How to be a Billionaire?

   

The Billionaire Mindset
Plant the seeds to build wealth and become a millionaire than a Billionaire.

I like writing about personal finance and investing.  But what is the goal of all this?

The goal is to build your wealth.  One of the ways we measure wealth is by becoming a millionaire.  This sounds pretty good to me.  So the goal of this article is to discuss how to become a millionaire.  Let’s get started with a little background information.

BILLIONAIRE DEMOGRAPHICS

Millionaire Demographics

Is it a big deal to be a millionaire?  I think it is. But it's a better to be a Billionaire. And I want to put some facts behind it.  I sourced the chart & demographics, above & below from the websites DQYDJ ( though a bit dated ), Forbes & Bloomberg Statista.

Knowing how many millionaires and billionaires there are helps you to know how to become a millionaire or billionaire.

Millionaire Demographics

Billionaire Demographics

20 of the Richest in USA

https://www.statista.com/statistics/201426/the-richest-people-in-america/

The States With The Most Billionaires

There are 540 billionaires in the United States, with a combined net worth of $2.399 trillion, according to our 2016 list of the world's richest people.

20 Cities w/ most Billionaires circa 2019 

https://www.statista.com/statistics/299494/billionaires-top-cities/

There are a record 2,208 billionaires in the world, according to Forbes' 2018 rich list

There are more billionaires than ever and they are richer than ever too. That's according to Forbes' annual ranking of the world's billionaires, published Tuesday. There are a record 2,208 billionaires in the world, up from 2,043 in 2017, according to Forbes. And the average wealth of the billionaires is $4.1 billion, a record high.

Millionaire Demographics

The chart tells us there are 14.8 million households in the United States that have achieved millionaire status.  And if you have a million dollars, you have more money than 88.24% of all the households in the United States.

Billionaire Demographics

There are by contrast 540 billionaires in the United States, with a combined net worth of $2.399 trillion, according to our 2016 list of the world's richest people.

For a list of Billionaires and their profiles go here...
https://www.bloomberg.com/billionaires/

Bloomberg Billionaires Index

View profiles for each of the world’s 500 richest people, see the biggest movers, and compare fortunes or track returns.

Let’s unpack this information regarding millionaire & billionaire demographics.

United States Only

First, this is only data for the United States.  There are certainly millionaires and billionaires in other parts of the world.  Rolling in the data from around the world, the wealth percentile would probably rise.  Because the US is a developed country with more American millionaires and billionaires in the population than other lesser developed countries.

Household Data

Furthermore, the data represents households, not individuals.  It is impossible to split up a household net worth by the individuals that live in that household.

The 1%

“We are the 99%” was a popular political slogan.  I do not hear about it as much anymore.

The phrase directly refers to the income and wealth inequality in the United States with a concentration of wealth among the top earning 1%.  Source:  Wikipedia

According to the chart, you would need to accumulate a little more than $10 million dollars to make it into the 1%.

Finally, some people define the 1% based on income.  I’m a believer in the phrase, “it’s not what you make, it is what you have”.  So I define the 1% based on net worth.  Just like the chart shows.

What Is A Millionaire?
What Is A Billionaire?

Then by that definition, a millionaire is a household with at least a $1 million net worth.  Net worth is defined as the sum of the value of all assets minus any debts owed to others.

By the same token, Then by that definition, a millionaire is a household with at least a $1 billion net worth.  Net worth is defined as the sum of the value of all assets minus any debts owed to others.

Some millionaires have most of their net worth tied up in their primary residence.  Some billionaires have most of their net worth tied up in their primary business(es) and residence. Assets are assets from my perspective.  Whether they be held in cash, bonds, stocks, business or real estate.  The downside of having most of one’s million or billion dollars in a primary residence or business is a lack of liquidity.

If you need cash in an emergency, it’s hard to sell your house or business.  So some millionaires and billionaires have more access to cash or liquid assets than others.  This is what the phrase “asset rich, cash poor” refers to.

Lifestyle

Do you think the average millionaire is living an extravagant lifestyle?  Jetting around in a private plane and eating dinner out at fancy restaurants every night?  I hate to burst your bubble, but they probably are not. That's likely the billionaire lifestyle. However, If they were, they likely wouldn’t be a millionaire or billionaire, for very long.

As popularized in the classic book The Millionaire or Billionaire Next Door, the lifestyle is pretty blatant and rather mundane.  It includes a comfortable home, modest automobiles, family vacations and the like.  What millionaires and billionaires have that others may not is a certain level of financial peace and security. The billionaires have their own economy.

HOW TO BECOME A MILLIONAIRE/ BILLIONAIRE

With that background out of the way, let’s get on with the key points on how to become a millionaire or billionaire.  Many of my findings come from a research project I did last year.  You can find that series of articles right here:  The New Millionaires and Billionaires.

#1 – START MAKING MONEY AT A YOUNG AGE

I may be a little old school on this point.  It doesn’t seem like high school kids work side jobs much anymore.  I’m not an expert, that’s just my opinion.

Working a side job in high school starts to build work ethic and responsibility at a young age.  I’m probably an extreme case.  At some point in high school I was delivering newspapers, doing landscape work and waiting tables.  It was nice to have cash in my pocket and not be dependent on my parents for spending money.

#2 – INCREASE CAREER OR BUSINESS INCOME

Becoming a millionaire or billionaire starts with making money.  The best way, in my opinion, to make the most money is from your primary career or business. Your best bet is a business, for example the money is in Real Estate it seems to have the most millionaires and billionaires.

Get a good education in a marketable field and maximize the earnings potential.  Build your skills both on the job and through formal training.  Bring value to your employer or business and demand to be compensated for it. Conservatively speaking for each degree you have you'll make about $2MM lifetime income. So if you have a Master's degree you'll make about $4MM. PhD $6MM. Some, women will make about $596K less doing the same job.

#3 – INCREASE SIDE INCOMES

I’m a little old school on this point too.  I’m not a big believer in side hustles.  I think they can distract from hunkering down and making the most of your primary hustle.  There is that old expression “jack of all trades, master of none”.  Let’s be realistic, you probably won’t become a millionaire because you are walking dogs or driving for Uber on the side.

But that is just my opinion.  Some people do very well with one or more side hustles.  Real estate rentals seem to be a popular choice.  Doing consulting or project work on the side is a good way to go if you have skills that are in demand.

#4 – MILLIONAIRES/ BILLIONAIRES MANAGE SPENDING & LIVE BELOW THEIR MEANS

Research shows that most millionaires and billionaires prepare a spending plan and stick to it.  This is commonly referred to as budgeting.  If they don’t have a written budget, they have a solid understanding of where and what they spend their money on.  Most importantly, millionaires and billionaires spend less money than they make. Some are on a mandated allowance & budget of say $400,000/ mon. for example

#5 – MILLIONAIRES/ BILLIONAIRES  HAVE A PLAN FOR EVERY EXTRA DOLLAR

So now income is on the rise.  Expenses are less than income.  That creates excess cash.  Millionaires and billionaires are adept at putting this excess cash to work in intelligent ways.  Let’s talk about a few of those ways next.

#6 – MAXIMIZE SAVINGS IN TAX ADVANTAGED ACCOUNTS

The first stop for excess cash is usually tax advantaged accounts.  You likely know about the ever popular 401k plan and Individual Retirement Account (IRA) in the US and their equivalents in other countries.

Whether it is the tax deduction or the tax deferred investment gains, these plans are popular choices for millionaires and billionaires.  The more money you make and have typically means higher income taxes.  Millionaires and billionaires know this so maximizing these contributions to the legal limit is a big priority.

#7 – MILLIONAIRES/ BILLIONAIRES MINIMIZE DEBT

Most millionaires and billionaires carry only two types of debt.  Specifically mortgage debt on their primary residence and/or debt related to a business enterprise or other real estate holdings.  Once in a while you might find a millionaire or billionaire with some remaining student loan debt.

Millionaires and billionaires prioritize debt reduction with their excess cash.  They target credit card debt and auto loans first, then student loans.  Some will pay off the mortgage on their primary residence.  Others will keep their mortgage.

Personally, I am very debt averse.  I recommend allocating excess cash to speed up mortgage reduction.  I like taking the sure thing.  And with the recent changes in US tax law; there is less incentive to carry a mortgage.  Not everyone including Certified Financial Planners would agree with me on this.  It’s really a personal preference.

#8 – MILLIONAIRES/ BILLIONAIRES INVEST THE REST IN TAXABLE ACCOUNTS

Now debt has been minimized and contributions to tax advantaged plans have been maximized.  Any excess cash gets invested in taxable savings and investment accounts.  This is money allocated to savings accounts, certificates of deposit, stocks, bonds, mutual funds and ETFs etc.

Many millionaires and billionaires alike, like to handle these investment chores themselves.  They are financially savvy and enjoy 'do it yourself investing.'  Other millionaires and billionaires prefer to have an investment professional handle this chore.

Do it yourself investing is lower cost, but more time consuming and requires basic knowledge of investing principles. I find that as I get older I farm out some of the work, I used to do personaly.

#9 – A MILLIONAIRE/BILLIONAIRES AUTOMATES MONTHLY SAVINGS AND INVESTMENT

Because most millionaires and billionaires set and operate against a budget they know how much extra cash they will have each month.  This allows for automatic savings and investing taking over and this can be enhanced by ai - artificial intelligence.

Savings deductions for tax advantaged accounts are automatically handled by the millionaire’s and billionaire's employer or his/ herself.  And the remaining excess cash is swept to other taxable investment vehicles automatically.

No messing around here.  Consistency is the key to success.  Never miss of month of saving and investing.  Do it automatically. 

#10 – YOU WON’T BECOME MILLIONAIRE/ BILLIONAIRES UNLESS YOU IMPROVE

We can boil millionaire and billionaire habits down to a few key skills and habits

      * Making money
      * Spending less than what is made
      * Personal finance

Through reading, learning and practicing these skills, millionaires and billionaires learn as much as they can to make more, spend less and manage their money effectively.  They have a continuous improvement mindset.

#11 – A MILLIONAIRE/ BILLIONAIRES HAS A PLAN

Armed with the 10 points discussed above, millionaires and billionaires develop a personal plan on what they will do in each area.  The plan could be in writing or could just be a thoughtful process in the millionaires head.  Written plans with action items are a good idea for accountability.

#12 – ENJOY THE JOURNEY

I doubt that a person’s life satisfaction changes the day they reach $1 million or $1 billion in net worth.  So it’s important to enjoy the journey, the process and the learning and satisfaction of improving your financial security each and every day.



HOW TO BECOME A MILLIONAIRE/ BILLIONAIRES RECAP

• Start making money at a young age
• Increase your career or business income
• Increase your side incomes
• Manage spending & live below your means
• Have a plan for every extra dollar
• Maximize savings in tax advantaged accounts
• Minimize debt
• Invest the rest in taxable accounts
• Automate monthly savings and investment
• Improve your knowledge and skills
• Develop a plan
• Enjoy the journey

I hope you enjoyed this article on how to become a millionaire or billionaire!

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Filed Under: Millionaires, Billionaires Tagged With: Earn Money, Manage Money, Personal Development

Reader Interactions
Comments

    Simple Money Man says

    March 25, 2019 at 7:30 am

    Very valuable insight here! I’m glad you laid out in the beginning to regarding primary residence. I agree that assets are assets. Liquidity is understandable. As long as your home is not underwater, it has positive value towards your overall net worth.
    Reply

        J says

        March 25, 2019 at 7:38 am

        Hi SMM. I’m always a little torn on the primary residence. It certainly is an asset to be included in net worth. But there are so many costs associated with home ownership that it can limit a persons ability to build wealth. J
        Reply

    GYM says

    March 25, 2019 at 8:51 am

    Haha we are totally in sync except yours US millionairism is more difficult to achieve because it is in US dollars and the Canadian dollar is weak right now!
    Reply

        J says

        March 25, 2019 at 9:15 am

        I hadn’t thought of that. I’m curious what the millionaire demographics are in Canada now that you bring it up. Maybe I will research that and do some type of comparison analysis with the US.
J
        Reply

    Miguel (The Rich Miser) says

    March 25, 2019 at 10:06 am

    Hi J,

    Great advice! As I’ve gotten older, this is what resonates the most with me: ” What millionaires have that others may not is a certain level of financial peace and security”. It’s not about cars and caviar, it’s more about being able to sleep soundly.

    I also think that what you say about automating investments is critical. It’s the best way to be consistent, in my experience – set it, and forget it.

    Cheers,
    Miguel
    Reply

        J says

        March 25, 2019 at 10:47 am

        Great points Miguel! Thanks, J
        Reply

    Dividend Portfolio says

    March 25, 2019 at 9:15 pm

    I feel like I do most of those things J but I’m nowhere near being a millionaire. A lot of it has to do with the fact that I’m late to the bandwagon, so to speak. Plus, I’m not as disciplined as I should be. But, those practices you mentioned are good for those of us striving to achieve millionaire status.

    On a wholly separate note. I just changed the tagline to my blog and I just realized it’s very similar to yours. I wrote about the recent change and will post it soon.
    Reply

       J says

        March 26, 2019 at 6:20 am

        Hey DP. Better late than never. Sometimes getting started is the hardest part and we all have bumps in the road along the way. I look forward to checking out the new tag line and your thoughts around it. J
        Reply

    Dividend Daze says

    March 26, 2019 at 4:00 pm

    Being knowledge about taxes is a very important skill that everyone should have. You don’t have to be a CPA to know how to take advantage of tax sheltered accounts and other simple things. Starting early also helps. More time in the market, gives you more time for your investments to build up. But even if one did not start early, they are still able to achieve the same outcome as long as they keep their spending under control for the most part. Thanks for sharing.
    Reply

        J says

        March 26, 2019 at 5:00 pm

        Thanks Daze. All good points. Hope you are doing great and well on your way to a million+!
J
        Reply


    Samantha says

    March 31, 2019 at 8:44 pm

    I’m a big believer in #3 with a small addition – make them primary income sources once they start throwing enough cash flow.
    Reply

        J says

        April 1, 2019 at 5:57 am

        Yes. That is the ideal situation if a person can pull it off! J
        Reply

    Millionaire Mob says

    April 17, 2019 at 7:19 pm

    Love it! It’s honestly all about repetition more than anything. If you can develop the pattern outlined above, then it’s only a matter of time. Nice post!
    Reply

        J says

        April 17, 2019 at 7:35 pm

        Who better to put the seal of approval on this post than the Millionaire Mob! Thanks for the kind words! J
        Reply

    Dan says

    April 23, 2019 at 6:18 am

    This is a great post. I like how you differentiate between making a lot vs. saving a lot (it’s what you have, not what you make) – that point is something I think most middle-lower class Americans struggle with – they look at people making more than them and think that’s the difference. The issue is the blue collar millionaire is alive and well in America and it’s by saving regardless of their income.
    Reply

        J says

        April 23, 2019 at 8:10 am

        Hi Dan. Thanks for stopping by and leaving your thoughts. You make a really good point. Financial security is in reach for most people if they put their minds to it over the long run. J
        Reply

    Smith says

    April 29, 2019 at 3:54 am

    Great Post.
    Reply

        J says

        April 29, 2019 at 5:28 am

        Thank you. J
        Reply

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