When the father of a friend was in college, he lived in a bunker on campus for part of the time and shivered through one winter for lack of a coat. He was determined, though, and despite his lack of money, he made it through Eastern New Mexico University and eventually got a Master’s degree in geology from the University of New Mexico.
Geologists are not known for their lavish earnings. Even still, he lived frugally and saved and invested his money, so when it came time to retire, he has done so quite comfortably. You wouldn’t know it to look at him; he drives a 1983 Blazer to the greasy spoons where he eats breakfast several times per week and shops the sales at our local grocery stores like some sort of coupon ninja.
This friend’s father is, in short, a hometown millionaire.
The habits and values of wealthy Americans like him are fairly ordinary: They call for 1) hard work, 2) saving money toward financial goals, and 3) keeping a close eye on tax liabilities and portfolio risks. What’s extraordinary, though, is the consistency with which they apply these practices. Most of the multi-millionaires polled in the 2016 edition of U.S. Trust’s Insights on Wealth and Worth, a survey that shares characteristics of nearly 700 Americans with $3 million or more in investable assets, got off to an early start. On average, they began saving money at 14; held their first job at 15; and invested in equities by the time they were 25.
Most of them have invested conventionally. Eighty-three percent of those polled by U.S. Trust credited buy-and-hold investment strategies for part of their wealth. Eighty-nine percent reported that equities and debt instruments had generated most of their portfolio gains.
Fifty-five percent agreed with the statement that it is “more important to minimize the impact of taxes when making investment decisions than it is to pursue the highest possible returns regardless of the tax consequences.” In a similar vein, 60% said that lessening their risk exposure is important, even if they end up with less yield as a consequence.1
Worth noting: According the high-net worth surveyor Spectrum Group, 78% of millionaires turn to financial professionals for help managing their investments.
Just how many millionaires does America have? By the latest estimation of Spectrem Group, a surveyor that follows high-net-worth people, the country has more than ever before. In 2015, the U.S. had 10.4 million households with assets of $1 million or greater, aside from their homes. That represents a 3% increase from 2014. Impressively, 1.2 million of those households were worth between $5 million and $25 million.2
According U.S. Trust, 77 percent of the survey respondents reported growing up in middle class or working class households. When asked, the multi-millionaires said the three values that were most emphasized to them by their parents were educational achievement, financial discipline, and the importance of working.
The Spectrem Group reports finds that millionaires and multi-millionaires come from all kinds of career fields. The most commonly cited occupations? Manager (16%), professional (15%), and educator (13%).3
Is education the first step toward wealth? Ninety percent of those polled in a recent BMO Private Bank millionaire survey said that they had earned college degrees. (The National Center for Education Statistics notes that in 2015, only 36% of Americans aged 25-29 were college graduates.)4
Interestingly, a lasting marriage may also help. Studies from Ohio State University and the National Bureau of Economic Research (NBER) both conclude that married people end up economically better off by the time they retire than singles who have never married. In fact, NBER finds that, on average, married people will have ten times the assets of single people by the start of retirement. Divorce, on the other hand, often wrecks finances. The OSU study found that the average divorced person loses 77% of the wealth he or she had while married.