The millionaire tag is deemed to be a great milestone in an individual’s life. But nothing great in life comes easy. In this post, we are going to discuss how millionaires achieve this millionaire mark and how they maintain it, how is it that some people achieve this mark and many are not able to achieve this mark?
So first of all let’s understand who is a millionaire.
Who is a millionaire?
Traditionally, a millionaire is someone whose net worth or wealth equals or exceeds one million units of currency, typically dollars, euros, or pounds. Net worth here means the total value of their assets minus any liabilities. Generally, the dollar as a currency is used to compare the millionaire mark.
For example, if someone has assets worth $1.4 million and liabilities of $200K, their net worth would be $1.2 million, making them a millionaire.
Types of Millionaires
Millionaires can be categorized based on their net worth and the nature of their wealth. Here are some common types:
- High-Net-Worth Individuals (HNWIs): These individuals have a net worth between $1 million to $5 million.
- Very-high-Net-Worth individuals (VHNWIs): These individuals have a net worth between $5 million and $30 million.
- Ultra-high-Net-Worth Individuals (UHNWIs): These individuals have a net worth of $30 million or more.
- Decamillionaires: individuals with a net worth of $10 million or more.
- Centimillionaires: Individuals with a net worth of $100 million or more.
- Billionaires: Individuals with a net worth of $1 billion or more.
Other classifications of millionaires can be based on the liquidity of their net worth, that is individuals with invested value of more than or equal to 1 million in liquid assets are known as liquid net-worth millionaires. These categories help financial advisors and wealth managers tailor their services to the specific needs of their clients.
Habits of millionaires
Becoming a millionaire often involves a combination of smart financial habits, strategic investments, and disciplined saving. Here are some common ways people achieve this goal:
Investing early and Regularly: They take advantage of compound interest by investing in stocks, bonds, or mutual funds over a long period. They understand that building great things takes time.
Living Below Your Means: They spend less than they earn and avoid unnecessary debt. Unnecessary debt refers to debt that does not generate any returns.
Saving Consistently: They regularly set aside a portion of their income into savings or retirement accounts
Starting a Business: Many millionaires have built their wealth by starting and growing their businesses. A business gives an individual many benefits apart from the profits it generates.
Real Estate Investments: They invest in Properties that can provide rental income and appreciation over time.
Continuous Learning and Skill Development: They invest in education and skills which can lead to higher-paying job opportunities.
Diversifying Income Streams: They have multiple sources of income, such as side hustles or passive income from investments.
All the steps mentioned above require discipline and a long-term perspective, and this is the reason that many people fail to achieve this as they lose track of this midway, but if done correctly these steps can significantly increase your chances of becoming a millionaire.
Traits of Millionaire
The path to riches may be different for different millionaires but all of them often share several key traits that contribute to their financial success. Here are some of the most common ones:
Independent Thinking: Millionaires tend to think differently from the crowd. They create their paths and are not afraid to follow what is important to them even if it is not a traditional path.
Vision: They are creative visionaries with a positive attitude. They set lofty goals and believe in their ability to achieve them and work towards achieving them.
Risk Tolerance: Many millionaires are willing to take calculated risks, which can lead to significant rewards, while others want to play it safe.
Emotional Stability: They maintain composure and make rational decisions, even in stressful situations. While many people tend to get emotional and make the wrong decision, millionaires more often than not have learned to control their emotions.
Openness and Adaptability: While others are dead bent on what they have been molded into and are not open to change, while millionaires are open to new ideas and willing to adapt to changing circumstances.
Conscientiousness: This trait involves being diligent, disciplined, and organized, which helps in managing finances effectively.
Frugality: Many millionaires practice frugality, saving diligently and spending wisely.
Continuous Learning: They invest in their education and skills, constantly seeking to improve themselves.
Multiple Income Streams: They often have diversified sources of income, such as investments, businesses, and side hustles.
These traits help millionaires build and sustain their wealth over time.
The 7 income sources
Millionaires often diversify their income sources to build, protect, and maintain their wealth. Here are the seven common income streams that many millionaires rely on:
Earned Income:
This is the income from a job or business where they actively work. It includes salaries, wages, and bonuses. This income source is time intensive as this occupies their time commitment.
Business Income:
Profits from businesses they own. This can include income from side businesses or full-time entrepreneurial ventures. These businesses can be part-time or full-time depending on the person and thus demand time commitment in the same proportion.
Interest Income:
Earnings from savings accounts, bonds, and other lending activities are another popular way of generating income for millionaires. They earn interest on the money they lend to others. This is a type of passive income.
Dividend Income:
This income comes from owning shares in companies. Dividends are payments made by a corporation to its shareholders, usually derived from profits. This is a type of passive income.
Rental Income:
This money is earned from renting out properties. This can include residential, commercial, or industrial real estate. Millionaires tend to have multiple real estate properties. This is a type of semi-passive income.
Capital Gains:
These are profits from selling assets that have appreciated, such as stocks, real estate, or other investments. This involves the liquidation of assets.
Royalties:
Earnings from intellectual property, such as books, music, patents, or inventions. Royalties are payments for the ongoing use of these intellectual properties created by the millionaire.
These diverse income streams help millionaires mitigate risk and ensure financial stability. By not relying on a single source of income, they can better weather economic fluctuations and continue to grow their wealth.
If you notice the habits, traits, and income streams section you might think that these are not extraordinary and can be done by anyone, then why do most people fail to reach there? The answer to this is consistency and never giving up. One of the most common traits among successful people is consistency and never giving up.
As it is popularly said, “You don’t lose when you fall, you lose when you don’t get up”. Millionaires are no different they are consistent with their habits and they don’t give up when they are faced with challenges.
This is all for this post. Tell me your thoughts in the comment section. Don’t forget to follow my Facebook and Instagram Pages for regular updates. See you all in the next post. Till then keep learning.