A large salary helps, but you can become a millionaire without one.
When you think of the typical millionaire, the first thing that comes to mind may be someone at the top of their field with a huge salary. According to research by Dave Ramsey's company, Ramsey Solutions, that couldn't be further from the truth.
This year, Ramsey Solutions released The National Study of Millionaires. It's based on a survey of over 10,000 millionaires, who were asked about their careers, financial habits, and much more. The most common millionaire careers probably aren't what you'd expect, and they show that making a lot of money isn't the only way to build wealth.
The top five careers of millionaires
Here are the top five careers of millionaires, according to the Ramsey Solutions' study:
- Engineer
- Accountant (CPA)
- Teacher
- Management
- Attorney
As you can see, not every career is one that's typically associated with a high salary. While some millionaires make significantly more than average, that's not the norm. Only 31% of those surveyed averaged $100,000 per year over their entire careers. One-third never made six figures in any year of their careers.
To be clear, income certainly matters. When you earn more, you can save more money and invest more. But you don't need to be in the top 10% or 25% of earners to become a millionaire. You could achieve it on an average salary or less with the right financial habits.
Millionaire financial habits
The financial habit that nearly all millionaires share is that they're careful about their spending. Of the survey respondents, 94% said they live on less than what they make. Even after achieving financial success, they still largely avoid overspending. In addition, nearly three-quarters of those millionaires had never carried credit card debt.
To get on the path toward being a millionaire, it's crucial to save money every month. If possible, saving at least 20% of your income is recommended. Make sure you also avoid high-interest debt, like credit card debt, or pay it off if you're currently in debt.
Next is deciding what to do with that money you're saving. Most millionaires use one simple, effective method to grow their money -- investing. Here's what Ramsey Solutions found:
- Eight out of 10 millionaires invested in their company's 401(k) plan.
- Three out of four also invested outside of company plans (options include IRAs and individual accounts with stock brokers).
- 75% of millionaires said that regular, consistent investing over a long period of time was the reason for their success.
- No millionaire in the study said that single-stock investing was a big factor in their success.
Instead of single-stock investing, most investors are better off putting their money in index funds that invest in a large assortment of securities. For example, there are plenty of exchange-traded funds (ETFs) that invest in the S&P 500. That index tracks the 500 largest companies listed on U.S. stock exchanges. Funds like this are a simple way to invest and offer better returns than most investors get by picking stocks themselves.
Consistency pays off
The millionaires surveyed by Ramsey Solutions are predominantly people with reasonable incomes who saved and invested. There are, of course, outliers who made a large amount of money or inherited wealth. But the research shows that becoming a millionaire is an achievable goal, and that's good news for everybody.
Making more money can certainly help you build wealth more quickly, so it's smart to look for ways to raise your income. However, the key is to consistently invest your money. If you invest a portion of your income every month for decades, you'll likely be on track for a million dollars or more.
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