Most Common Myths about Everyday Millionaires

When I was at FinCon (the financial media conference) last September I attended a speech by Chris Hogan, one of the professionals in Dave Ramsey’s speakers’ group.

I don’t know Chris, but have heard him on podcasts, liked what he had to say, and was excited to see him talk. It was a good presentation and I enjoyed it — one of my favorites from the week.

After his presentation he made an offer to get his new book, Everyday Millionaires (not out then, but now out), at a discounted rate. People lined up like crazy.

It was interesting for me to see this as most publishers will give bloggers free books because they know that 1) the cost of a book is around $1 and 2) they can more than get their money’s worth from almost any blogger with a simple review post.

But whatever, if people wanted to pay for the book, who was I to stop them?

Reception with Chris

Before I arrived at FinCon I had received an invitation to attend a conference reception with Chris after his speech. So as others lined up to buy their books, I walked through the hotel and to the event.

It was in a bar area just outside the hotel (still on the property) and was packed with 75 people or so. It was loud and guests were drinking and eating appetizers.

About 30 minutes into the event Chris took the floor, thanked us for coming, introduced his team (5 to 10 people), and told us about the new book. It was short and sweet and pretty much what you’d expect.

After Chris finished, several members of his team fanned out to work the room.

The Millionaire Next Door

One of the team members came up to the group I was in and introduced himself.

He was around 30 or so, nicely dressed, and professional in appearance. He reminded me of me a couple decades ago.

As we were chatting he gave the group some details on Chris’s new book.

They had done an extensive research project interviewing 10,000 millionaires (the biggest study of millionaires ever completed) and the book was about their findings.

He informed us that there was an older book titled The Millionaire Next Door but for their new book they had surveyed far more millionaires.

The way he “explained” this to us made it seem as if he thought we’d never heard of it.

I wanted to tell him that probably everyone in that room could cite chapter and verse from The Millionaire Next Door, but he was on a roll so I let it slide.

As you know, I’m a big fan of reading about millionaires. I interview them, I love The Millionaire Next Door (it made it into my top five money books), and I like the update to it, The Next Millionaire Next Door (here’s my review). So I was very interested to read Chris’s work and see what he had to say.

I asked the young executive if they were giving out review copies of the book (these are copies given to media in advance so they can read the book and then post thoughts/reviews on it near the release date).

He said he didn’t know, but they did have gift bags for us. I could tell that when he said he “didn’t know” that what he meant was “no”.

Sure enough, when the gift bags were handed out they had two older books, but not a copy of the new one. The marketing guy in me died a bit. They had a room of 75 bloggers that probably reached MILLIONS of people. For $75 they could have gotten the word out about their book to that large audience. But they blew it.

Not one to be slowed down though, I emailed my contact on Chris’s team once I got home. I asked for a review copy and they sent me one. I took it on my October trip to DC and read it on the plane.

I’m only posting on it now since the book has finally been released to the public.

Everyday Millionaires

As you might imagine, this book is right up my alley. I highlighted much of it and on the flight back wrote an outline of what I wanted to cover on ESI Money.

Over the next week or so, I’ll be posting about the book. I’ll cover enough to hit the highlights but not so much as to ruin it for any of those who would like to read it.

If you want just the very top line, here are my thoughts:

  • I loved the book. If you’re interested in knowing more about millionaires, it’s a great read.
  • It’s very easy to read. I “read” (i.e. skimmed for content) on the flight, then re-read parts of it afterwards to decide what I wanted to share. It’s simple to pick up the key points as they summarize them at the end of each chapter and highlight key facts within the chapters.
  • They did find differences from what we see here in the millionaire interviews. Our millionaires tend to have higher incomes and attained millionaire status earlier in life. But other than those, the similarities are remarkable.
  • The findings are not revolutionary. We all know the basics of becoming wealthy are what they are and there’s not a lot of room for variation. Even a semi-well-read money nerd won’t find many new wealth principles here.
  • That said, they did offer some unique findings, some of which I’ll share and some of which you can read about if you’re interested.

Overall, this wouldn’t crack my list of must-read money books but it would certainly be in the group right after these.

Three Common Myths

One unique thing about the book (in a way, I think we all “knew” these but the book “confirms” them) is their list of “the most common myths that are perpetuated in our society about the wealthy”.

They list these as:

  • The wealthy didn’t earn and don’t deserve their money.
  • The wealthy take big risks with their money.
  • The wealthy have a leg up in education and careers.

It’s an interesting take on how the general public perceives the wealthy (which they use interchangeably with millionaires). I’m not sure if this is part of their survey (I’m guessing not) or just their thoughts based on dealing with the public’s perceptions about money.

Either way, I do think the list is correct. I have seen it time and time again when I get stories in the mainstream media — whether it’s about me or other wealthy individuals — people come out of the woodwork with one excuse or another why someone else is wealthy and they are not.

Let’s look at the myths one at a time, the beliefs that the book says leads to the myths, and my take on each one.

Didn’t Earn and Don’t Deserve

The first myth that “the wealthy didn’t earn and don’t deserve their money” is supported by two general beliefs:

  • Wealthy people inherited all their money.
  • Wealthy people are just lucky.

The book counters these beliefs with the following findings:

  • Millionaires build wealth on their own without any inheritance. 79% received zero inheritance. Only 16% inherited more than $100k and only 3% more than $1 million.
  • Millionaires believe anyone in America can become a millionaire with discipline and hard work. 76% of millionaires believe this to be true.
  • Millionaires don’t all come from upper-class homes. 48% grew up middle class, 27% lower-middle class, and 4% lower class.
  • Millionaires don’t rely on luck. They are 15 times more likely to say becoming a millionaire is about discipline over luck.

My thoughts:

  • We’ve only had one or two of our Millionaire Interviews where the person has received a sizeable inheritance as part of their wealth. It’s just not that common. Sure, when some famous rich person passes on their wealth it hits the news and makes this seem more frequent, but in reality, it isn’t that common (just like the average millionaire isn’t a flashy person living in a 10k square foot house and driving one of seven $100k cars — which is also an outdated stereotype).
  • As we get into the qualities that make people wealthy, discipline is something you’ll see over and over again. I’ve seen it mentioned in this book, the others listed above, and my interviews. It comes up over and over again. The fact is that you need to have discipline to become wealthy. We could even go as far as saying that it’s probably unlikely (or even impossible) to become wealthy without it. Unfortunately discipline is tough as Americans prefer their wealth to come fast and easy.
  • I ask all my millionaire interviewees how they started their careers to emphasize a point — most of them begin pretty low on the economic totem pole and have had to work their way up. They don’t start out working as a vice president in their dad’s $1 billion corporation. They are of more modest means and work hard to grow their wealth. This was certainly the case for me as well. I was in that lower-middle class group and combined some good steps along with hard work to help my family move up.
  • Luck is an interesting concept. I go with the notion that there are four kinds of luck, only one of which is bad luck you can’t influence (i.e. you’re hit by a truck). The rest you help along by either taking the right steps (some call this “making your own luck”) or trying to avoid trouble (i.e. don’t go into a dark alley at night). Of course there’s random good luck too, but you can’t count on that either. The point is you can certainly increase the odds of good luck finding you if you take the right steps. Our millionaire interviews show this over and over.

In the end the book concludes that millionaires do earn most of their money and work hard to get it. As such, they certainly deserve it.

Big Risks

Now let’s move on to the myth that “the wealthy take big risks with their money”.

The book says this myth is supported by these beliefs:

  • Wealthy people make risky investments.
  • Wealthy people take stupid risks to get rich quick.

Here’s the reality:

  • Millionaires build their wealth through retirement plans. 79% of millionaires reached millionaire status through their employer-sponsored retirement plan.
  • 97% of millionaires believe they control their own destinies.
  • Millionaires understand it takes time. The average millionaire hit $1 million for the first time at 49. Only 5% got there in less than 10 years.
  • Millionaires don’t take huge risks with their investments through get-rich-quick gimmicks and fad investments. Not one millionaire put “single stock” in their top three wealth-building factors.
  • Millionaires don’t take out high-risk loans. 9 of 10 have never taken a business loan.
  • Millionaires don’t borrow money from their friends. 80% haven’t.

My thoughts:

  • Chris Hogan has a book about retirement and I’m guessing he’s big on employer-sponsored plans. I am too, to be honest. But 79% seems high. I have more than $1 million in retirement accounts, but I’m not sure I’d classify it as having made me “reach” millionaire status — I got there before I had $1 million in retirement funds.
  • One thing that separates the wealthy from the not wealthy IMO is a desire/drive to take action and make things happen. I think this is why so many millionaires believe they control their own destinies.
  • Time is a HUGE asset in becoming wealthy.
  • We all know the first million is the hardest. While the book has the average age of millionaires reaching the milestone as 49, the millionaires on this site are much younger, with an average age of 41 when they reach $1 million.
  • You don’t need to take risks when you save a ton over a long period of time — it grows steadily to do much of the work for you. I would say that most of the millionaires I’ve interviewed are the opposite of risky. They are generally pretty conservative investment-wise.
  • The last two points above seem self-serving to fall in line with the “no debt” Dave Ramsey mantra. What about a mortgage? What about borrowing for a car? My guess is they left this out because it doesn’t reinforce their message of no debt. That said, I know debt is expensive and most of my millionaires avoid it to a great degree. I’m guessing the survey results didn’t show the same for the 10k millionaires, otherwise they would have made a stronger statement where debt is concerned.

In the end, millionaires are neither risky investors nor looking to get rich quick. They save and invest their money conservatively over time and get rich slowly.

Careers and Education

Finally we have the myth that “the wealthy have a leg up in education and careers”.

Supporting beliefs according to the book:

  • Wealthy people have prestigious private-school educations.
  • Wealthy people have high-paying jobs.

The truth:

  • Millionaires go to college. 88% graduated with a bachelor’s degree versus 33% of the general population.
  • Millionaires work for companies and not themselves. Only 18% own a business.
  • Millionaires have regular jobs. Top three occupations are engineer, accountant, and teacher.
  • Millionaires don’t attend fancy, exclusive universities. 79% didn’t.
  • Millionaires don’t ace all their college classes. 48% had a B average or less.
  • Millionaires don’t take out student loans. 68% never did.
  • Millionaires don’t all have high-paying jobs. One-third never had a six-figure household income in a single working year. Only 31% averaged $100k household income a year and only 7% averaged $200k household income over the course of their career.

My thoughts:

  • College is still a very good deal if done correctly. And by “done correctly” I mean the student doesn’t borrow a ton of money to get a degree that has no way of allowing them to afford paying back the money.
  • This is why I focus so much writing on growing your career — because most will make it to wealth through their job and without a business.
  • Teacher one of the top three occupations. Yep, you heard that right. Interesting that I have posts on becoming a millionaire teacher as well as how to get to $100k income as a teacher.
  • Haha. No, most don’t go to the ritzy private schools. I went to a small liberal arts school for undergrad and a Big Ten school for my MBA.
  • So if 48% had a B average or less, then 52% had a higher than B average. And probably a very high percentage had a “B average or better.” I think this is a case of trying to make the numbers say what you want them to say.
  • 32% took out student loans. That’s pretty good (low). Perhaps this is a way they got to wealth — they didn’t start $100k in the hole.
  • Let’s look at the opposite income numbers. Two-thirds had at least one year making $100k or more as a household. 38% averaged $100k or more throughout their career. So while these numbers aren’t as high as what we see in most of my millionaire interviews, it does seem that millionaires earn more than average. Also their “Millionaires don’t all have high-paying jobs” statement is weak. “All” of anything in a survey is never the case (I still remember seeing market research in the early 90’s saying not “all” households used toilet paper).

So yes, millionaires go to college. But they don’t attend ultra-exclusive schools that set them up for life (like those schools guarantee success anyway). They don’t have outrageous incomes and many of them start at the lower end of the income scale and work themselves up.

Don’t Make Excuses

As a wrap up to the set of myths the book puts a big emphasis on not letting excuses stop people from becoming wealthy.

Their reasoning is as follows: Now that we’ve shown the folly of these myths, it’s up to each individual to stop believing them, realize they can become wealthy, and begin to take action.

They conclude this line of thinking by noting “millionaires don’t make excuses or believe their success depends on anyone else.”

As you might imagine, I love this sort of sentiment. 🙂

That’s it for this time. Next time I’ll begin getting into the attributes most common to millionaires.

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