Becoming a millionaire is hard, but staying a millionaire can be harder. Often, we are in awe of their high-profile lifestyles and fancy jets. But little do we know about the way they handle cash, which is something anybody can try and benefit from.
John, who runs ESI Money, a personal finance blog, interviewed 100 millionaires and found out that most perceive and grow money in similar ways. Now, about John, he never shares his last name and retired at 52 with $3 million. We have highlighted his exciting findings here.
Most Millionaires Get Professional Money Advice
With big money comes bigger risks, and most millionaires have learned that the hard way. All millionaires make financial blunders but are careful to avoid deathblows. Their financial mistakes mostly revolve around unprecedented misfortunes and decisions made in haste. But it is understood that no one needs to make 100% right decisions for wealth creation.
Behind those fancy cars and huge mansions lie years of hard work, discipline, and smart money moves guided by professionals. Yes, millionaires are picky about their personal advisors.
Putting safeguards in place to protect your assets and investments is the key takeaway from this pandemic. Millionaires often team up with financial advisors following fiduciary standards who oversee their investments, retirement planning, and curate the smartest roadmap to growing money.
We all know that investing is emotional. Market downturns are often followed by Americans raiding their retirement funds and panic-selling stocks without any regard for the fact that investing is for the long haul. Financial advisors are there to keep business and emotions separate. They prevent clients from making such decisions that cause irreversible damage to their portfolio.
Sadly, only 17% over 65 use a financial advisor, whereas 75% manage their own finances. Many feel that fiduciary advisors are costly and might not look out for their best interests. But bound by law to work in your best interests, the intuition and experience of fiduciary advisors far outweigh their fees in the long-run.
Today, cutting-edge tech can help you team up with the right fiduciary advisor near you within minutes. An emerging fintech called SmartAsset is bridging the gap between investors and financial advisors with their award-winning proprietary tech. You can take a short quiz, and then their concierge team will match you up with up to 3 vetted fiduciary advisors near you within minutes. Since working with an advisor can stretch for decades, make sure you interview all before picking the right one for you. Over 65 million people use their popular tools and services each month.
Millionaires Believe in Passive Income
Business Tycoon Warren Buffet said it right that if you are not making money in your sleep, you’ll end up working for life. John found that around 62% of the millionaires had one or more sources of passive income, with real estate being the most common. For decades, the ultra-rich held 30% of all real estate investment globally since most people couldn’t afford the high-capital entry into the market.
Today, things look different, especially for the 64 million Millennials who are chasing a dream of owning a house someday. Amidst the pandemic, experts believe that the real estate market is as strong as the housing bubble in 2005 since the number of Americans buying houses reached a 14-year high last month. Pockets across the nation are heating up as millennials are using low-cost gateways like Fundrise to become real estate investors.
Since the inception of REITs, millennials have invested and earned millions in dividends from real estate by initially investing as little as $500! The safer part about investing in REITs is that your money is diversified to the extent that you can expect average annual returns of 10%. Your portfolio is usually managed by a team of fiduciary advisors, real estate experts, and investors.
In simple terms, with your $500, you’ll be the owner of scores of carefully evaluated real estate properties across the US. Holding stakes in multiple properties spread out the risks from market volatility.
As for Fundrise, their track record speaks for them. They claim to have helped over 130,000 investors earn $79 million in dividends with 8%-12% ROI. They follow a straightforward way of signing up, funding your account, and owning properties that take minutes. Speaking of returns, you can see them pour in at the end of every quarter. Your investments will be illiquid in some way since real estate investments are for the long haul; keep a goal of 5 years. But they do have provisions for redemption depending on economic conditions.
Millionaires Worry About Retirement Healthcare
Most millionaires understand that ill-health is one of the killer circumstances that can drain their savings overnight. On average, Americans live 22 years in retirement, and the costs associated with long-term care and medical bills are more than $300,000!
But more importantly, you might lose out on the subsidies from the Affordable Care Act (ACA) when you are earning a lot, which can make things problematic. Millionaires make sure to protect their families for contingencies before they focus on building wealth.
With the pandemic reaching new heights, securing your family’s financial future with a term life insurance can bring you some peace of mind. It can pay for your kids’ education, mortgage, loans, and daily expenses in case you pass away. Archaic institutions usually insist on blood tests and doctor visits before they underwrite a policy, which might be risky when social distancing is the new norm. But that’s changing as sophisticated tech firms like Fabric are using AI and accelerated underwriting to offer term life insurance online within minutes.
Fabric offers 10- and 20-year terms with coverage up to $5 million for as little as $14 a month. This is, of course, depending on your general health, credit history, and medical records, which they compile using complex algorithms to give you an instant quote. You can fill in a brief questionnaire, and if eligible, customize the insurance term and coverage to suit your family’s needs before you purchase. Fabric offers policies issued by Vantis Life, a Penn Mutual Company, which is rated A+ by A.M. Best for financial strength.
Millionaire Have Fun but Save Most of Their Income
John was surprised to find that millionaires love to spend on traveling. They are cautious about their work-life balance and save fun time for all the hard work they put in. They strive to achieve maximum productivity with strict fitness regimes and work routines. Since they have so much on their plate, some would wish there were 48 hours a day. The takeaway is that when you are earning a lot, it is okay to spend it on the things you love.
At the same time, millionaires are saving up to 64% of their income. The median spending would be $90K for someone earning $250K a year. Usually, they start maxing out their contributions to 401(k)s and IRAs by the age of 35, which shows that most millionaires grow money with basics over time. It doesn’t make sense to earn $100K and spend it all, but that’s what most of us do.
Keeping track of money is simply a matter of will, and those with busy schedules can start with Wismo. A feather-light app that paints a vivid picture of where your money is going and promotes financial awareness through their social hub. The app does well at remembering recurring bills and expenditures so that you can just add the new ones and let Wismo do the heavy lifting.
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