Becoming a millionaire is neither quick nor easy for most people, and the reality is that the majority of us will never reach millionaire status.
Yet it cannot hurt to examine the mindsets, habits and behaviours of people who have attained this status to see if there’s anything we can learn when it comes to managing our own money.
Here are some of our top five observations of millionaires from our experience with clients here at Cedar House:
(What follows is for information purposes only, and should not be taken as financial advice. Speak with a financial adviser before making any investments or significant decisions with your money which could affect yours and your family’s future).
#1 Income over savings
Take a look at the current interest rates offered by UK high street banks at the moment on savings accounts. You don’t need to be a financial adviser to realise that putting all of your money into cash savings will not result in significant wealth growth!
That’s one reason why, rather than focusing on increasing income through interest on savings, millionaires tend to focus on increasing their income.
Think about how income growth might apply to your own situation. Attaining a pay rise might be difficult in the current economic climate, but it could happen with the right negotiating strategy with your employer. You could consider other sources of passive income too, such as letting out a property or starting a freelance job on top of your current role.
Of course, these two suggestions are not iron-clad routes to greater wealth. Letting out a property comes with its own pros and cons, and any freelance/self-employed work you do will also need a solid, scalable business plan (and tax plan) to potentially become a big wealth booster.
Simply designing logos on the side, for instance, isn’t likely to project you to millionaire status. Yet perhaps there are ways to monetise the things you are already doing, such as a hobby or favourite pastime (e.g. online gaming, blogging or personal training). Have a careful think, and look at what others with similar interests have achieved to see what’s possible.
#2 Investing
We don’t want to downplay the value of saving. After all, it’s important for most people to have quick, easy access to an emergency fund during financial difficulties.
However, when you look at the money-management habits of millionaires, almost all of them prioritise investing for the long term over saving for the short term.
In other words, if you have thousands of pounds in spare cash lying around it is probably not the best idea simply to place this in a savings account. Consider other options with the help of a qualified financial adviser, such as investing in Stock & Shares ISAs or a portfolio of funds.
Investing tends to tie up some of your money in the short term. In exchange, however, the money is much more likely to grow larger over, say, 5-10 years. Investments (rather than saving) also helps develop a mindset of focusing more on income growth, rather than resting upon cash savings to keep you going.
#3 Diversifying income
Do you think most millionaires get all of their cash from their full-time salary?
In most cases, this isn’t true. Whilst many millionaires do have impressive annual salaries (e.g. £250,000+), much of their income arrives from multiple sources outside of their job.
For lots of people, these income sources might include a mixture of real estate, side businesses, dividends and other investments (e.g. returns on investments in startups).
For some people, diversifying their income could involve starting a small side business or perhaps developing a property to later sell on at a profit.
Whatever you do, be careful not to make any big, impulsive financial decisions which could expose you and your family to unnecessary risk. Speak to a financial adviser if you would like to look at your best options for diversifying your income streams.
#4 A different mindset
Whilst rags-to-riches stories do exist, not many people become millionaires after spending much of their life believing it isn’t possible for them to achieve this status and maintain it.
Millionaires tend to have a certain mindset and level of self-confidence. They recognise the ned to invest in your most important asset – yourself!
One of the most powerful ways people do this is to put time and money into learning about business, finance, investing and other important subjects which can lead to income growth.
Many millionaires continue to do this even after gathering significant levels of wealth, listening to experts in their field and consulting with knowledge, experienced people who will help them identify new areas of opportunity to increase their wealth even further.
#5 Work-life balance
Some people do seem to become millionaires by seemingly doing nothing at all – perhaps by inheriting a large estate, for instance. Yet the typical story of millionaires is – at least at the beginning of their journey to accumulate wealth – they worked incredibly hard.
If you think about it, very few employers are going to pay someone an annual salary of £200,000 for turning up 3 days a week and putting in minimal effort. Many millionaires got to where they are now because they worked – and continue to work – very long hours, which often ate significantly into family and leisure time.
Quite often, the work-life balance of millionaires becomes more relaxed as they establish themselves, allowing for more family time. Yet it is important to note, however, that most people do not become millionaires by simply clocking in from nine to five, Monday to Friday.
Rather, they tend to bring incredible focus and dedication to something – often outside of work – which takes up a lot of time and energy (e.g. a new business or real estate investment), but pays off in the long run as it grows.
Conclusion
Most people will not become millionaires, and so will likely never spend, save or invest in the way that many of them do. Yet it helps to see some of the traits, behaviours and strategies which tend to fuel and facilitate their success:
● Focusing on income growth rather than saving.
● Committing money towards a sound investment strategy.
● Developing a diverse set of income sources.
● Investing in personal development to increase wealth-generating skills and knowledge.
● Being willing to put in the work required for success.
(This content is for information purposes only, and should not be taken as financial advice. Speak with a financial adviser before making any investments or significant decisions with your money which could affect yours and your family’s future).