Ever heard of the American game show "Who Wants To Be A Millionaire?" The title of the show is rhetorical. Because everybody wants to be a millionaire (if they can't be a billionaire or, as we're possibly slated to soon see with Elon Musk, a trillionaire).
Becoming a millionaire is far more feasible today than it's ever been before, but that doesn't mean it's easy. Understanding how millionaires think, and why, will help you get on the road to riches. What do millionaires know about money and money management that you don't ... yet?
They Know That Stashing Too Much Cash in the Bank Is a Bad Idea
Yes, you need to have an emergency fund on hand, ideally about six months to one year's worth of living expenses secured in a high yield savings account (HSYA). Anything more is excessive and downright wasteful. And millionaires know this.
"Sure, with a nice big cushion of savings, it feels safe, but cash sitting in your account is losing value," said Gary Gray, co-founder at CouponChief.com. "It's subject to inflation and won't be worth as much tomorrow. Millionaires know that to build wealth, they need to put their money to grow, such as investments in real estate, stocks or even their businesses."
They Know the Importance of a Crystal-Clear Spending Plan
Millionaires may have more money than most, but that doesn't mean they can do whatever they want with it. They have to be incredibly organized with their spending and micromanage just about every dollar they spend.
"Millionaires know the value of having a clear, detailed spending plan," said William R. Moore III CPWA, CFP, CLU, ChFC, AEP®, CAP, founder and private wealth advisor at Stratview Wealth Management, a Northwestern Mutual Private Client Group. "Tracking both your day-to-day expenses and long-term goals is crucial to building a secure financial future. You don't need to be a millionaire to start saving with intention - many millionaires have achieved their financial success through consistent and careful saving."
You can easily do as millionaires do here. "Try setting aside time each week to take a closer look at your finances," Moore said. "Identify areas where you can trim costs and redirect that money into your savings. Small, thoughtful changes now can lead to big results down the road."
They Know to Be Proactive with Tax Planning
Ugh, tax season is here. Should you wait until the last minute and just phone it in right before the deadline crashes down? A lot of us do that, but not millionaires. They know the importance of proactive tax planning.
"By managing tax liabilities and designing an intentional framework for retirement contributions, charitable contributions and tax-efficient investments, they ensure more of their income and investments are safeguarded," Moore said. "This approach not only helps maximize wealth but also accelerates the path to financial independence by allowing money to compound and grow efficiently over time."
They Know That Frugal Is Better Than Flashy
Yes, there are millionaires who drive exotic luxury cars and wear the most exclusive designer clothing. But this isn't the norm. Generally, millionaires don't succumb to pressures to flaunt their wealth. Any of us who has splurged on a status symbol item should take note of just how damaging such consumer behavior is.
"Not feeling pressure to display one's wealth or status naturally leads to increased savings," said Robert Furst, wealth management advisor at Merrill Wealth Management. "Designer clothing tends to lose the bulk of its value the moment it leaves the store. Wearing less costly fashion leads to increased savings and investment, which builds wealth."
If you're aspiring to become a millionaire, keep in mind that being frugal will help you pass the finish line.
They Know the Monetary Value of Patience
Compound interest is key to building wealth, and nobody knows this better than millionaires and, of course, billionaires. To generate compound interest you need to be patient and let time do its money-making thing.
"Patience is a virtue when it comes to building wealth. The greatest advantage of an investor is time," said Robert Johnson, PhD, CFA, CAIA, chairman and CEO at Economic Index Associates. "The wonders of compounding make a relatively small investment grow exponentially over time like the proverbial snowball rolling downhill. That is, time in the market is much more important than timing the market."
They Know to Be Both Resilient and Optimistic
The savviest millionaires may get upset when the stock market tanks, but they don't freak out and bail on all their investments. They lean optimistic. People who've yet to make their millions should take note.
"Wealthy individuals often maintain a resilient and optimistic outlook because they've built financial plans designed to weather these risks," Moore said. "They recognize that while the future is inherently unpredictable, a strong financial strategy rooted in diversification, long-term goals, tax efficiency and risk management, provides a solid foundation to face any challenge with confidence."
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