this is in this study, one in five millionaires or 21% of millionaires did receive some inheritance, but only 3% received an inheritance of a million dollars or more. So 3% of millionaires became millionaires instantaneously because of an inheritance. The rest of them either received a small amount of money or a dollar amount of

Starting point is 00:15:54 less than a million dollars. And we've heard them talk about that the majority of them that did receive an inheritance, it was a very small amount of money. It wasn't very much money at all. So really, the overwhelming majority made it on their own. And they found that the majority didn't even grow up around a lot of money. So eight out of ten millionaires come from families at or below middle income level. And only 2% of millionaires surveyed said they came from an upper income family.

Starting point is 00:16:20 So only 2% of millionaires came from an upper income family. So 98% came from middle class or below. Now this is so incredibly reassuring because this means that anybody can build wealth. And the millionaire next door found a very similar statistic when they did the same exact survey. The majority of millionaires came from middle class.

Starting point is 00:16:40 Why? Because money that you earned is much more important to you than money that was given to you. This is shown all the time when people win the lottery. When you're given money, you just don't treat it the same

Starting point is 00:16:51 as when you put your sweat equity into that money. When you earn that money yourself, you're not just going to frivolously spend it because why? Every dollar you spend means that you got to go back out there and start working for another dollar.

Starting point is 00:17:04 And this is the rat race. This is the cycle that a lot of people fall into. But if you take those dollars and you put those dollars into investments and watch those investments grow, that means one less hour that you have to go back to work. And the more you do this over time,

Starting point is 00:17:18 you can get out of that cubicle, you can get out of that office. We don't have to go into the office anymore. Why? Why? Because your investments are making the same amount of money that you make at your day job. And that means you don't have to work anymore in your financially independent. This is the goal. This is the goal for all of us, is to be able to do this.

Starting point is 00:17:33 So now that we know that millionaires didn't inherit their money, well, how did they get their money? How much money did they actually make? Now, you know income is a big factor for us. And increasing your income over time is something that we talk about all the time. But here's what the study found is that millionaires don't always make the big bucks. They found that the majority of millionaires didn't have high income, high salary jobs. In fact, only 15% of these millionaires were in senior leadership roles, and 93% of millionaires said they got their wealth because they worked hard, not because they had big salaries.

Starting point is 00:18:03 So they had actually the top five careers for millionaires in this study. Engineer, accountant, corporate management, attorney, and the last one is crazy, teacher. So only 31% averaged $100,000 a year over the course of their career. And one third never made six figures in any single working year of their career. This is absolutely amazing. First of all, to become a millionaire on a teacher's salary means that somebody over time has worked hard consistently over time. There's a great book called The Millionaire Teacher.

Starting point is 00:18:34 And the Millionaire Teacher is a guy who tells his story of how he became a millionaire at the age of 40 on a teacher's salary. It's a really, really good book if you're new to personal finance. And he talks through exactly how he did that. But your career and the money that you earn isn't always a factor when it comes to millionaire. because if you live below your means and you invest your money over time, you can become a millionaire.

Starting point is 00:18:56 That's what we're talking about. That's the resounding theme within this study. But imagine this, because we talk about increasing your income over time. So imagine if you did what we're talking about here is a baseline, then you started to increase your income. And you utilize what we call wealth accelerators, things like real estate, things like buying boring businesses. And all of a sudden, your cash flow starts to grow every month.

Starting point is 00:19:18 And you can take that cash flow and invests more dollars. how much wealth can you absolutely build? This is the power that you have with your money. And it doesn't matter how much money you make, you can make it happen with the amount of money that comes in. As long as you live below your means, that's all you have to do is live below your means and you can utilize the extra dollars that you have

Starting point is 00:19:38 to really start building well. I mean, think about this for a second. The majority of people in this study did not make over $100,000 a year. That is absolutely astounding to me. So your income doesn't always matter. We see this all the time, where I'm talking to people all the time who are doctors, lawyers, and they make a high income and they spend all of their income.

Starting point is 00:19:57 So making sure you keep a portion of that because you can see someone down the road, they're driving a Lamborghini, and right next to them, there's someone driving a Honda Accord. The person that's driving the Honda Accord could be much more wealthy than the person driving the Lamborghini. The person just driving the Lamborghini has an income that can buy that Lamborghini, but the person who's driving the Honda Accord, if they live below their means, they might have a much higher bank account over time in a much higher net worth. The next one,

Starting point is 00:20:22 millionaires go to college, but not to elite schools. So almost two-thirds of millionaires graduated from public state schools while only 8% went to prestigious private schools. So this is really interesting because a lot of people come into building wealth thinking that you have to go to some fancy school

Starting point is 00:20:38 to get your fancy job so that you can start to build wealth. But 62% went to public state schools. A lot of young people come to me and say, hey, should I go to college? Well, here's a factor you can consider, 88% of millionaires graduated from college compared to 38% of the general population. And over half, 52% of millionaires in the study earned a master's degree.

Starting point is 00:21:01 So 88% of millionaires went to college. Now, is college a requirement to build wealth? Absolutely not, because 12% of millionaires didn't go to college at all. But the thing here is, 88% did, the majority did. And I've heard people like Elon Musk all this time say, you don't need to go to college. And he's right in terms of how well that you can do in life. But at the same time, going to college does give you options. And what those options are is you always have the option to fall back on the job.

Starting point is 00:21:26 And having that option to fall back on the job is incredibly important because in any situation, you can go out and get a job that earns a decent wage so that you can continue to build well. Because you don't want your income to stop. And that's what we talk about having multiple streams of incomes all the time, because this gives you an insurance policy on your money. Because you always want that money working. You always want to put that money to work all the time. And if that stops for any period of time, you're you losing those years to build well.

Starting point is 00:21:52 So that is what going to college does. It gives you the option. It doesn't mean that you're going to have life-changing lessons in college because you're not. A lot of the stuff that you learn, you may not use. Some of it you may use. But the reason, in my opinion, this is just my opinion, in my opinion, the reason to go to college is so that you have those options. Close to 50% had a B average or less in school.

Starting point is 00:22:12 So a lot of people think millionaires made straight A's. They went to Harvard. They did all of these different things. but 50% had a B average or less in school. So before we wrap this episode up, I want to give you a couple other cool facts that are in here. 89% of millionaires have a net worth between $1 million and $5 million.

Starting point is 00:22:29 Now, what is your net worth? It's your assets minus your liability. So your assets are things like how much you have in your brokerage accounts, the amount of equity you have in your house, minus your liability, how much credit card debt you have, how much is left on your mortgage,

Starting point is 00:22:43 all of those types of things. So if you take your assets minus your life, liabilities, then you have your net worth. Now, this study did factor in millionaire's houses and their equity on their house in their net worth to discover if they're a millionaire. Now, there's absolutely nothing wrong with that because if you sell your house, your equity means that you're going to have money coming in from that equity as part of your net worth. But I think a lot of people need to have another goal. And the goal is to be a liquid millionaire. What that means is you want to have a million dollars invested, whereas you

Starting point is 00:23:12 you could draw down a million dollars at any point in time. Now, being a liquid millionaire is an incredibly different strategy than just being a net worth millionaire. But being a net worth millionaire means that you're a millionaire. That's the traditional form of a millionaire. Being a liquid millionaire means that you're going to have additional money invested over time so that you can draw that down for retirement. Fifty-five percent of millionaires gave the charities and churches on a regular monthly basis. So they utilize their money over time to give to the causes they believe in. Whether it's a charity you believe in, charities like charity water or something like that. Or it's your local church that you go to. Giving is a major factor

Starting point is 00:23:49 for 55% of millionaires. And giving is a big thing for me as well. This is one of the biggest reasons why I love to build wealth is because I can give money to the things that I believe in. And it's one of the best reasons to do it. It's actually the first thing I do with my money is when my money comes in, I give a portion of it first, then I spend what is left over. 18% of millionaires are self-employed. So a lot of people think that to become really wealthy, you have to be self-employed. But only 18% of millionaires are self-employed. Now, a lot of people in the fire movement, they become financially independent by having a job. They work for 10, 20 years, save up as much money as they can, invest as much of that money as they can. And over time,

Starting point is 00:24:30 they become financially independent when they hit their fire number. So the myth that you have to become an entrepreneur to become a mega millionaire is absolutely false. You can build wealth at a job. You can build wealth with a career. So don't let anybody tell you that you have become an entrepreneur. Now, can you do it faster as an entrepreneur? Absolutely. But can you also have financial ruin as an entrepreneur? Yes, there's a higher risk involved there. And not everybody's made up to become an entrepreneur. So making sure that you understand, hey, there's much higher risk, there's much more stress and anxiety. And I don't have to take that path. I can stay at my job and build wealth at my job. And then one other interesting one is on average, their homes are

Starting point is 00:25:10 2,600 square feet, and they've lived there for an average of 17 years. And two-thirds have a paid off mortgage, and they paid off their home on average in 11 years. So you can see a recurring theme here. A lot of these millionaires that were surveyed in this study do not like debt. And if you are interested in paying off your mortgage, we have an episode on that with Andy Hill, and he talked about exactly how he paid off his mortgage as well. Now, do you have to pay off your mortgage? Absolutely not, because if your interest rate is really low, then I would much rather or have you invest those dollars than to pay off your mortgage because mathematically it makes more sense. But if having debt is something that you don't want whatsoever and you like paying cash for

Starting point is 00:25:49 things and all that kind of stuff, then more power to you because there's nothing wrong with paying off your mortgage. It's actually very powerful with some of the options that you have if you pay off your mortgage. So make sure you checked out that episode if you haven't heard it because Andy explains a lot of those options that he has now. It's really a lifestyle choice. It's something that you can absolutely do at any point in time. Now here's a really cool one. This is the last last one I'm going to give you is they became millionaires on average at the age of 49. So when you open up the gram or you open up TikTok, you see all these people in their 20s flashing money and you think you're behind. And I always think I still think I'm behind all the time.

Starting point is 00:26:23 And when that happens, you start to get down on yourself and you're saying, am I doing the right thing? Should I be doing something else? It brings stress on people. It brings anxiety. Well, the average millionaire became a millionaire at the age of 49. How'd they do it? Consistently investing over time. Time is your best friend, and the millionaire next door found the same exact time frame, where it was like late 40s, early 50s that the majority of millionaires became millionaires. So understanding that this is the number. This is the stat that happens means that you can see that investing for 20, 30, 40 years is the way

Starting point is 00:26:56 to get to millionaire status on any salary whatsoever. But you have to be investing consistently over time. So listen, I hope you guys enjoyed this episode and you learned a lot about how millionaires act. any questions, hit me up on Instagram at Master Money Co. and follow us on Spotify, Apple Podcasts, or whatever podcast player, you love listening to this podcast too. And if you want to help out the show, leave a five-star rating and review on Apple Podcast. Thank you guys so much for listening to this episode.

Starting point is 00:27:25 And we will see you on the next episode. Frozen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play. Feel the fun with Playojo. The online casino with all the latest slot. and live casino games. What you win is yours to keep with no wagering requirements,

Starting point is 00:29:21 instant payouts, and no minimum withdraws. Hey, I just won. Woohoo! Feel the fun. Play, Ojo. Honey, forget about the lasagna. Let's celebrate. 19 plus Ontario only.

Starting point is 00:29:31 Please play responsibly. Concerned about your gambling or that of someone close to you. Call 1866-531-2600 or visit connexontera.ca.

The Personal Finance Podcast - This Millionaire Study Will Blow Your Mind!

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.