There Are 22 Million Millionaires in the US — 10 Reasons It’s Not as Out of Reach as You Think
Whether you’re living paycheck to paycheck or trying to build wealth, the idea of becoming a millionaire probably seems out of reach. You might be surprised to learn, then, that there are approximately 22 million millionaires in the U.S.
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In fact, 8.8% of U.S. adults are millionaires. And these millionaires aren’t any smarter or better than you, they have just leveraged some financial secrets and strategies to grow their money. Financial experts explain why becoming a millionaire is not so out of reach:
The Millionaire Next Door Effect
There’s a fascinating phenomenon known as The Millionaire Next Door Effect, according to Skyler Fernandes, financial advisor, founder and general partner of VU Venture Partners. “Contrary to the image of millionaires as flashy spenders, many are quite frugal. They don’t necessarily drive luxury cars or live in massive mansions. Instead, they focus on financial discipline, saving diligently and investing wisely. This approach allows them to accumulate wealth steadily over time while maintaining a low-key lifestyle.”
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Tax-Efficient Wealth Building
Millionaires are often just people who know how to engage in tax-efficient investing, Fernandes pointed out. These folks utilize all of the tax-advantaged accounts available to them, such as Roth IRAs and 401(k)s, which can provide significant tax benefits over the long term. “Additionally, they strategically manage their investment portfolio to minimize capital gains taxes, allowing their wealth to grow faster.”
Leverage Entrepreneurship
Many millionaires have achieved their status by starting and growing their own businesses, Fernandes pointed out.
“Entrepreneurship provides opportunities to create significant wealth, but it also carries risks,” he said. A business can generate an initial round of money that you can then invest, which is where the opportunity for wealth really comes in. “Entrepreneurs often maintain a diversified portfolio of investments outside their businesses. This ensures that their wealth is not solely tied to the fortunes of a single venture and adds an extra layer of financial security.”
Find Your Niche
Achieving millionaire status may seem like a far-fetched dream, but Tom Humble, an entrepreneur and founder of E.C.D. Automotive Design, believes it’s manageable, especially for entrepreneurs who want to start a business. He draws on personal experience raising his company’s annual revenue from a modest $240,000 to a grand $25 million.
“Firstly, a solid business plan is paramount,” he said. “In my case, we pursued our passion for customizing Land Rover vehicles, which we discovered was a high-demand, niche market.”
Scale Effectively
Secondly, you have to be realistic in how you scale. For Humble, scaling up strategically has been crucial to their success. “We started with a single garage-sized space and now operate in a 100,000-square-foot facility.”
Identify Your Customers
Finally, understanding customer experience is crucial to business success. Humble realized that they needed to target the luxury segment to cater to a specific, high-paying clientele.
Understand the Power of Compound Interest
Wealth emerges through “the magic of compound interest,” Fernandes said. “It’s not just about saving; it’s about letting your money work for you over time. The earlier you start investing, the more time your money has to compound, exponentially increasing your wealth.”
Seek Passive Income Streams
Millionaires are also especially good at figuring out how to make passive income, Fernandes said. “They often invest in income-generating assets like rental properties, dividend stocks or businesses that can run without their daily involvement. These income streams can significantly boost your wealth-building efforts.”
You don’t have to have a lot of money to start investing — there are many brokers and apps that allow you to buy partial shares for a dollar or less.
Embrace Financial Automation
Automation is a secret weapon of millionaires, Fernandes said, and one you can easily learn to do. “Set up automatic transfers into your savings and investment accounts, and automate bill payments.”
This not only ensures consistency in your financial actions but also reduces the chances of emotional or impulsive financial decisions.
Make Strategic Financial Choices
According to Michael Ryan, founder of Michael Ryan Money, becoming a millionaire is a process of strategic financial choices, largely built upon smart investments that have a high rate of return, and frugality, which he defines as “holding back on wasteful spending for a short period to set up a lifetime of financial security.”
Be Consistent
Start early and stick to the plan, Ryan advised. “Consistency is key. Just ten years of discipline can set you up for a comfortable future. After that, the money works for you.”
Avoid Lifestyle Inflation
When you start to see your money growing, while it’s tempting to splurge, Ryan said to resist that urge, because it will work against your future wealth building. “That’s money that could be growing exponentially over time.”
Consult Financial Professionals
Lastly, don’t try to make this up on your own, Ryan said. “Whether it’s a financial planner or advisor, their expertise can guide you to make smarter investment choices tailored to your specific situation.”
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This article originally appeared on GOBankingRates.com: There Are 22 Million Millionaires in the US — 10 Reasons It’s Not as Out of Reach as You Think
