Becoming a millionaire with a net worth (assets- debts) of at least $1 million is a financial goal for many people. What can we learn from studies about characteristics of millionaires? Below are six take-aways about building wealth:
It Takes Time- It generally takes three or four decades to build wealth. Most people become millionaires after age 50. A study by Fidelity found that the average age was 58.5 for women and 59.3 for men.
Stocks Build Wealth –History tells us that stocks outperform other types of assets over time. The Fidelity study found that, contrary to stereotypes that women are more risk-averse than men, both genders invested in a similar fashion.
Free Money Helps– An employer match is basically “free money” and should definitely be accessed to maximize retirement savings. For example, an employer might match half of your savings contributions up to 6% of pay.
Career Longevity Promotes Savings– Millionaires in the Fidelity data base had long careers, thereby enabling them to invest for decades. Fidelity recommends that workers aim to save 10 times their final salary by the time that they retire.
Frugality Helps– Living frugally has helped many millionaires accumulate wealth. Authors of The Millionaire Next Door,Stanley and Danko, found that millionaires were not interested in a lifestyle of consumption and high-status items.
Leverage the Power of Compound Interest– Most people simply don’t earn enough to become wealthy from their incomes alone. They need help from compound interest and patience to allow their money to grow.
It is possible for people of ordinary means to become millionaires through hard work, steady investing, and the magic of compound interest. Will you be a millionaire someday? This easy three-step online calculator can help you develop an action plan: http://money.cnn.com/calculator/pf/millionaire/