6 REAL Habits I've Observed From Self-Made Millionaires
Business Insider (and forbes to a lesser extent) are flooding the younger generation with all of these seemingly simple ways to become a millionaire (see "13 Habits of Self-Made Millionaires"), and they're usually written by journalists, not millionaires, so beware of treating them as gospel. They all seem to follow Richard Branson's life lessons about treating people well, having fun, reading books, etc., but it's just not that simple.
I don't disagree with ANYthing on the list, but here are some things I've noticed from the self-made millionaires I've worked with.
1. They take risks.
This can be things from moving to a different country on an assignment, even if this means leaving family behind to work in singapore for 5-8 years. this could mean starting a business after getting laid off from a F500 gig. all of the millionaires I've worked with have taken some sort of risk that, while calculated, definitely got them over the hump in terms of wealth and success.
2. They understand the power of equity.
This can be in terms of ownership, compensation, whatever. all millionaires I know built wealth with equity, either in their business, via company stock, etc. this kinda leads into the next one...
3. They are all owners in some fashion.
This does NOT mean you start your own business, but it means you own something. if that's your client base, like with IB, if that's a business you started, division of your company, territory for sales, industry for sales, whatever, you own something. this makes you independent if you're an entrepreneur and very difficult to replace if you're an employee.
4. Their knowledge is narrow and deep.
Every millionaire I know is smart, but to different degrees. what they all have in common is expertise in a narrow area. they're leaders in their marketplace, company, discipline in some specific area, rather than being a "marketing guru" or a "tech whiz" they may focus on network security for companies in the industrial space, specifically auto, defense, and oil & gas (just as an example). the difficult part for young people is to know what to specialize in early on. this is why having "lines in the water" is important. as you go through life, certain areas will catch your eye. if you're smart, you'll be aware of trends in the world and in your industry, so if for example, you're in tech and you think that VR is the next big thing, maybe you bone up on that. this does not mean you have to be a pioneer in everything, but I think there's tremendous value in specializing.
5. They live well below their means.
This may sound counterintuitive. I mention how millionaires take risks, are all equity, and most aren't afraid of a little bit of leverage (something I didn't mention earlier), but they also are calculated in how they take risks. most of them will live below their means on the way to the top and continue to save a high % of their income once they've made it. I think this is the simplest thing to explain but I also don't think you'll become a millionaire making $100k a year saving 10% (or even 20%) for 20 years. kids come along, houses, cars, debt all piles up, and unless you advance your career, you won't become a millionaire.
6. They can sell
Every millionaire I know can sell, even if they're not a salesman. they can sell themselves when looking for a job, they can sell potential investors on their future, or if they are a salesman, they can sell their product/service. the takeaway here is while they are knowledgeable, they can distill that knowledge into a concise pitch that can be understood by someone not in the industry, they turn complex concepts into simple concepts.
Mod Note (Andy): This post was originally posted as a reply to this post: 13 Habits of Self-Made Millionaires and is so on point I thought it deserved its own standalone post on the homepage.
How about those who are avid readers of history? They tend to have a firm grasp on geopolitical shifts, critical thinking and a rather supernatural tendency to be calm in the face of adversity. I don't mean to bounce around, but there seems to be an acute correlation between history and successful high-ranked military officers. Their tactical skills seem to derive from centuries-old military strategies and from the ability to think upon one's feet in raging waters. Some of them I believe have branched off to become wealthy individuals that have applied all the steps you have written about.
The more you know, the more your realise you don't know. That tends to make you more risk averse.
In my view, ignorance and blindness to risk is more common in success stories, at least when people are making their initial millions. There's a high casualty count, sure, but more willingness to take the risks that can deliver rewards.
Once you've built up your capital, knowledge is more useful in preserving and growing it. But, unless you're lucky enough to inherit someone else's capital, you're better off starting out full of romantic ideas and not too firm a grasp on reality.
Yep. Book learning tends to dilute your chances at outsized success IMO. It takes a very uncommon set of brass ones to be both wise and inclined towards risk.
I think the importance of those things is overstated. it makes for good articles on buzzfeed (25 year old entrepreneur incorporates sun tzu management style...), but in my experience it's just not the case. rather than centuries old military strategies they employ strategies from business leaders that have worked before them (e.g. jack welch with having some expertise and dropping losing divisions, sam walton with the volume game and the art of merchandising, etc.)
I mention this because while I love history and I think it's important to have an idea of the world in which you live, it'd be difficult to write a business plan based on that. think about it: if you knew some geopolitical shift was taking place, how would you profit from it? those shifts take place at a glacial pace. top firms talk about the "emerging markets consumer" but have been doing so for over 10 years. if you opened a best buy equivalent in malaysia in 2005 you'd be broke by now, those types of shifts take a while. on the flip side, if you disrupt the grocery/health food industry by starting an Amazon/blue apron/myfitnesspal type company, that's something that could immediately take off and it doesn't need the right geopolitical shifts to occur (sidebar: if you start this company, I will be your first customer).
Love this post
If I had focus on one point that young people miss, it's #6 ("They Can Sell")
In most lines of work, the front office employees tend to fall into two buckets: "pitch" guys or "execution" guys. Even in finance this is the case. Most groups have an MD or two who originates few deals, but prove invaluable to the deal process with their specific skills, e.g. cross-border tax expertise for M&A.
If you can both successfully pitch the deal and execute it at a high level, you are an invaluable asset and should be well on your way to becoming a self-made millionaire.
I only have 3 out of 6 but t'was a great read! thanks for the info.
I'm a serial failed entrepreneur and exhibit 5 of the 6 traits (I actually live well above my means--I drive an expensive car, have expensive clothes, and I have an expensive condo in a sick area). I'm hoping that the traits I do possess, as well as the past entrepreneurial failures, lead to millions real soon. I'm working on it.
Ya know what my biggest concern is? I know that I will always struggle with living above my means. If I make $100 million/year it's conceivable that I'll be tempted into living like I make $110 million per year. So that's a character flaw I need to work out sooner rather than later.
that's a shame, but at least you're an entrepreneur and have the cojones and the means to try these ventures. as far as living beyond your means, in the rare cases this has happened with our clientele, it's almost like drug rehab. you have to recognize you have a problem and do something about it.
examples of what we've seen work are not going to sound fun, but they do work: sell house and move to less expensive area (even if nowhere near as nice); go through your friends to see who's a genuine friend versus someone who just wanted to ride the gravy train, get the 2nd group out of your life; change your shopping habits, there's nothing wrong with driving a nice car, but let's say your income affords you a brand new audi a6 or a brand new 5 series, get an a4 or a 3 series that's 2-4 years old. if you don't change your habits now, you won't once you have a liquidity event if one of your ventures is successful.
to consultbanklive luck is certainly a factor. just because you have all of these habits does not guarantee success. luck could be your family connections, a chance meeting, or simply right place right time, I just wanted to point out common traits amongst the self made millionaires I've worked with.
This is a struggle of mine too. I have far more clothes than I need, finally got rid of a luxury car that I didn't need, and can spend money like a trust fund kid, most likely because I'm not a trust fund kid. I've gotten a lot better at it though, so perhaps there's hope.
With the exception of 5, this is insanely true. Just had an intern meeting with the billionaire founder of the PE/HF firm I'm interning at, and he kept stressing the importance of taking a calculated risk, and knowing how to sell. That said, he also agreed that luck is a HUGE factor in becoming extremely wealthy/successful
This comes up repeatedly in some of my favorite business books too, including Zero to One by Peter Thiel and Originals by Adam Grant.
in for later.
Most I have seen are really humble. none are driving anything higher than a low grade benz/bmw.
they have an outlook that all the money can be gone in an instant and protect for the downside
a few questions for you thebrofessor... obviously impossible to put an exact figure on these but curious to hear your best guess
1) for those who go "all out" to be a self made millionaire, what % would you estimate never succeed?
for #1, Risk, this is a personality trait you could argue they are more often born with ("nature" rather than "nurture" - I assume you agree?)
2) what % of the risks taken by all of those striving to be self made millionaires would be considered irrational in the commonsense view?
then,
3) what % of the risks that those are successful (or on the path to becoming successful) would be considered irrational in the commonsense view?
4) if you had to rank these habits by order of importance - how would you rank them?
andy great questions. my answers are only based upon my experience, and my experience is obviously limited to my coworkers who are millionaire, my clients, and a few others. there are probably some things I'll mention that won't apply universally, but what the hell, here it goes.
answering the question now, that's very hard. since I typically only interact with millionaires, I'm probably biased to think it's easy. at the same time, very few people "go all out" to become successful, making sacrifices, performing well on the job, living below their means, being specialists, and so on. there was a thread a while back about luck versus skill. I think becoming a millionaire is the 6 habits I mentioned plus a little bit of an X factor (call it luck, call it skill, whatever), there's not a formula, but I think if you do the right things for long enough, you'll become successful. I can't put an exact % on it, sorry, but this might help. there's 11mm millionaires in the US, or about 3% of the population, so 97% of the US is not a millionaire, but pick your # for people who "go all out," I don't know what that is.
on risk, agree, some people are naturally risk averse, others not as much, I think it's more calculated risk than simply throwing caution to the wind at every chance. at the same time, I think any of these behaviors can be learned (much like the introvert can learn to be a good salesperson) with the right amount of effort.
many of the risks I've seen work out well would be not looked upon favorably by peers. that's because most people don't understand how to take calculated risks, most people take the well worn path, which is certainly not the way to financial independence. not sure of an exact %, but I'd definitely say it's the majority, maybe even as high as 75%.
I'd answer this the same way, regardless of success/failure, many people look at risks as irrational, but you never know until you try.
I think they're all equally important. for example, you can understand the power of equity but live beyond your means, you'll never accumulate assets. you can be an owner and a great salesman, but if you never take any risks, you'll never move up in your company. you can have specialized knowledge, take some risks, and live below your means (engineers), but if you can't sell, you can't advance your career. brains alone doesn't do it, so it's hard to rank these.
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4 makes me think of the way it is suggested that we problem solve.
An inch wide, and mile deep. Focus on a specific aspect and really go deep.
Also of Bruce Lee's quote: "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times."
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