The Real-Life Secrets of Millionaires

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Getty ImagesEarning a lot of money doesn't make you wealthy, but these strategies do.
By Kimberly Palmer

Several years ago, New York Times Wealth Matters columnist Paul Sullivan opened up his finances to a group of high-powered, high-net worth investors known as Tiger 21. Members gather regularly to discuss investing strategies and at one meeting, Sullivan asked them to critique his own -- relatively meager by their standards -- financial life.

"Given what I do, I thought [my wife and I] had a handle on it, but what I learned from that meeting is that we hadn't thought enough about the risks in life," Sullivan says. Those risks include declining incomes and the unexpected death or disability of a household wage earner. As a result of that meeting, Sullivan and his wife took out life and disability insurance policies and sold off a condo in Florida that had been a vacation home for the family.

"They were so direct and harsh about that being a possible drain, if we weren't able to sell it if something bad happened. That was a wake-up call," Sullivan says.

The lessons he absorbed from that wealthy, exclusive group of over 300 members across the U.S. and Canada led Sullivan to write his new book, "The Thin Green Line: The Money Secrets of the Super Wealthy." The title refers to the security that can come from knowing you're prepared for a negative event, like a layoff, no matter how much money you have or earn. "The people in the book who I call wealthy, whether they're a teacher or a hedge fund manager, are wealthy because they have security. They have behaviors around money that let them be in control of their lives when something bad happens," he says.

Those behaviors, Sullivan says, can be learned or even adopted later in life. As someone who grew up without much money, he says it took him a long time to have a healthy relationship with it. He would avoid credit card debt and overspending so assiduously that he often wore threadbare clothing and skipped even affordable purchases he would have enjoyed. "You should be able to spend money on things you enjoy. If you love $4 Starbucks lattes, then buy it," he says.

If you're looking to adopt some secrets of the wealthy, Sullivan suggests the following strategies:

1. Focus on the things you can control, not what you wish you did in the past. "Too many normal Americans think, 'I wish I bought Apple stock 15 years ago' -- that's the wrong way to think. You can't control that," he says. But you can control how much money you save each month. So instead of fretting over specific stock picks, just put your money into a broadly diversified portfolio and forget about it while it grows slowly over time.

2. Load up on insurance. Term life insurance is very cheap, Sullivan points out. While there is a low probability of a family breadwinner dying early, it would be disastrous if that were to occur. Sullivan suggests asking, "How many years will the surviving spouse need to get back on his or her feet?" Paying around $400 to $500 a year for a basic policy can help alleviate that risk​.

3. Don't worry so much about taxes. "People waste a lot of time obsessing about taxes," Sullivan notes. Instead, he recommends sitting down with an accountant to figure out your tax rate -- ​and then accept it.

4. Find a fee-only financial adviser. "A bad adviser is worse than no adviser, so find an adviser who is really going to act in your best interesting," Sullivan says. Fee-only advisers are obligated to work in clients' best interest and aren't paid based on products they sell to clients.

5. Get your 401(k) benefit. Take advantage of any 401(k) plan your workplace offers, Sullivan says. If you put in even a small percentage of your paycheck each month and your employer matches it, you'll slowly build a nest egg for retirement.

6. Spend on what makes you happy. After the Tiger 21 meeting, Sullivan says he became mindful of the purchases that brought him joy​. "What I really like is to go out to dinner and have a nice bottle of wine once or twice a month," Sullivan says, so that is what he and his wife do.

At the end of the day, Sullivan says, it's not earning a lot of money that makes you wealthy. "There are people on the wrong side [of the thin green line] at the top of their earning potential," he says. Even from where he sat at a tennis club near his home in Connecticut during the interview​​, he says, "there are people all around me who are in the process of making horrendous decisions every day. They have too many cars, giant homes. But it's a house of cards. If the bonus doesn't come in, they could be in a lot of trouble when they shouldn't."

In fact, he says, one of the wealthiest people he knows is his aunt, a retired schoolteacher who lives in Western Massachusetts. "She has a pension, some investments and she gets to do everything she wants. She volunteers at a church, spends time with her grandkids and goes on one big vacation a year," he says. You're truly wealthy, he adds, when you have enough money to do all the things you want to do.

Kimberly Palmer is a senior editor for U.S. News Money. She is the author of the new book, "The Economy of You." You can follow her on Twitter @alphaconsumer, circle her on Google Plus or email her at
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