Those of us who are personal finance bloggers or blog readers know that it doesn’t necessarily take remarkable luck and good fortune for someone to eventually become a millionaire. Sure, those things are a tremendous help, there is no question about that. However, an individual or family with a more modest level of income and not coming from wealth still has a chance to get there, provided they start saving early enough.
Yahoo! Finance had an article on 7 common millionaire myths that are commonly held. Below are those myths, with my comments:
1) Millionaires Don’t Pay Their Taxes.
As the article states, they already do, and this is not likely to change in the near term. While we all want to be millionaires, there’s no need to hate on those who are, just because they’re millionaires!
2) Millionaires Just Inherited Their Money
Some sure have, but the viewpoint that all have inherited big money is simply not true. Many of them have worked hard for their money. I think that this myth is one that’s perpetuated in order to make people feel better about their own situations. Believe me, I’m no millionaire but I’m not going to stick my head in the sand and think that all millionaires just had the money handed to them. Some did, but not all. Sometimes that’s evident.
3) Millionaires Feel Rich
I’m not a millionaire, so I can’t tell you exactly how they feel. It would be nice to find out from personal experience someday! That said, from what I have seen, I suspect it’s the drive to cover life’s necessary expenses, and a bit of “paranoia” about being broke, that has driven people to get to the point of being wealthy.
4) Millionaires All Have High-Paying Jobs
No, they don’t. Some people are able to live within their means, maximize the savings minus expense gap,invest properly, and avoid big financial and life mistakes. With a mixture of discipline (and in some cases a little luck), there have been innumerable middle-class people who have accumulated wealth.
5) Millionaires All Drive Fancy Cars
Many people became millionaires by living within their means, and being able to discern wants and needs. If I had a million dollars handed to me today, I still wouldn’t buy a new, upscale branded car. Rather, I would buy a reliable used car.
6) Millionaires Hang Around the Golf Course All Day
If they did this, they had better be worth well more than a million dollars! Otherwise, their millionaire status would be gone in a hurry. This myth is a bit strange.
7) Millionaires are Elitists
Some may be, and I’m sure many are out there. I have also seen a few that are outwardly just like the average person, but behind the scenes when you get to know them their hidden snobbery comes out. Also, I have seen a few that are not elitists and frankly, don’t want to spend any money at all if they could help it. I think it’s tough to generalize about the attitudes of millionaires.
What do you think of this list?
I think there is much wisdom to be gained from those that are. Having a mentor, role model, or millionaire teacher are ways to get help and wisdom. In order to absorb that wisdom, I believe one must cut out biases, perceptions, and jealousies, and focus instead on embracing reality.
I also think that some people who want to be wealthy try to act like they’re already there. You know, driving a car that’s really a step or two above what they should be driving, buying a home that’ s not a good fit based on their income and savings, or purchasing designer clothes despite not saving much money.
A buddy of mine who is in his mid-30’s and dating shared with me a story about a woman he went out with who told him about her vacation preferences. She said that when traveling, she preferred to stay in 5-star resorts and get pampered as that was her standard. She just wouldn’t stay in someplace lesser. His take was that this was a huge red flag, and the relationship never got started. Clearly, to him, she was someone with very high tastes that was living well beyond her means. He’s not stingy at all, by the way. He’s a good guy that would be generous to anyone he is with (in case you’re reading, my friend!).
Anyway, I think that outside of those who inherited or got extremely lucky in some way, many people who are millionaires got there because of hard work. In addition, they got there by living within their means, saving a significant percentage of their income, making smart health choices (such as deciding to stop smoking), and being responsible overall in their lives. For example, making smart decisions such as saving enough money in tax-deferred accounts, and only making an IRA withdrawal when the rules are clear. Furthermore, these aren’t necessarily extraordinary income earners, either.
What do you think? Do you agree that these are generally myths? Do you have any examples from your own life to prove or disprove these assertions?
This article was included in the Carnival of Personal Finance at Budgeting in the Fun Stuff
Well, I am not a millionaire either, but I do believe those are myths. Actually, I think more and more studies have shown that many rich people become well off because they do not buy flashy things. They just live their life and save whatever they can. Whenever I see someone driving an expensive car, I think “I wonder how much debt they went into for that”. I do not assume they can even afford it because our society seems to value spending much more than saving these days.
Everyday Tips – I have similar thoughts when I see someone driving around in an expensive car. I think about how they spent $50,000 on their car while I spent $15,000 on mine. That $35,000 difference, over time, could grow to something much greater. Life is to enjoy, so if they want to live it up now and have less later, I guess it’s their choice!
The millionaires I know just saved their way to wealth. They still lived full lives and they worked in middle-class jobs (plant worker and civil engineering), but they saved 30-40% of their total earnings and hit millionaire status by age 55. That’s our plan as well. Mr. BFS is a school librarian and I’m an office worker, but we are on target to be millionaires by 43…saving 30-40% really does stack up quickly. 🙂
That 30% to 40% figure is fantastic. That’s probably what people should be doing, given the uncertainties in our economic future.
A million dollars is not very much these days, especially for retirees making 6 figures during their working life. Things change as you go up the income brackets.
Nicole – I agree that a million is not what it used to be. Even for people making 6 figures, it requires diligent savings habits to get to that point – especially if one is living in a high cost of living area.
Nicole’s comment is certainly worth repeating. It would take over $3 million to equal $1 million back in the 80s.
Roshawn – you bring up a really good point, about comparing the purchasing power of money today vs. several decades ago. I think many people get caught up in a million as a benchmark ,but don’t realize what that will actually get them. In this age of defined contribution vs defined benefit, savings need to be higher than many people perceive it to be.
The rich are rich because they don’t spend money! I hope to be like them one day…
A million will only throw about 90K/year in income (plus or minus a lot depending on how it is invested and how things are doing). If you’re using the heuristic of needing 80% income in retirement, really that’s only what an upper middle class person should have saved just following basic heuristics. There’s still some draw down and presumably home equity to live off of, but it’s still only about what a diligent upper middle class person should have saved doing what they were supposed to be doing. Someone making 250K/year (a standard definition of high income/rich) or more would need much more at retirement to replace income… and if they’re big savers are more likely to have an accountant who knows all the loopholes.
I read this article on Yahoo Finance and I enjoyed it a lot.
They directly quoted the book The Millionaire Next Door, which is one of my favorites. The two real takeaways from the book are that:
1) Millionaires are interested in security and freedom more than material things
2) Milloinaires are more likely to be self-employed than salaried
I’m still working on number two.
We are millionaires and NO one knows it. We saved and invested, now at 53 have well over a million squirreled away…even with the poor market and without counting our home.
I can say that all those myths do not pertain to us.
As to a million not being much anymore, it helps us sleep at night and ponder early retirement from our government jobs! Yes, government jobs in social services. We are actually going to have much higher take home incomes in retirement than we do now because we have always had so much held out for RIRAs and 401K equivalent.
Glo – good for you. It seems as if you have played the game well!
I am not, but happen to work for a company where many of my bosses are (in fact, some make over $1 million per year). They all work 50-70 hours per week (like me – booo!). And with very few exceptions I would say none of these apply to the ones I know well.
I think many of these myths exist as crutches for people – excuses for giving up and not pushing to become a millionaire (in real dollars). Instead of saving, scrimping and working to become a millionaire (because financially it’s better to be one than not be one no matter what a million dollars is worth, right?), people say something like #s 1, 2, 4 and 7, especially, to provide an excuse for giving up.
Not me. I’m going for it!