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10 Common Habits of Self-Made Millionaires

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Self-made millionaires are just that – they’re self-made. And while each has a unique story as to how he or she amassed his or her fortune, there are definite common traits, practices and habits they all possess which has gotten them to the financial standing they have today.

For those of us who would like to join this ever-elusive club, here are ten common habits of self-made millionaires to help us get there!

1. They Avoid Debt

• Although this may seem obvious, one common trait of self-made millionaires is in how they avoid debit.
• Indeed, outside of a mortgage on their home or homes, most individuals in this financial category tend to avoid other types of debt.
• After all, you cannot build wealth if you’re wasting money paying interest on consumer credit.
• This is especially the case with credit cards which tend to carry a high interest rate.
• Instead, for this class of citizens credit card charges are only made based upon what they can pay off at the end of the month.
• Which leads us to the second common habit . . .

2. They Buy Their Cars and Plan to Keep Them for a Long Time

• Self-made millionaires tend to fully understand a car is a depreciating asset, which loses value the second you drive it off the lot.
• As such, any new car purchase, instead of a lease, is done so with the intent of keeping the car for several years.
• Indeed, it is not uncommon for such individuals to keep a vehicle beyond the life of the loan to save money for funds which would otherwise go towards a car payment.

3. They Have Emergency Funds

• While establishing an emergency fund for an uncertain future is generally regarded as something all of us should do, very few actually do.
• That’s not the case with self-made millionaires, as this is a common practice amongst this financial group.
• Simply stated, self-made millionaires understand having a solid reserve of cash to tap into during an emergency situation goes a long way.
• So, instead of having to finance an urgent car repair, home fix or medical bill, a ready-made, rainy-day fund can be accessed to pay for such emergencies.
• While there is always a debate as to how much should be set aside in an emergency fund, a common trait for self-made millionaires is having six to nine months of expenses set aside.
• Keep in mind, this is not the financial equivalent of your paycheck for six to nine months, but rather just living expenses – food, shelter, utilities, etc. (i.e., the basics of life).
• And if you think doing so is too difficult, here are “Five Ways to Start an Emergency Fund.”
• And once, these self-made millionaires have built their emergency fund . . .

4. They Invest

• Whether it’s stocks, bonds, or exchange-traded funds, individuals in this financial bracket invest!
• In doing so, most of them have the funds needed for their investments automatically taken from their paycheck or checking account.
• That way they never miss the money because they never see it!
• Instead, it is put directly into their investment account(s), and they live on the remaining funds.
• In turn, the invested funds are used for future car purchases, vacations or other types of goals.
• As a general rule, 20% of their income each month goes towards savings plans, retirement and investments.
• Should you decide to do the same, it is important to first of all “Know Your Money Psychology” to better understand your natural financial tendencies as well as risk tolerance.
• That’s exactly what self-made millionaires do!

5. They Take Advantage of Everything Their Employer has to Offer

• Another common habit of self-made millionaires is they take advantage of everything their employer has to offer.
• Taking advantage can go beyond just a retirement plan and, depending upon your employer, could include programs to save you money and/or investment opportunities.
• As such, it is important to act like these millionaires by taking advantage of the following employer programs:
  • Employer Retirement Match
    • If you can afford to do so, make sure you are contributing enough to match any employer contributions.
    • After all, this is “free” money so not taking advantage does not make much sense.
  • Employer Life or Disability Insurance
    • Employer group plans may offer significant savings versus buying these insurance policies on your own.
    • As such, be sure to take advantage.
  • Employer Health Savings Account (HSA)
    • If you qualify for an HSA, some employers will match your contributions up to a certain amount.
    • Again, this is “free” money and your contributions are tax-deferred.
    • So, take advantage!
  • Employer Legal Services
    • Be sure to find out if your employer plan offers discounted legal services.
    • If so, again, take advantage!
    • That way, if you ever need to have legal documents, such as a will, trust or any estate plan prepared, you can save money doing so.
  • Employee Stock Purchase Plans (ESPP)
    • In the event your employer offers ESPP, you can typically put up to a certain percentage of your pay into the plan which allows you to purchase company stock at a discount comparted to the market price.
    • So, if you like your company and believe they are doing the right things to be successful, purchasing their stock can be a cost-effective way of investing to build your net worth.

6. They Don’t Try to Keep Up with The Joneses

• Keeping up with the Joneses is a phrase we have all used.
• And for some of us, it is something we have been guilty of by purchasing large dollar items to impress family, friends and neighbors, as opposed to satisfying a need.
• Self-made millionaires, however, tend to avoid the pitfalls associated with this practice as they know living beyond their means not only puts a person in debit but, eventually, also catches up to him or her.
• As such, they tend to fight the need to have the latest and greatest gadgets as well as flashy “toys.”
• Yes, it’s only human to want to compare your life to others, but self-made millionaires tend to focus on what’s most important in achieving personal goals as opposed to societal norms.

7. They Utilize Tax Deductions

• Another common trait associated with self-made millionaires is they try to minimize the taxes they pay.
• This includes finding some element of tax savings in everything from retirement plan investments to home mortgage interest to charitable contributions, college funding and health savings accounts.
• Such plans have multiple benefits so be sure to consult with a financial planner as well as tax professional to learn more and take advantage.

8. They Look for Other Income Streams

• It is not uncommon for self-made millionaires to diversify their investment portfolios with other assets, such as rental properties which provide passive income.
• And while the average person may not own multiple properties or be able to do so, that does not prevent him or her from renting a room at his or her home or apartment, a car while at work, or some type of equipment he or she may own such as a lawn mower.
• In other words, self-made millionaires do all they can to make money from what they have.

9. They Start Saving Early for Their Kids’ College

• College savings plans, like a 529 plan, help individuals kick-start their children’s future education early so they have less of a financial burden years later.
• But there are other long-term benefits to saving for your child’s or children’s education early in their lives.
• In addition to being able to save more, these plans also allow for tax-free withdrawals when money is taken to pay for college.
• Remember, not only does it not take much to start a college savings plan but, in addition, the power of compound returns make them extremely beneficial.
• So, be sure to start early just like self-made millionaires do!

10. They seek advice

• One last, and extremely important, habit of self-made millionaires is they make a habit of being well-informed about their money.
• That is, they are constantly educating themselves about what they can do better!
• Whether it is earnings, investments costs, cash flow, or tax considerations, they are always looking to improve their financial situation.
• In other words, it is a constant journey as opposed to destination.
• Like these individuals, it is important we all do the same!
• And we certainly have the resources to do so.
• From free online resources to financial apps such as Mint to books, magazines, and financial advisors, the resources are abundant and available to everyone!

Remember, self-made individuals didn’t start with a fortune. Like you and me, they started from scratch and, over time, built their wealth by mastering basic money skills such as budgeting before moving on to saving and investing.

The great thing about this is the money habits of the self-made are practices just about anyone can learn from, no matter your financial situation when you first start out.

So don’t wait! Discipline yourself to follow these strategies now and you, too, can reap the benefits associated with such success!

Resource: https://www.cnbc.com/select/money-habits-of-self-made-millionaires/