Want to be a millionaire? Here's the research on how to become one.
The 5 common (and proven) paths to becoming a millionaire and what it takes to get there
Time to read: 11 minutes
What you’ll learn in this article (with links to each section):
What millionaires have in common (it’s more than money).
Thinking time: Questions to explore your path to financial success.
Let’s get the thinking juices flowing:
What are the keys to creating financial success?
What about becoming a millionaire?
How about achieving financial freedom?
Now, what are the keys to living the life you truly want?
If you took a minute to actually think about (or write down) your answers, how many of them did, or would, overlap?
My guess is that when it comes to the financially oriented questions, many of them would be the same – spend less than you make, save and invest regularly, set goals, create a plan to achieve them, avoid unhealthy debt, invest in your personal growth, start a business or side hustle, etc.
I would also wager that the final question, the one about life, gave you a moment of pause. Why? Because in my 20 years as a financial advisor, the majority of people I worked with could more easily articulate a financial goal than a personal or life goal.
It makes sense if you think about it. Financial goals in many cases come down to simple math. Now, “simple math” doesn’t mean achieving the goal is easy, but there are proven ways to achieve financial outcomes.
When it comes to life goals, like defining the type of parent you want to be (top of mind for me as a new dad), there’s no equation to help you calculate an answer.
Now, what’s the point?
There are proven paths to becoming a millionaire, and you will learn about them below. That doesn’t mean that choosing a path guarantees an outcome for you. There's a big gap between making a choice, taking action, and actually achieving the goal.
However, every path has a unique set of habits, strategies, and methods that lead to becoming a millionaire. And each path will have a very distinct impact on the life that you live.
As you read the rest of this article, think about the life you want and which path might make the most sense for you.
There’s no right or wrong path, but I can almost promise you (as a financial advisor I’m not allowed to make promises or guarantees for compliance reasons!) that getting clarity around the life you want to live is a much better place to start than choosing an arbitrary level of wealth (e.g. one million dollars).
Now, let’s dive in and explore the world of millionaires.
The 5 paths to becoming a millionaire*
#1 - The savers path (aka the “easy” path) - About 20% of millionaires achieved this goal through intentional spending, savings, and investing habits. They followed the tried and true methods of living below your means, saving and investing early and often and avoiding unhealthy or unproductive debt.
Now “easy” doesn’t mean it requires less work, but it does mean it’s a more proven method, with a higher probability of success, than the others we will discuss below (i.e. it’s simple math). So if you save and invest the right amount each year and you get appropriate returns you will eventually become a millionaire. So “easy” = tried and true.
The not-so-easy part is that those that achieved millionaire status saved at least 20% of their income and started saving much earlier than most.
The average wealth created through this path? People that chose this path achieved their first $1 million in their mid to late 30s (so after 15 to 20 years).
#2 - The dreamers path (aka the “hard” path) - About 28% of millionaires achieved this milestone by pursuing higher risk and higher reward (and lower probability of success) endeavors like becoming an actor, musician, athlete, business owner or entrepreneur.
However, while it is the “harder” path to becoming a millionaire, it does lead to, on average, the greatest amount of overall wealth. So, once again, the risk reward trade-off plays out. You have to work harder and take on more risk, but you are rewarded properly if you are successful.
The average wealth created through this path? $7.4 million after 20 years.
#3 - The corporate path - About 33% became millionaires by climbing the corporate ladder. They started in entry level positions, put in their time, got promoted, became managers of teams, moved into executive roles, and maybe even reached the C-suite.
Along the way, they invested in their 401(k)s, they invested in other types of accounts (Roth IRAs, taxable investment accounts), and they accumulated company stock via stock options.
So they made more money (over time), saved and invested intentionally as they made more money, and accelerated their wealth building path through stock in their companies.
The average wealth created through this path? $3.4 million after 20 years.
#4 - The best-in-class path - About 20% of millionaires achieved this milestone by becoming world class in their field of work. This group committed themselves to studying, learning, and becoming masters at their craft in fields like medicine or law, and they were paid well for their unparalleled level of expertise.
And we aren’t talking about the Tony Robbins-like people of the world. We’re talking about the people in our communities that are the best doctors, surgeons, lawyers, real estate developers, architects, etc.
The average wealth created through this path? $4 million over 20 years.
#5 - The lottery winners - No, not people that played the actual lottery. I am talking about the people that inherited their wealth. Interestingly, the number of people that inherit $1 million or more has been shown to be about 3% of all millionaires.**
Now, there are people that inherited less than $1 million that went on to use that money to become millionaires. It’s certainly easier to become a millionaire if you start with $250,000 than with $0.
The point is that the vast majority of millionaires are self-made.
One final point - many of these paths will converge or overlap. As an example, I started on the “best in class” path and then changed to the “dreamers” path along the way. I made the commitment to become an excellent financial planner and then that provided me with the opportunity to be a co-founder of the company I now help run and operate.
So your path may change or several paths may converge.
Now, the real secret…
Can you guess what all groups of millionaires have in common?
Intelligence? Luck? Sales skills? Are they extroverts? Are they better than you and me? Are they just born with the skillset to become rich?
The good news is that it’s none of that.
All of us (yes, you as well) are capable of achieving financial success if we understand an apply the following five things:
Mindset - Success isn’t just about the mechanics of money; it’s about creating the mindset necessary to achieve it. One of the main mindset shifts necessary is to believe that you are capable of building wealth and worthy of having it (we all have limiting beliefs we need to let go of before we can rise higher).
Alignment - Success comes from focusing your resources – your time, energy and money – on what matters most to you. Whether they’re supporting your path to financial success or the life you want to live, focusing your resources can accelerate your timeline of achievement.
Time - This study on millionaires wasn’t conducted over one year, five years, or even ten years. It was conducted over twenty years. Now, some people were able to amass $1 million earlier than 20 years, but, the point is that becoming a millionaire takes time.
Habits - Regardless of how each person achieves success, there are clear habits, strategies and methods that lead to greater success. Without the right habits and the discipline to take action and remain committed to your goal, success will be very hard to achieve.
Support - Think of support as the team you need around you to achieve success. It can be a great boss or co-workers at work, a great coach or mentor, a financial advisor, and even friends and family to be there to celebrate your wins and support you during the losses.
I call this the MATH(S) of achieving financial success. So choose your path and then apply the MATH(S).
Remember, the media wants to sell you the get-rich-quick schemes. They will put the overnight successes on TV or on a podcast because it captures eyeballs and sells ad space.
This is partly the media’s decision, but my take is that financially successful people play a role in this, too.
The everyday millionaire isn’t worried about being on TV or jumping on the next podcast episode. They’re focused on becoming a millionaire based upon the path that they chose, and they spend their time, energy, and money on things that align with this path. And they also realize that their time is better spent on the things they value outside of work like being good partners, being good parents, giving back to their communities, taking amazing vacations, etc.
And now for some breaking news.
The National Study of Millionaires conducted by Ramsey Solutions surveyed 10,000 people to ask them how they became millionaires. There’s a lot to sort through, but one stat in particular stood out to me. Here’s an excerpt.
“But [millionaires] didn’t risk their money on single-stock investments or “an opportunity they couldn’t pass up.” In fact, no millionaire in the study said single-stock investing was a big factor in their financial success. Single stocks didn’t even make the top three list of factors for reaching their net worth.
That’s right. Millionaires don’t credit “picking the winner” to their success. Despite that fact that this is what many main stream media outlets and social media influencers want you to believe, investing in the next big stock isn’t the proven path to financial success.
BTW, it’s much easier to sell the get-rich-quick scheme than the “work hard, be smart with your money and give it time” narrative.
There is no right or wrong path
Don’t let anyone tell you that one path is better than the other. There is no right or wrong path to achieving financial success. There is only the one that will work for you.
However, while there is no right or wrong path, there are some things that will lead to the wrong outcomes. Here are three big mistakes you can make:
#1 - Not choosing a path - Lack of focus or lack of purpose means you never really have a true direction. More importantly, it means you can’t focus your time, energy, and money on the things that will continue to drive success.
Without a clear path, not only do you waste your valuable resources along the way but you also become susceptible to distractions – ideas, thoughts, schemes – that can take you in a new, and different, direction. The real problem here is that you often can’t tell when you lose site of your goal or when you fall off the path. You become a ship at sea without a destination that’s sailing at the whims of the wind.
A good friend of mine is a great example:
This guy is excellent at taking action in his business. I mean world class at it. He comes up with an idea and WHAM he’s off to the races like Usain Bolt. To the untrained eye it looks like he is destined for success. However, his biggest challenge is that he often changes his mind or starts chasing a new idea. Today it’s Project X. Tomorrow it’s Project Y. Next week? Who knows!
He sees this as positive change or as only a slight shift in his direction.
Having worked alongside this person at various times in my career, what I noticed is that he often gave up on his current idea when success on his current path was only a short distance away. His biggest problem isn’t that he’s making a change; it’s that he doesn’t see that he is now sprinting in the complete opposite direction.
He couldn’t stay on a path, and, as a result, he could never see the benefits, the real payoff, of any path he chose.
What you’ll miss: Clear strategies, habits and methods that lead to success. Choose a path and stick with it.
#2 - Choosing someone else’s path - I am guilty of doing this. I looked at successful people around me and decided that I would follow in their footsteps. This isn’t always a bad thing, but it can lead to choosing the wrong path forward. It isn’t so much that it’s a bad or wrong path for you, but if it’s not truly the path that will work for you, you will soon find yourself lacking vision or motivation to keep going.
The trick is to find the path that works for you and to remain committed to following it. That doesn’t mean you can’t change your path in the future, but being intentional about the path you choose today, creating a strategy to bring it to life, and then taking action will lead to a greater chance of success than trying to follow someone else’s path.
What you’ll miss: Motivation and the ability to keep going during the hard times.
#3 - Not taking action - The path you choose is just the first step of many that you will need to take. Once you’ve chosen a path, you need to put one foot in front of the other again and again and again. You need to take decisive and intentional action and keep moving forward. And when you fail (and failure will come) you need to pick yourself up and continue on your path.
What you’ll miss: This might be obvious, but you’ll miss everything. Why? Because…
“You miss 100 percent of the shots you never take.”
- Wayne Gretzky
Bottom line —> if you don’t take action, you’ll never move forward.
Bringing things home
I am adding to my newsletter a section called “Thinking Time.” It’s something I picked up from a book I read recently titled The Road Less Stupid by Keith Cunningham. He ends every chapter not with telling you the answers to problems but with questions to help you find your own answer(s). So let’s end with a few questions to explore:
What path to financial success resonates most with your goals and values?
What goals have you set to measure your progress on this path?
What habits, actions, strategies are you using to create success?
How has your mindset about wealth and success influenced your financial decisions?
Can you identify any distractions or shifts in direction that might be keeping you from making progress?
Who do you need on your team to achieve success?
Now, forget about becoming a millionaire for a second and think about the life you want (I mean truly want). How are you spending your time, energy, and money in pursuit of it?
Give it a second. Let it sink in.
Is your path aligned with this life or might a change of course point you in the right direction?
Cheers to health, wealth, and the good (financial) life,
Brent