Build Wealth Like Millionaires | Introduction | Part 2

Build Wealth Like Millionaires

build wealth like millionaires

Who wants to be a millionaireHave you ever heard of that television game show?  I remember when it burst onto network TV in the late ’90s with host Regis Philbin.  Most noteworthy, the show still exists in the syndicated format today.

First of all, I like to think of it a little differently.  Who doesn’t want to be a millionaire?  I didn’t see many hands go up.

YOU AND YOUR MONEY

You want to build up your wealth.  But, different people have different goals.  Furthermore, a million-dollar goal sounds pretty neat.  But you say, a million ain’t what it used to be.  And I say, whether you are a millionaire or not, you need to start somewhere.

In addition, why wouldn’t you want to learn how to build wealth like millionaires?  After all, if someone has a million bucks, they must know something about accumulating wealth.  Right?

In my first article in this series, Build Your Wealth, I outlined the Dividends Diversify 5 principles to wealth building.  In the next few articles, I am going to explore wealth in America.  Here’s what I have been researching.

THE NEW MILLIONAIRES

Have the millionaires of the world changed?  Changed from what?  Changed from what was outlined in the classic book, The Millionaire Next Door.  While this is a popular and time tested book, it was published in the mid-1990s.  As a result, it is more than 20 years old.

Also, it was based on research from many years prior to publication.  Consequently, I ask myself, do the millionaires of today differ from what is portrayed in The Millionaire Next Door?  In addition, do today’s millionaires practice the principles outlined in my prior article Build Your Wealth?

WHAT’S IN IT FOR YOU?

Maybe you are a millionaire.  Yet you are interested to see how your financial habits compare to others.

Opposite, you hope to be a millionaire someday.  Hence, you would like to learn how to go about it.

Or, perhaps you are just curious and interested in learning something new.  All great reasons to pull up your tablet and give this second article in the series and the next couple a good read.

Furthermore, whatever your interests are, sit back and relax.  I promise to throw you a lifeline so no one drowns in their pursuit of 7 figures.

DATA VERSUS INFORMATION

We are lucky to live in a time where information is very accessible.  Well now, let me rephrase that.  The internet has brought us lots of data.  And, almost as many news sources or even more.  In addition, plenty of noise and misconceptions.

As a former corporate finance professional, I had this saying: “most companies are data rich and information poor.”  That is, most companies I encountered had lots of data but also lots of noise around the data.

However, they had very little information.  No one to actually interpret the data.  In addition, no one to tell management what was going on from a finance and business perspective.  I made a nice living turning that data and noise into actionable information for the company’s I worked for.

And, that is exactly what I have done here.  For you, as part of this series of articles on how to build wealth like millionaires.

THE RESEARCH

Based on my personal research, I have created a picture of the new millionaire.  What they do.  How they act.  And, most importantly, how they think about and handle money.

My sources included the following:

  • personal finance websites
  • wealth management and encore feature sections in the Wall Street Journal
  • blogs
  • investor profiles provided by mutual fund companies
  • discussions with family and close friends
  • academic research
  • a few associates I consult with regarding their money

After collecting the data over the past year, I put it all together and created a Dividends Diversify new millionaire cocktail.

Are my sources and research methods perfect?  Probably not.  Are they statistically valid?  No.  Rather, I think they are credible enough to learn a few things and draw some conclusions about millionaires these days.  I call them the new millionaires.  Regardless, I had fun sifting through all the information and pulling this series together.

SPECIAL RECOGNITION

I want to specifically mention the personal finance blog ESI Money.  If you like to read about millionaires and their habits, this is the site to visit.

The blog author regularly conducts and publishes interviews with millionaires.  They discuss their wealth and how they created it.  The interviews count 50+ at this point.  I read them frequently.  The articles provided inspiration for this series of posts.  In addition, I took a small random sample from the interviews and included it with the rest of the data I collected.

Thank you ESI

SO WHAT’S NEXT, TOM

Over the next several articles, I am going to explore the money habits of the new millionaires.  Specifically their

  • Demographics
  • Net worth levels
  • Net worth composition
  • Income levels
  • Income sources
  • Expense levels and saving techniques
  • Sources of wealth
  • Keys to building their riches

BUILD WEALTH LIKE MILLIONAIRES

With this information in hand, I will compare their habits and practices to the 5 principles in my article Build Your Wealth.  In addition, we will compare and contrast to what we know about millionaires from the classic book The Millionaire Next Door.  Most importantly, my fine readers are going to learn how to build wealth like millionaires!

Okay, my financially savvy readers here at Dividends Diversify.  Give me your wealth building secrets.  One tip or maybe two.  How are you building your wealth?  What secrets can you share with us?

Then, come back again soon and find out how your methods compare to the new millionaires.  Here is everything published in the series:  

32 thoughts on “Build Wealth Like Millionaires | Introduction | Part 2”

  1. I just received my copy of The Millionaire Next Door and so I’m keen to learn what has changed in the world of finance over the last 20 years as you pointed out. A million dollars sure isn’t what it used to be, but it is still a hell of an effort to get to.

    Great post Tom
    -Money Professor

    • Happy reading Professor. It is a great book. Mine has sat right by my desk at home for so many years! Tom

  2. Interesting scope of topics, Tom. This will be very helpful – thanks.

    On your question, just attempting to increase the gap of what we earn/invest vs. what we spend. Slow n’steady, gettin’ dividend heavy.

    • Hi Mike, The gap, as you call it, is where it all starts and of course no argument here on getting dividend heavy. Tom

  3. I’m excited for this series! I just finished Millionaire Next Door, and really enjoyed it.
    I just hit 100k net worth, but it feels like a million to me, since we were in the negatives for so long haha.

    • Steph,
      At your age (mid 20’s if I remember correctly), 100K is awesome. You should write your own book, The Millennial Millionaire to be Next Door. Tom

  4. We use a method that could probably improve, but it’s the one that works for our time and energy right now: we simply live below our means, making sure that we spend less than we earn.

    We invest the leftover money, mainly in the form of automated transfers to robo-advisor accounts every month. Also, our remaining debt is low-interest, and we pay it down every month, without taking on new debt. In that way, we become a bit richer each month.

    • That is certainly a time test strategy Miguel. No need to over complicate things. And, as the old saying goes, if it ain’t broke don’t fix it. Tom

  5. Slow and steady. Start early. A little here and there will turn in to much more down the road. It took until crossing the 100k mark to put all hands on deck to continue to build the snowball.

    • And as you know HP. Once you turn the corner and have a tidy sum invested it just keeps building on itself. The snowball as you say! Tom

  6. Looking forward for this series Tom! It will be interesting to see what has changed since the 90s. My prediction is that the habits and practices are similar but the numbers will be different.

    • Good prediction Steve. The habits are pretty timeless, but the numbers are different as well as the primary driver of income. Tom

  7. Hi Tom, looking forward to the new series. Our strategy isn’t too top secret or complicated. We aim to keep widening the gap between income and expenses every month/year. That has involved some continuing education for promotions and budget tightening through the years. Served us well so far. Also having joint banking accounts and being very open and transparent during our marriage has worked wonders for the finances.

    • Working both the income and expense angles is the way to go Mr. DS. Then have an investment plan for every extra dollar of cash you create. Tom

  8. Looking forward to this! Hope to join the club (even though it’s not what it used to be) soon. Loved the Millionaire Next Door, it is a good book.

  9. My wealth building strategy is quite simple. I take advantage of any free money that’s available to me either through employer matching or government tax breaks. Secondly, I invest my savings in tax sheltered accounts first so that my money can grow faster without being taxed until I withdraw. I also spread my money into different areas like stocks and real estate.

    Most importantly though, I have no consumer debt and I always pay my bills in full every month. It’s that simple.

    • Excellent points Leo. One of the things that was apparent in my study is that millionaires take advantage of company benefits and tax advantaged accounts to the highest degree. In addition, few have debt. Tom

  10. Slow and steady is working for me in a sense that I take bite-size investments one day at a time. This involves limiting risk while gaining respectable returns.

  11. AWesome idea, congrats!

    I’d be very keen to know how these people get about their expense levels and saving techniques…

    Cheers!

    • Hi Codrut, Come on back for the rest of the series. Hopefully we can learn a little bit about those topics as we work through this series of posts. Tom

  12. Reading interviews and listening to podcasts of successful people has definitely helped me see things differently. Success leaves clues as they say.

    • Totally agree IM. We need good role models to learn from in every facet of life. Not just personal finance, but anything we want to be successful at. Tom

  13. I’m very interested in your upcoming articles Tom. I think I’ve learned more about personal finance from my year of blogging and visiting your blog then all my previous years combined.

    • Glad to hear it Mr. Robot. I have learned a lot too. What you are learning and doing with your personal finances and investing is going to pay big dividends in the future! Tom

  14. Looking forward to this Millionaire Project Tom. Its so easy to think you know all the basics about money and wealth, but there are never-ending thoughts and data from others to absorb to continue to give you new perspectives. This certainly sounds like it will be a fresh perspective!

    Millionaire Next Door was a great book, and even though some people critique it for implying ‘causality’ between the traits identified and the result of becoming a millionaire, I think the principles in it are still very sound for everyone. Hard not to become a millionaire if you live simply, work hard and invest sensibly.

    Cheers, Frankie

    • Hi Frankie. Interesting. I did not know about that criticism regarding the Millionaire Next Door. I guess it makes sense though. Most results, in whatever area, due have a cause of some sorts. Otherwise life would be completely random. Tom

  15. I honestly can say that there is no secret to build wealth. One must be discipline, stick to a plan and a budget. I’m 32 and have portfolio close to 300K (between taxable, IRA and 401k accounts) that I was able to build in just a little over 4 years working my butt off and the rules I mention have being the foundation of it. I certainly care less to be a millionaire I’m more concern for the dividends to pay for my living expenses. If I become a millionaire by 40 by doing what I do then I will drink to that. Really good series here I do almost everything you describe a millionaire do and must say it sure works. Is not easy but definitely possible and well worth it. Thanks Tom!

    • Hello CD, Good to hear from you as always. The secret is, there is no secret. You have many excellent character traits that will serve you well. Congratulations on what you have accomplished with your own wealth! Tom

  16. Look forward to ths series.

    We are not millionaires yet but simply paying ourselves first is probably our best strategy atm. Diversified sources of income helps alot too, I plan on adding some more.
    Cheers

    • You are the master at multiple income streams Rob. Keep it going. I like to see what you are up to next. Tom

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