Through the years, I have interviewed hundreds of millionaires with the goal of learning from their experiences and knowledge.
I’ve published these as Millionaire Interviews, featuring my specific questions and their responses.
After a few hundred interviews, I realized that there was phenomenal wisdom in several of the questions I asked, especially when the responses from different interviewees are read one after another.
I’ve decided to publish these here on ESI Money in my Millionaire Wisdom series.
Note, not every millionaire answered every question and I did change around questions from time to time, that’s why every millionaire isn’t listed below.
Today we continue the series (see part 1 here to start the series) with millionaires addressing the following question:
What advice do you have for ESI Money readers on how to become wealthy?
Here are their responses…
I would say, education, education, and education about personal finances for the reasons that I mentioned in the mistake section above. Also, if you have a partner, being on the same page with him or her about money is also crucial.
When we graduated college together, initially my husband was the only breadwinner in our household, and we had three loans as mentioned earlier. We were also starting our careers a bit later than most people… I was 30 and husband was 25. I wanted to watch our spending as much as we could, whereas he wanted to enjoy his first consistent paychecks a little bit. We often had arguments about how to spend money, so much so that I actually wondered if our marriage would last.
I think we are now on the same page in just about all aspects of our finances. These days my husband can actually be more frugal than I am 🙂 We both feel that we can be frugal in our daily life, though it’s ok to spend generously on what we truly enjoy – great food, traveling to Japan, and having great times with our family and friends.
First, live on a budget and below your means, allowing you to save money aggressively.
Second, don’t overspend on your primary residence and work hard to pay it off early.
Third, pay cash for used automobiles. (You are not what you drive, what you wear, or where you live!)
Track your net worth! I preach it to anyone who will listen. I can’t say enough about the value this practice brings. I update mine every month (which is probably overkill), but it’s the best way to maintain perspective.
If you dip in certain months due to poor decisions you will notice. It holds you accountable to your goal. And I think it works especially well for people who are on the journey of paying down debt. It can get discouraging when you’re paying down debt and never see your bank account ever grow. But if you are tracking net worth you will actually see that progress every month. Nothing is more motivating than looking back to see your progress.
And of course, pay yourself first. You are your own worst enemy when it comes to money. Find your gap between expenses and income and then make a commitment to yourself to save before you rationalize a way to spend.
I think it is worthwhile to keep an open mind when you are young and explore things you might like, take risks when you are young to see where your most potential may be.
After that I recommend to be as valuable professionally as possible to earn as much as you are capable.
Then establish financial goals and a plan to get there. Make this plan at as young an age as possible.
For me, I didn’t get really serious about this until my early 40s, though I did attempt to save in my early years, when I could afford to. I wish I created a serious spreadsheet plan by age 30.
Well this site (which is my favorite PF site!) and those like it are a great start!
My recommendations:
Ask people how they did and are doing it…take notes and listen! I ask my tax guy every year…what are people with more money than me doing to manage their finances…what are they focused on to growth their wealth and protect their money? No matter what amount you have there are people doing better that you can learn from. Be curious! Ask questions! I personally carry the profiles for Millionaires 18 and 27 in my purse every day and I have a side by side analysis of what they did to get there vs what I am doing so I can clearly see my opportunities…these multi-millionaires are on pathways that I want to follow and I revisit their “how” vs “my how” frequently…and then I tweak and reengage in my plan because they motivate me!
Read-read-read and apply-apply-apply.
The best book I ever read…and the one I say follow is “The Richest Man in Babylon.” And then “The Automatic Millionaire” is also a must read/must apply book. I am also a fan of “The Aspirational Advisor” and “The Simple Path to Wealth.” Read these and then focus on application.
Start early-But if you missed that window…then start late!!! Automate your savings- save consistently- keep pushing up your savings rate- and invest, invest, invest. These to me are the secrets. Oh yes…and pick the right field…and then hustle…and hustle harder!
Teach your kids about money because if you don’t, who will? There is no reason we should leave “life” to be our kid’s teacher of money when we are so educated as a group; we MUST pass the education on. My daughter and I have very open discussion about money. She knows how much we have, how it will grow when the rule of 72 applies to it across time and how she is supposed to treat and manage the money when she has a family, i.e. contribute to it, live off a part of the interest and pass it on to her children.
I think there are a couple of things. First, the common theme we’ve all heard is to save early. It’s cliché’, but true! As an example, I rolled an old 401k that had around $300k into my IRA in 1994. Fortunately, I put it into a Vanguard aggressive fund that has grown and is over $800k now. I added nothing so this was just a matter of time!
Take full advantage of matching funds or profit sharing that are available from your employer. I’m getting 11% matching right now which is great! So many of my coworkers literally invest nothing, so they forgo the matching as well.
I don’t watch my investments all that close. I look weekly but don’t agonize over the daily\weekly\monthly rises or drops. My decisions have to be long term, so I can’t be influenced over temporal changes. This has served me well.
Finally, live within your means. In my neighborhood, we’re the family with the older cars, the empty living room with no furniture, etc. You can’t spend your way to riches.
Budget and then don’t live beyond your means. Have a monthly family budget. Mine is right down to the dollar, with every possible spending category captured, and I follow it religiously. We took the kids on a school week vacation this year, but it’s only the second one we’ve done in seven years. For our summer vacations we go up to our lake house, and they can bring friends.
Save up for things.
Buy classic things made well that never go out of style.
Treat your possessions with respect.
Don’t hang out with rich people, which encourages envy spending. One of my best friends who knew me all too well in college used to ask me the same question whenever we met up in my early and mid-twenties: “Are you saving?”
Get these four books from the library and read them over and over and over (I’m not kidding): The Tightwad’s Gazette, The Millionaire Next Door, Your Money or Your Life and Winning the Loser’s Game: Timeless Strategies for Successful Investing. As a bonus, read The Life-Changing Magic of Tidying Up, which is a bit flaky but really helps you to stop acquiring for its own sake.
It feels impossible to live within your means until you actually start doing it, then you challenge yourself to, as New Englanders like to say, “Use it up, wear it out, make it do, or do without.” I have that saying taped to a shoebox in my closet where I can see it every day while I’m getting dressed. Of course, me being me, it’s a Lanvin shoebox. (But I got those Lanvin shoes at 75% off and they are going to outlast me!)
Eliminate what I call “I’m worth it” spending. I used to see an $800 pair of sneakers or a $3,500 sport coat at Hermès and think, ‘Yeah, I work my tail off. I’m worth it. And anyway, that’s an investment piece.’ Incidentally, I love that phrase ‘investment piece’, which they use in high-end retail to trick your mind into thinking that the value of a piece of cloth or leather will grow like an equity. Or I’d see that Robert Parker or Jancis Robinson gave that Burgundy 98 points and shell out $500 for it, knowing that I’d be able to unload it for more in a decade if I hadn’t drunk it yet. I’m happy to say there is no ‘I’m worth it’ category in my monthly spreadsheet. Unless you count kale salads at Sweetgreen.
Always wait before taking action. After doing four Whole30 eating plans I know that the typical food craving lasts three to five minutes, and the typical spending craving not much longer than that. If I can think, ‘Shop your own closet’ or ‘Want what you have’ or ‘They have that at the library, I’m sure’, the craving typically abates.
I’ll close on this last rule, because in terms of psychological wealth, nothing makes me happier than contributing money to a worthy cause. That’s been proven in scores of studies: giving away makes you happier than hoarding it all for yourself. It’s also part of our duty as humans to help each other along, fight institutionalized economic and social unfairness like racism, and stay present in the moment so we enjoy life to the utmost. We only get one trip around the sun as this person, so we should always make the most of it. You never know when that cosmic flyswatter is coming for you.
I shared quite a few tips above in the career section above that are relevant to this question but would recommend folks read this article on how the top 1% cultivate their wealth as it’s filled with research and I am big believer in many of items it mentions.
Don’t forget to read every ESI Millionaire Interview as they are packed with great insights from folks that have achieved wealth in a lot of different ways. One of them will be a way that you can do it!
I’d say two things: Have a plan and be patient.
The plan part is taking the time to think about where you want to be in the future, and what you want to do to get there. Life is a matter of choices, and the more thoughtful you can be about the choices you make the better off you’ll be. Planning also gives you the opportunity to say “what if” – what if I lose my job, what would we do? How would we pay the bills? I think it’s human nature to push this kind of thinking off until a later date. The more you can consider what might happen earlier, the more likely you can be to avoid the pot holes life tosses your way.
Patience is not a skill everyone possesses naturally, especially when it comes to investing and saving. It takes some inner strength to delay gratification and wait while money grows. If you can be consistent when it comes to dollars you set aside for investing, and track them over time you can begin to see the power of growth as markets go up over time and can see the power compounding has as well.
Low-cost index funds is the way to invest for the long term.
Live below your means.
Create and follow a spending plan (budget). Stay away from credit card debt.
Pay yourself first, and maximize your pre-tax contributions as soon as you can.
Manage your career, and educate yourself on investments.
Think about the future. It will be here sooner than you think.
I remember when we purchased our dream house in 1987, which was something we never thought we would be able to do, coming home the third night and saying to myself “Is this all there is?” Realizing that so many fabulous possessions lose their shine very quickly has helped me to tone down
Silly aspirations for “things”.
1) Finding the right person to marry might be the most important decision you have to make in your life; it can make or break you. My advice is to live with that person at least 5 years before you consider marrying him/her.
2) Put some emergency money away, then invest the rest. Have money work for you. Also, it’s important to have multiple income sources.
3) The road to becoming a millionaire is challenging; you must be both mentally and physically fit. So, workout every day and always have a positive mindset. I have a morning routine, where I wake up at 5am every day, I would work out for at least 30 minutes, followed by meditation for 15 minutes to clear my head, then finish with reading a list of positive affirmation out loud. So, every day I would start the day full of energy and positivity, that put me ahead of everyone else to start the day. It’s a great feeling and it really works!
4) If you have employees, train them yourself, pay them well so they will stick around, give them incentives so they will work harder and, most importantly, trust them by giving them full authority to do their jobs. That’s the only way to run a successful business.
5) Read at least one book a week. Pick up an Amazon Kindle and take it with you wherever you go.
Knowledge is power. We’ve all heard the saying, but it couldn’t ring truer when it comes to wealth. The more I’ve learned (particularly in the past few years as part of the personal finance community), the more I’ve been able to apply and help to expedite the growth of our net worth.
If you’re new to the game, start with reading books like:
- “The Automatic Millionaire
” by David Bach - “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” by Thomas Stanley
- “The Richest Man in Babylon” by George Samuel Clason
” by David Bach
” by Thomas Stanley
” by George Samuel ClasonIf you’re further on down the line, don’t stop learning. Becoming an active part of this part of this community can do wonders. Read personal finance blog posts every day and listen to some of the great podcasts out there. You’ll learn everything from smarter investing to tax optimization. The amount of knowledge available in this community is incredible.
The key is don’t just sit there… DO SOMETHING! If you aim to do one thing every day (even as simple as listening to a financial podcast), you’re going to become wealthy over time. It would be hard not to.
I am a big believer in the ESI mantra of increasing earnings, focusing on savings, and investing smartly and aggressively.
This is simple.
Get out of DEBT and stay out.
Don’t try to impress people. Trust me, they don’t care what kind of car you drive or how big your house is.
Surround yourself with smarter people than you at all times. If you’re the smartest person in the room, leave the room.
Get your mind right. You CAN do anything you set your mind to. Ask God, and he will provide.
Set goals and work hard to achieve them.
Automate your investments and focus on index funds. No amount of investing is too small.
Education & personal drive are key! We stress this with our children, education simply provides you options and opens doors for opportunities, it is one’s personal drive that can make something happen.
Both in the couple need to be engaged and on the same page.
Max out everything you can (401k, IRA’s, ESPP).
Live below your means.
Don’t buy the most expensive house in the neighborhood.
Don’t try to keep up with the Jones’.
Learn about investing.
Don’t pay advisor fees.
Teach your children!
Take an interest in your personal finances, if you don’t, who will?
I would say when you are young invest in Real Estate and Stocks and stay the course.
Real Estate allows you to leverage your investment using other people’s money. Make sure you have a positive cash flow and the numbers make sense. Stocks are the only other way to keep pace with inflation. There is an intrinsic value to all stocks based on their cash flow. Stocks in the short term will be volatile but in the long term will revert back to their intrinsic value.
Dollar cost average but also if there is volatility buy on the dips when everyone is selling, and sell on the highs when everyone is buying. Use bonds to reduce the volatility. Stocks have pricing power that increases over time.
Some of my co-workers became wealthy through real estate. I have noticed the wealthy buy Real Estate. You can sink your teeth in a piece of property. Stocks are paper and although both rise and outpace inflation, I like the idea of Real Estate, and it provides a stream of passive cash flow too.
My worst mistakes was selling my duplex and not buying Real Estate during the housing crisis.
Make saving easier by giving up nonsense spending. Realize early on that a cluttered life only holds you down. Experience is so much more valuable than some nonsense trinket. Do you need 11 bicycles? I have a friend who has literally given up everything he owns. He as some clothes and a toothbrush. He is completely unshackled and free to do everything he wants to. He works a high powered job at a Fortune 50 company and is one of the happiest guys I know.
Take advantage of the next downturn. Stuff gets cheaper. My partner and I got great deals on a couple of our rental properties.
Read, read, and read and compare your financial strategy, tweaking it when appropriate. Your Money or Your Life, The Millionaire Next Door, Rich Dad Poor Dad, The Waltons, Dave Ramsey. We outgrew Money magazine, but it was useful early on in keeping our financial perspective. Now I enjoy your ESI Money site for the variety of situations and the focus on financial successes rather than disasters and of course, the readers’ comments.
Learn Excel if you don’t know it already, and use it to track net worth on a regular basis. It’s a real kick now to look back at our net worth statements from nearly 40 years ago and see the changes over time. Those net worth statements let us know if we were sinking, treading water, or rising above the tide.
Keep your affairs in order at ALL ages. Net worth statements are a great start to what I call the two envelope system; one is the “grab and go file” with everything pertinent to a doctor or emergency room visit including a medication list, all doctors’ contact info, healthcare power of attorney, and advance directives. The other is the “executor” file with all assets, accounts, titles, beneficiaries, pre-need documentation, wills, trusts, family contacts, etc. Everyone should have these handy.
Teach your kids about money early – what information not to share, how to think of money in different buckets based on its future long term goals such as college, houses, etc. We were particularly lucky that both sons liked math. We played Cash Flow board game (Guy Kawasaki) which taught them balance sheet skills and the value of passive income.
When each son was a teen, he met with our wealth advisor team who gave them good briefings, treated them like intelligent adults, and reiterated the mantra of taking the long view on investing. The info was daunting but it stuck, and they were proud to have “met with their financial advisor”. As a result, they are very comfortable questioning any advisor – wealth, accountant, or lawyer. We’ve heard some families don’t talk about money, but we sure do!
It may seem at odds with the formulaic approach on earning, saving and investing, but I really think that creating wealth is accomplished by acting with mental and emotional fortitude. It takes a firm belief in yourself and sustained effort to win at life. If I can do it, anyone can!
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Lots of good stuff, huh?
Stay tuned, we’ll be adding to this series in upcoming future posts.
I love that you take one questions and add in the best responses, this is gold! Take advantage of the next downturn is key advice, though we are still waiting for that to happen. Lots of great book recommendations. I’d love to see what some thought about zero based budgeting coupled with pay yourself first, and if that worked better than an actual budget
I like, “Knowledge is power. We’ve all heard the saying, but it couldn’t ring truer when it comes to wealth. The more I’ve learned (particularly in the past few years as part of the personal finance community), the more I’ve been able to apply and help to expedite the growth of our net worth.”
Finding out more via intimacy with Jesus Christ and Bible reading about the Lord’s desire to prosper His people and principles upon which to build my life (including work life and finances) have helped me immensely. Books that helped us along the way are:
Radical Riches by Dave Williams
Business By The Book by Larry Burkett
Money, Possessions, & Eternity by Randy Alcorn
Financial Peace by Dave Ramsey