What's the secret to becoming a millionaire? The truth is there are many ways people have accumulated $1 million. But some life choices may significantly increase your chances of having this much success with personal finance. A recent survey found that there's one key trait, in particular, that nearly 9 out of 10 millionaires share.
Here's what 88% of millionaires have in common
Ramsey Solutions conducted what it calls the largest study of millionaires ever, with 10,000 participants. It found that 88% of millionaires graduated from college, compared to 38% of the general population. In addition, 52% of millionaires had a master's or doctoral degree, compared to 13% of the general population.
This isn't the only research to find a strong link between wealth and level of education. A 2015 report by the Federal Reserve Bank of St. Louis, The Demographics of Wealth, found that families with higher levels of education are far more likely to have at least $1 million. Here was the probability of a family having at least $1 million, based on the highest level of education in the household:
- No high school diploma: 1 in 110 (less than 1%)
- High school diploma: 1 in 20 (5%)
- College degree: 1 in 4.6 (~22%)
- Professional/graduate degree: 1 in 2.6 (~38%)
Why education is strongly linked to wealth
The first explanation that comes to mind for why education is linked to wealth is its effect on income. Research on the average American's income by education level has shown that the average salary rises with a person's level of education. High school graduates earn just under $40,000 per year on average. Americans with bachelor's degrees earn a little over $80,000.
However, it's important to clarify that this doesn't mean education is the only factor in the amount of wealth a person accumulates. The authors of The Demographics of Wealth pointed out several other contributing factors that aren't directly caused by having more education.
For example, family background, including parents' levels of education and wealth, can be a predictor of success as an adult. Highly educated people are more likely to have wealthy and educated parents. That's something they were born into, not something they attained themselves through their education, and it puts them at a significant advantage. They're also more likely to receive sizable inheritances, boosting their wealth.
Another factor is assortative mating, which is the tendency for people to marry those with similar characteristics. Educated people tend to marry other educated people. Given that they also tend to earn more, this leads to much greater household incomes. Two people with high school diplomas earning average salaries will have an annual household income of $80,000. Two people with bachelor's degrees earning average salaries will make $160,000.
The phrase "correlation is not causation" applies here. Yes, most millionaires are college graduates. And there's a clear financial benefit to staying in school, as it often leads to a higher income. But education doesn't guarantee you're going to be wealthy or have millions in your savings accounts. The inverse is true, as well. Even if you don't have a college education, it's still possible to become a millionaire, depending on the money moves you make.
What can you do to become a millionaire?
There are a few financial habits most millionaires share that are instrumental in their success. Here's what Ramsey Solutions found in its millionaire study:
- Millionaires are long-term investors. 3 out of 4 said that consistent, long-term investing leads to success.
- Millionaires are careful about how much they spend. 94% of respondents said that they live on less than what they make.
- Millionaires avoid high-interest debt. Nearly three quarters said they have never carried a credit card balance in their lives.
For most people, there aren't any shortcuts to becoming a millionaire. A select few make millions from being extremely gifted in a specific area. Tech geniuses and superstar athletes are two notable examples. Some people also get lucky with ultra-high-risk investments. These are all rarities, though.
The vast majority of millionaires get there by building good financial habits and following them for decades. They spend less than they earn, they don't take on expensive debt, and they invest regularly. The amount you ultimately save this way will depend on your income, how much you can invest, and how much time you have. Regardless of how much you end up with, these habits will undoubtedly benefit you financially.
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FAQs
According to research from Zippia, 88% of millionaires are entrepreneurs, meaning they made their money through businesses, investments and their own salaries.
Are 88% of millionaires self-made? ›
Business News Daily cited Fidelity Investments data that said 88% of all millionaires are self-made — slightly more than the previous standard. No matter the percentage that separates the two groups, one differentiator sets them apart more than all the rest: how they grew their fortunes.
How do 90% of millionaires make their money? ›
90% of millionaires made their money in Real Estate. I became a millionaire without owning a single property. But I own 6 small businesses that make me $725k/year. Here's why I prefer buying businesses over Real Estate: -- 1) Cash Flow The average rental property in the U.S. cash flows ~$300-$500 (some even less).
Do 90% of millionaires make over 100k a year? ›
Ninety-three percent of millionaires said they got their wealth because they worked hard, not because they had big salaries. 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.
Are 86 of millionaires self made? ›
The study by Fidelity Investments found that 86 percent of today's millionaires are self made and did not consider themselves wealthy growing up. Overall, the research revealed current millionaires are, on average, 61 years old with $3.05 million in assets.
What wealth puts you in the top 1%? ›
In the U.S., it may take you $5.81 million to be in the top 1%, but it takes a minimum net worth of $30 million to be considered among the ultra-high net worth crowd. As of the end of 2023, this ultra-high net worth population is on the rise, reaching 626,000 globally, up from just over 600,000 a year earlier.
What do 90% of all millionaires become so through owning? ›
Shelby Elias | “90% of all millionaires become so through owning real estate.” This famous quote from Andrew Carnegie, one of the wealthiest entrepreneurs...
What are the three things millionaires do not do? ›
Millionaires prioritize avoiding consumer debt, making wise financial decisions, and aligning spending with long-term goals.
Are most millionaires self-made or inherited? ›
79% Of Millionaires Are Self-Made — Lessons From Those Who Built Wealth Without Inheritance. Recent studies have shown that the notion that most millionaires are born into wealth is a myth. Recent studies have shown that the notion that most millionaires are born into wealth is a myth.
What are the top 5 professions of millionaires? ›
By those standards, the five jobs with the most millionaires are engineer, accountant, teacher, people in management, and lawyer. Doctor is sixth. They make a lot of money, but also spend a lot. The poll found doctors aren't great in general at managing their money.
While some wealthy Americans drive luxury vehicles, an Experian Automotive study found that a whopping 61% of wealthy people with household incomes of more than $250,000 don't drive luxury brands. Instead, they drive less showy cars, such as Hondas, Toyotas and Fords, Ramsey said in an article.
How do most millionaires go broke? ›
When you understand how much money you have coming in as well as going out, you're in a better position to cut out unnecessary spending activities. According to Entrepreneur, not having a budget is a common way that millionaires end up broke.
How rare is 100k a year? ›
Over one-third of American families earn $100,000 or more
The U.S. Census Bureau found that 37.1% of U.S. households earned at least $100,000 in 2022. Here's a more detailed breakdown of six-figure income brackets and the percentage of households in each one: $100,000 to $149,999: 16.9% $150,000 to $199,999: 8.7%
Is $100 000 considered rich? ›
In the previous example, the median income would be $100,000—one person earns less, one earns more. By that measure, in 2022, the median U.S. household net worth was $192,900. So, if yours was higher than that, you don't need a million bucks to consider yourself “richer” than half of Americans.
Are most millionaires married or single? ›
18% have master's degrees, 8% law degrees, 6% medical degrees, and 6% PhDs. 10. Single people are more often millionaires than married people.
Are 8.8% of US adults millionaires? ›
Millionaires comprise about 8.8% of the American population. The average net worth of a millionaire in the U.S. is $2.2 million, according to Charles Schwab's 2022 Modern Wealth Survey.
Did 79 of American millionaires inherit $0? ›
79% of U.S. millionaires did not receive an inheritance from their parents or other family members. The majority of millionaires really did work for their wealth (and made their wealth work for them). They didn't wait for a rich uncle to come along with a check for $1 million.
What is the richest 1 percent wealth? ›
The 10,000 wealthiest individuals of the 92 million Indian adults own an average of 22.6 billion rupees ($271.91 million) in wealth, 16,763 times the country's average, while the top 1% possessing an average of 54 million in wealth.
What is the net worth of the top 1 percent rich people? ›
Key Takeaways
- The top 1% of household net worth in the U.S. was just shy of $13.7 million in 2023.
- An individual would have to earn an average of $407,500 per year to join the top 1%. ...
- The median household income in the U.S. was $74,580 in 2022.
