We all have our preconceptions about millionaires. For example, they're probably tax evaders who just inherited their money from a rich aunt and they hang around the golf course all day with their snobby, elitist friends. Right? Well, not so fast. 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.
- Many people have preconceived notions about what it means to be a millionaire.
- It's a myth that millionaires don't pay their taxes; the truth is that the top 1% of earners pay about 40% of all taxes in the United States.
- Only about 20% of millionaires inherited their fortune, while about 80% worked for it.
- Most millionaires don't feel rich and worry about retirement, funding their kids' college education, and paying their mortgage.
- Half of all millionaires are self-employed or own a business, and about 80% of millionaires have a college degree.
Myth 1: 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.
Myth 2: 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, managers, and other 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.
Myth 3: 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.
Myth 4: 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.
Myth 5: 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.
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.
Myth 6: 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.
Myth 7: 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.
7 Millionaire Myths
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.