For five years, I studied the daily habits of 233 millionaires, 177 of them self-made, in order to find out what they were doing to build and maintain their wealth.
In my Rich Habits Study, I learned that there are four paths to wealth: the Saver-Investor Path, the Big Company Climber Path, the Virtuoso Path, and the Entrepreneur Path. And I've been able to share what I've learned through bestselling books I've written like "Rich Habits, Rich Kids," "Change Your Habits, Change Your Life," and "Rich Habits, Poor Habits."
The saver-investor path, in which you focus on living within your means and investing as much of your income as is practical, is the only one of the four models that is widely accessible. About half, 49%, of the self-made millionaires in my Rich Habits Study successfully used the saver-investor path to grow their wealth.
The prospect of building wealth might seem intimidating or out of reach, but you already have everything you need to succeed with the saver-investor path.
You don't need to be born with unique innate talents or devote years to honing some specialized expertise. You don't need to get a Ph.D., attend an expensive college, even go to a traditional college at all.
You don't have to go into debt or put up the equity in your house, for example, in order to build wealth this way. The path also doesn't require you to put in long hours at work that would take you away from your friends and family, and it doesn't demand that you take significant risks.
Two of the individuals in my study were public school teachers. Although they did not make a great deal of money, they were able to save and invest as much as 30% of their net pay by maintaining a modest standard of living.
They didn't deprive themselves, but they were careful with their money: They used coupons and bought most of their clothing at Goodwill stores. They also invested part of their savings in a rental property at the Jersey Shore and spent their vacations there, which kept their costs down.
Another self-made millionaire ran an auto repair business. He never made more than $100,000 in any given year and lived in a house that was attached to his repair shop. His modest home reduced his housing costs and enabled him to save over the years.
The typical saver-investor in my study accumulated an average of $3,260,000 over an average of 32 years.
If you want to follow their example, the key thing to remember is that you need to save before you can invest. And then make a plan to pursue both actions with discipline and consistency over time.
One of the prerequisites for the saver-investor path is getting into the habit of saving 20% or more of your net pay. The saver-investors in my Rich Habits Study budgeted accordingly and treated that 20% savings as if it was the first bill to come in each month.
Once they accumulated enough in savings, they then put that savings to work, by prudently and consistently investing those funds, all while budgeting and planning to create a standard of living that worked for them with that remaining 80% of their income.
If you're able, your 20s or early 30s are a prime time to begin on this path. And while it's never too late to get started, there are some adjustments you can make the older you are. For example, as a rule, it's smart to increase your savings rate by 10% for every 10 years you did not save.
If for whatever reason that 10% isn't feasible at first, the best thing you can do is gradually, and consistently, increase your savings rate.
For example, if you decide to pursue the saver-investor path in your mid-30s, you would have to increase your annual savings to 30% of your net income and work into your mid-60s. If you start in your mid-40s, you would have to increase your annual savings to 40% of net income and work into your mid-70s.
Everyone's life is a series of stages punctuated with major milestones. Those could include getting your first job and your first apartment, finding a partner, buying assets like a car or home, raising a family, and developing a career while working toward retirement. The money choices you make at all these junctures have a ripple effect over the course of your financial life.
So to ensure you always operate from a place of strength, consider the saver-investor path to build wealth for your future.
Tom Corley is a CPA, a certified financial planner and and holds a master's degree in taxation. He is the bestselling and award-winning author of "Rich Kids: How to Raise Our Children to Be Happy and Successful in Life" and "Rich Habits: The Daily Success Habits of Wealthy Individuals."
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