How Do Self Made Millionaires Make Their Money

How Do Self Made Millionaires Make Their Money? Many people are envious of the lifestyles of the rich and famous, but that’s far different than becoming like them. There are many myths about how others became millionaires, but here’s how they can be broken down generally.

Many would think the way to go about obtaining wealth is to start your own company or work hard at a big one. While all of this certainly helps, it is not the only way to become a millionaire. Millionaires are mostly self made, and the process they use to do it is not that difficult to duplicate once you know what they are doing.

What traits do millionaires have in common?

The Fidelity study results showed that even though millionaires have different ways of making money, they often share these traits:

• They set ambitious goals and act on them. Self-made millionaires put their ideas and dreams into action, whether that’s starting a business or achieving other professional or personal pursuits. This determination is a common driver among many who made their millions without an inheritance.
  
• They have mentors. Many self-made millionaires are quick to admit that they cannot possibly know how to do everything. They reach out to others who know the ins and outs of different types of saving and investing, tapping into the best minds on each subject for perspective and insight. That certainly pays off.
  
• They look for feedback. For a self-made millionaire, self-improvement never stops. Self-made millionaires look for critique and feedback in their ideas and business practices, ensuring that they can better identify blind spots and guarantee that their ventures will succeed.
  
• They are not afraid of failure. Millionaires understand the benefits of learning lessons through failure. However, the risks they take are thoroughly calculated and each scenario played out. Once they commit to something, they give their all.
  
• They understand the value of time. Time is money, and millionaires know this all too They quickly learn how to manage their time, and they know that there is no reason to trade time for money.

What do millionaires do with their money?

When it comes to investment strategies, self-made millionaires were more likely to add equity investments, while those who were born wealthy typically had more real estate investments, according to the study. Diversifying those investments is key among many millionaires.

Millionaires put their money in a variety of places, including their primary residence, mutual funds, stocks and retirement accounts. Millionaires focus on putting their money where it is going to grow. They are careful not to invest large sums into items that will depreciate. A car for everyday driving, for example, will most likely lose value over time.

The key for most millionaires is to save money before spending it. No matter how much their annual salary may be, most millionaires put their money where it will grow, usually in stocks, bonds, and other types of stable investments. 

How do most people become millionaires?

I have been researching how most people became millionaires for a very long time. I cannot find a survey or survey results that give a straight answer! I can find how most billionaires made their money and the statistics are listed below for the world.

Global Top 10 Industries Producing Forbes Billionaires

1. Investments: 371
2. Technology: 365
3. Manufacturing: 331
4. Fashion and Retail: 273
5. Health Care: 221
6. Food and beverage: 219
7. Real Estate: 215
8. Diversified 188
9. Energy: 100
10. Media and Entertainment: 95

While it is interesting to see how most people became billionaires, the average person does not have a very good chance of becoming a billionaire or may not even want to be a billionaire. I have found a couple of articles that claim 80 percent of millionaires made their money with real estate. However, I can’t find sources for the studies or where this information came from. However, it does not surprise me that most people become millionaires because of real estate.

The common thread is that everybody is an entrepreneur. We all took a lot of risk. We all went through a lot of bad times. And we all got some very lucky breaks because we gutted it out for a long enough period of time. It is really hard getting truly rich working for someone else.

These public company and private company CEOs with thousands of employees actually feel kinda bad for their employees who make $200,000 – $500,000 a year. Seriously, because they realize these employees are the ones who are helping them make huge fortunes!

Being a entrepreneur is a completely different mentality from being a worker bee. It’s all about figuring out how to get very motivated and talented people to come work for you to make you a success. And the irony is, many of these highly educated people could become extremely wealthy as entrepreneurs as well, but they are too fearful to take too much risk and would rather just live a comfortable life.

What are the best ways to become a millionaire?

The Fidelity study showed that when considering their financial future, 30% of the millionaires surveyed said they were concerned with preserving their wealth, while 20% said they were focused on growing their fortune. This forms the basis of some basic strategies if you’re hoping to join the millionaire ranks.

“Today’s millionaires are multidimensional, and to really understand them, you need to look not only at their outlook but also at their path to wealth and their financial goals for the future,” said Sanjiv Mirchandani, president of National Financial, a Fidelity Investments company.

Millionaires suggest several paths to building your wealth. Here are a few that you can learn from yourself:

Invest in different places and avenues

Don’t put your eggs in one basket. Diversifying your investments helps manage risk by ensuring that all your money is not at risk if a particular investment goes south.

Have multiple streams of income

Many self-made millionaires have money coming in from several places, including their salaries, dividends from investments, income from rental properties, and investments they have made in other business enterprises, to name a few examples. If one income stream slows down, there’s another that can take its place. Much of this is called passive income, or money being earned without actively spending time and effort in the enterprise.

Save, save, save

One common theme you’ll hear from self-made millionaires is to hold on to your money. Put your money in investment accounts where it can sit and earn interest over time (even though interest rates are much lower than they used to be).   

What steps can you take right now to become a millionaire?

You don’t have to use real estate to become rich, but I feel it is one of the easier ways to make a lot of money. Here are some other tips for other industries.

• Do something that you like doing. If you hate your job and can’t wait until you can go home every day, it is very unlikely you will give the extra effort it takes to get ahead.
• Save Money: Yes I bought a Lamborghini, but I saved money for many years before buying it. I also bought the car partially as an investment and it has increased in value this last year.
• Make goals and plan your life: Most people drift through life hoping success will find them somehow. It doesn’t work that way, you have to find success and make it happen. Start by writing out how you want your life to be in the future and then make goals and plans that will help you make it a reality.
• Start your own businesses: 75 percent of millionaires are self-employed even though only 20 percent of the workforce is self-employed.
• Don’t be afraid to learn from those before you: Whatever you do, there has been someone else who has tried it before. Most likely there are people who have written about it or have created products to help those who want to get started. Don’t try to do everything on your own, because it will take longer and your chances of success will be less.
• Associate with people who believe in you: If you are constantly around negative people who tell you that you can’t succeed you probably won’t succeed. Choose friends and associates wisely who are supportive and encouraging.

Why does real estate produce so many millionaires?

Many people will argue that stocks or mutual funds are a much better investment than real estate because the average gain of the stock market is higher than the average gain of housing prices over the last 100 years. However, when you invest in real estate or even buy a house to live in, the wealth you are gaining is not as simple as the increase in the value of the home.

• Leverage: Most people get a loan when they buy a house. Getting a loan increases your returns if housing prices increase. If you buy a house for $300,000 and it increases in value to $360,000, that is a 20 percent increase in value. But if you only put $10,000 down on the property, then you actually made a 600 percent increase on your investment.
• Buy below market: When I buy houses I do not pay retail value, I want a great deal and you can do that with real estate. Many houses can be bought for less than they are worth if the seller is motivated, the home needs repairs, or for many other reasons. On my rental properties and fix and flips I usually pay at least 20 percent below market value. As soon I buy the house I increase my net worth by the discount I got on the property.
• Cash flow: Owning rental properties is not all about the value of the home increasing. In fact, I pay more attention to the cash flow my properties make me, not appreciation. My first rental properties made me about $400 a month. That is not a ton of money, but when you buy multiple properties that money begins to add up.
• Equity pay down: When you use leverage to buy rental properties you are paying down the balance of the loan every month. Depending on the type of loan you get, you could pay off the house in 30 years, 15 years or sooner if you want to pay off the loan early.
• Tax advantages: Real estate has awesome tax advantages for your personal house and for investment properties. In some cases, you can make money on cash flow every month and pay no taxes thanks to depreciation. You can also use a 1031 exchange to defer taxes on sales.

Buying one rental property and holding it for 30 years may not make you a millionaire. Actually, it most likely would make you a millionaire thanks to inflation, but being a millionaire in 30 years will not be the same as being a millionaire today. If you can buy multiple properties over time that are great deals you can become a millionaire rather quickly. You don’t even have to have a lot of money to start with.

Conclusion

Just because most people make their money one way does not mean people who want to become millionaires should follow the same path. You will be surprised once you understand how to make money how much money making methods are really changing. Learning about the ways the rich make their money can help you figure out how to become a millionaire.