We all have our preconceptions about millionaires: they're tax evaders who just inherited their money from rich aunt, and they hang around the golf course all day with their snobby, elitist friends. So what's the average millionaire really like? Here are seven millionaire myths, and the real facts about the ones who seem to have it all.
IN PICTURES: 6 Simple Steps To $1 Million
- Millionaires Don't Pay Their Taxes
Fact: It is estimated that millionaires, those in the top 1% of earners, pay about 40% of all taxes. Current tax regulation shifts may change these numbers to make this even larger than that - so think twice before accusing the millionaires in America of not paying taxes. (Do you know when you're going to retire? It might not be as soon as you think. Read The New Retirement Age.)
- Millionaires Just Inherited Their Money
According to Thomas J. Stanley's book, "The Millionaire Next Door: The Surprising Secrets of America's Wealthy," only 20% of millionaires inherited their riches. The other 80% are what you'd call nouveau riche: first generation millionaires who earned their cash on their own. Many millionaires simply worked, saved and lived within their means to generate their wealth - think accountants and managers: regular people going to work every day. Most millionaires didn't get their riches overnight when a rich relative died - they worked for the money.
- Millionaires Feel Rich
From the outside looking in, you would think that millionaires feel rich and secure, but that's not so. Most millionaires worry about retirement, their kids' college fund and the mortgage just like the rest of us. Those worries are greatest among new millionaires, the people who just recently acquired their wealth. (For more, see Don't Forget The Kids: Save For Their Education And Retirement.)
- Millionaires Have High-Paying Jobs
It certainly doesn't hurt to be gainfully employed, but half of all millionaires are self-employed or own a business. It does help to have a college degree, as about 80% are college graduates, though only 18% have master's degrees.
- Millionaires All Drive Fancy Cars
You can get that idea of the rich guy in a fancy German car out of your head when you think of a millionaire: they actually drive a Ford, with the carmaker topping the millionaire preferred car list at 9.4%. Cadillacs run second on the millionaires' favorite car list, and Lincolns third according to onmoneymaking.com.
Car payments are an investment with little return, which is why someone looking to grow wealth avoids high-priced vehicles in favor of a more economical set of wheels. (For more, see 10 Steps To Retire A Millionaire.)
- Millionaires Hang Around the Golf Course All Day
Those millionaires are all retired, with nothing else to do but hang around the golf course, right? Wrong: only 20% of millionaires are retirees, with a full 80% still going to work. It's not as glamorous or fun, but millionaires go to work just like you do; it's how the money gets in the bank.
- Millionaires Are Elitists
We've already established that most millionaires earned their money not inherited it, still go to work, drive a Ford and worry about their kids' college expenses. Sounds a lot like the rest of America, right? Millionaires come in all shapes and sizes - some may be elitists, but most are just regular Joes who successfully managed their money.
The Bottom Line
Maybe you see a pattern here: today's millionaires are people who live within their means, budget and spend wisely, and focus on financial independence first. These are habits that take discipline, but ones we can all adopt to begin growing wealth. If these facts prove anything, it's that every one of us can strive to become a millionaire - you can start by driving your old car with pride. (For tips from the rich, check out 6 Millionaire Traits That You Can Adopt.)
Catch up on your financial news; read Water Cooler Finance: Who Is The Next Buffett?
SavingsHere are seven millionaire myths and realities that reveal they don’t quite have it all.
SavingsBudgets are some of the best financial tools around – when planned properly and followed faithfully.
SavingsCheck out these seven ways to cut the fat from your spending.
BudgetingMoving doesn't have to be as expensive as you think. Here are some great ways to save money on moving costs.
SavingsSocial entrepreneurs recruit "skeptics" to team green, by providing economically efficient products and services that minimize consumers' carbon footprint.
BudgetingConvenience is a luxury. However, any cost-conscious individual should be aware of these ridiculous ways we pay for convenience and how to avoid them.
BudgetingDon't let your baby's wardrobe derail your budget. These top tips help you to save money and spend wisely on baby clothes.
Personal FinanceFinancial trends among college students are a cause for concern, prompting a renewed emphasis on financial literacy.
BudgetingThe excitement of welcoming your first child to your family shouldn't prevent you from making good cost-effective decisions.
BudgetingDating on a budget doesn't have to be boring. Try these 5 tips to find the best dates on a budget.
A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>
The best answer to the question, "How soon should I start saving for retirement?", is probably, "yesterday," and the second ... Read Full Answer >>
Although federal Internal Revenue Service, or IRS, regulations prohibit using a 401(k) account as collateral for a loan, ... Read Full Answer >>
Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>