- There are six myths people believe about millionaires, according to an author who studied more than 10,000 millionaires.
- They think rich people didn’t earn their money, took risks with their money, and have a leg up with education and careers.
- Believing these myths can prevent one from building their own wealth.
If you don’t believe you can be a millionaire, you’ll never be one.
That’s according to Chris Hogan, author of “Everyday Millionaires: How Ordinary People Built Extraordinary Wealth – and How You Can Too.”
The book, out January 7, explores Hogan’s findings from a seven-month study of more than 10,000 American millionaires (defined as those with a net worth of at least $US1 million) with the Dave Ramsey research team.
They discovered there are several myths circulating the wealthy and how they built their wealth – and believing them can be one of the biggest hurdles preventing you from becoming a millionaire.
“Believing the myths about wealth and the wealthy will prevent you from ever becoming wealthy yourself,” Hogan wrote. “Saying, ‘I can’t’ or ‘It’s not possible for someone like me’ will become a self-fulfilling prophecy. You’ll be short-changing your potential and guaranteeing your own failure.”
Non-millionaires believe that the wealthy didn’t earn their money, took risks with their money, and have a leg up with education and careers.
Hogan breaks down the six biggest myths everyday people believe about millionaires that can prevent wealth building:
1. Millionaires inherited their money
“Most millionaires are first-generation rich,” Hogan wrote. “That means they worked hard, made sacrifices, and lived on a plan.”
Less than a quarter of the millionaires Hogan studied received an inheritance – of those, 16% received $US100,000, while only 3% received a minimum of $US1 million.
2. Millionaires are lucky
“People view wealth like lightning strikes, as though they have no control over when and where the millionaire lightning will strike next,” Hogan wrote.
On the contrary, his research found that most millionaires are self-made, meaning they worked hard to build their wealth from the ground up. More than three-fourths of the millionaires Hogan studied said anyone can build wealth with discipline and hard work.
But hard work isn’t the only attribute characteristic of millionaires – another researcher found that resilience and perseverance are key to building wealth.
3. Millionaires make risky investments
“Millionaires understand that risk is something to be managed, not avoided,” Hogan wrote. “They simply tread carefully, weigh the risk and potential reward, and then move forward cautiously and confidently, knowing that their success is in their own hands.”
The majority of millionaires in his study hit seven figures thanks to their employer-sponsored retirement plan.
Many millionaires also use a simple investing strategy that’s low in risk, according to a self-made millionaire who spent three years interviewing other millionaires: Investing in low-cost index funds.
This strategy, recommended by experts like Warren Buffett, is favoured for its high returns and low costs.
4. Millionaires take stupid risks to quickly build wealth
Hogan called building wealth a “long-term play.” Most of the millionaires he studied built their wealth “low and slow,” he said.
Hogan found it took many millionaires decades to become a millionaire – only 5% reached millionaire status in less than a decade, while nearly half didn’t become millionaires until they were almost 50.
“They balanced risk and reward with a long-term mindset, and now they’re sitting pretty,” he said.
One of the best ways to build wealth is taking advantage of compound interest, in which both the balance and older interest payments earn even more interest over time. The sooner you start putting money away in a high-interest savings account, the more compound interest you’ll be able to accumulate.
5. Millionaires have prestigious educations from a private college
An overwhelming number of millionaires Hogan studied didn’t attend a prestigious private school; more than half graduated from public state schools, while less than 10% never even graduated college at all.
What makes a difference, Hogan said, is how involved one is. Millionaires were more likely to be involved in extracurricular activities in high school – a sign of “the drive and initiative that would ultimately lead to financial independence,” he wrote.
Dr. Kat Cohen, the founder and CEO of college-counseling firm IvyWise, previously told Business Insider that the value of a student’s education comes down to what they make of their experience on campus. Being involved, she said, will help them secure long-term career success in the future – which can lead to higher earnings.
6. Millionaires make a lot of money at their job
Around 33% of millionaires never earned more than $US100,000 as a household in a single working year, according to Hogan’s study, and only 31% averaged $US100,000 a year.
“Salary is a factor in building wealth, but it isn’t the biggest factor,” he wrote. “Millionaires know that how much you make isn’t nearly as important as what you do with it.”
Bottom line: Wealth isn’t random and doesn’t involve a leg up. The average millionaire has a regular job and used the typical retirement plan and hard work to build their wealth.
“The average millionaires rejected the myths that told them ‘someone like them’ couldn’t do it,” Hogan wrote. “They chose a different path; they chose to swim upstream.”
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