Despite the economic woes brought on by the pandemic, 1.7 million Americans became new millionaires last year. That's according to the latest Credit Suisse Global Wealth Report.
In all, there are now 56.1 million people globally with assets of at least $1 million USD, the investment bank estimates, and Americans represent 39.1% of that total. Almost 1 in 10, 8.8%, of U.S. adults are now millionaires, up from 7% in 2015. In 2000, just 3.8% of Americans were.
The swelling ranks of millionaires is a surprising trend considering so many people struggled with money during Covid. As recently as March, more than half of Americans said they were still in "financial recovery" mode.
But wealthier Americans disproportionately benefited from the market's quick recovery and new bull market, and from rising home prices: "Wealth creation in 2020 appears to have been completely detached from the economic woes resulting from Covid-19," the Credit Suisse report notes.
Although the number of millionaires has increased, it's still "a rather large minority," points out Douglas Boneparth, a certified financial planner and the president of Bone Fide Wealth in New York City. "It looks like it's easy," he says, especially when the market is doing well. "That's a trap."
Outside of generational wealth, Boneparth says, people who have gotten to $1 million have done so with "organization, really hard work, and likely a combination of those two things."
There are four main ways that people become millionaires, according to "Rich Habits, Poor Habits" author Tom Corley, who studied 233 wealthy individuals, 177 of them self-made millionaires. Those are the saver-investor path, the big company climber path, the virtuoso path, and the dreamer-entrepreneur path.
"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," he wrote in a Grow piece.
Half of the self-made millionaires Corley surveyed used that approach to increase their wealth. By living within their means and investing as much of their income as practical, the typical saver-investor accumulated an average $3.2 million over the course of 32 years.
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Most millionaires who take this route have key traits in common, says Jorge Padilla, a CFP and senior client advisor at The Lubitz Financial Group in Miami. They "are patient, disciplined savers and long-term investors."
"It's going to take time to build wealth," he says. "The hard part is to have the patience and discipline to invest regularly and increase income."
More evidence the saver-investor path works: The number of 401(k) and IRA millionaires hit an all-time high in the first quarter of 2021, according to Fidelity. Their ranks more than doubled over the past year.
These savers "are usually older and have been saving for 20 to 30 years in their 401(k) – meaning they didn't become millionaires overnight," says Jessica Macdonald, vice president of Thought Leadership, Fidelity Investments. That "demonstrates that saving for retirement is a long-term objective."
Over a 40-year span, you could reach millionaire status with roughly $232 per paycheck, and less if you're saving in a workplace 401(k) that offers a company match. If you start out small and gradually increase your contributions, time and compounding can work in your favor.
Even so, becoming a millionaire is easier said than done. "There's no silver bullet here," says Boneparth, who is also the author of "The Millennial Money Fix." "There's no easy answer to accumulate wealth."
Luck has an undeniable role to play, too. Coming into a windfall, cashing in an inheritance, or coming from money in the first place can make it much easier to accumulate $1 million.
Video by Helen Zhao
Taking a practical approach to budgeting can help, regardless. Start by "building a strong foundation," says Boneparth, who recommends "being organized, having a plan, and controlling the things you can control." Live within your means and dedicate part of your income to saving and investing.
Look for ways to increase your income while cutting down unneeded expenses, Padilla says. "When you look at millionaires, having different sources of income is a differentiator, and having your money work for you," he explains. "Other than investing in stock, putting money in real-estate is another accessible way for people to grow their wealth."
Keep in mind that building sustainable wealth "is a long-term process," says Andrea Blackwelder, a CFP and the founder and president of Wisdom Wealth Strategies in Denver. "A lot of investors get caught up in the idea that they have to be making large contributions, she says, but "time is the most important asset that we have."
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