I’ve been reading many of the posts at the Early Retirement forum, which led me to do a little reading about people who appear to be on a path to millionaire status through their own hard work, commitment to saving, and smart investment strategies.
In The Middle-Class Millionaire, Russ Alan Prince and Lewis Schiff take a page from The Millionaire Next Door, and suggest that ‘middle-class millionaires’ are different enough from all of us regular Joes (or Marys) that they can be studied as a unique group. And, of course, the reason we’d want to study them at all is so that we can emulate them and become millionaires ourselves.
The authors define ‘middle-class millionaires’ as having a net worth that falls between $1 million and $10 million---including the equity held in their homes. Importantly, Prince and Schiff point out that their millionaires became wealthy not through inheritance but through hard work. In other words, these millionaires are self made. These millionaires were then compared to a sample of middle-class families with incomes between $50,000 to $80,000 and with net worth of less than $1 million (whom I'll call the 'non-millionaires').
What they found was interesting. For example:
- Middle-class millionaires are always ‘on’. While both millionaires and non-millionaires alike believe the statement “Anyone can become a millionaire if he or she works hard enough”, millionaires work, on average, 70 hours per week, as compared to 41 hours per week for non-millionaires.
- Millionaires are five times more likely to say that they are always available for business by email or phone (76% versus 16%)
- They are three times more likely to say that they regularly work weekends (67% versus 21%)
- They take fewer vacations than non-millionaires (12 days versus 19.5 days)
- Middle-class millionaires believe in networking. They believe that knowing many, many people is crucial to success.
- Millionaires are three times more likely to say they belong to a formal or informal networking group (43% versus 16%)
- They value networking as a way to connect with people you can turn to for information (83% versus 29%)
- Middle-class millionaires never give up. Nine out of ten respondents in both the millionaire and the non-millionaire groups reported having had a serious setback with a very bad outcome. However, millionaires had 3.1 such incidents, while the non-millionaires had 1.6.
- Millionaires were twice as likely to credit learning from these bad experiences as being very important to their eventual financial success (73% versus 36%)
- Millionaires were five times more likely than those in the middle-class non-millionaire sample to try again in the same field, after a setback (77% versus 14%)
- Only 2% of millionaires reported that their most common course of action was to give up and focus on other projects In the middle-class non-millionaire sample, 51.5% reported giving up.
- Millionaires go where the money is. Middle-class millionaires can more often be found in ownership of a business, or in businesses with incentivized or pay-for-performance compensation.
- Millionaires are three times more likely to say that choosing a career on the basis of its prospective financial rewards is important to financial success (73% versus 28%).
- Non-millionaires were more likely to believe in the idea of “do what you love and the money will follow” (54% versus 2%)
In all, there do appear to be some important differences between the middle-class millionaire and the non-millionaire. If you want to be a millionaire, as many in the Early Retirement forums do (and, truth be told, as I do), you may want to check this one out at the library.
Later in the week, I’ll present some of the differences that made me a bit squeamish about the middle-class millionaire route to financial success. . . .
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