5 Myths About Millionaires and Money Management

Updated July 17, 2021 - First published on March 11, 2019

Writer

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield

There are a lot of misconceptions about millionaires and how they got their money. But the truth is it's easier to join them than you think.Image source: Getty Images.

Nearly everyone wishes they could be a millionaire, but if you asked most people whether they think they'll ever attain that coveted status, you'll find few who will say yes. Many think there's some secret formula to building a seven-figure net worth, but the reality is far more ordinary than you'd imagine.

Being a millionaire often has little to do with luck and connections and everything to do with responsible money management. Here's a look at five common myths about millionaires that hold people back from realizing their own million-dollar dream.

1. They inherited their money

Perhaps the most prevalent millionaire myth is that millionaires have never had to work for their money because they just inherited it from a wealthy relative. In reality, only about 12% of millionaires inherited their wealth, according to a 2017 Fidelity survey. The remaining 88% are self-made. Through a combination of hard work and smart money management, they were able to steadily grow their net worth over time.

2. They made the right bets on risky investments

While you might meet the rare millionaire who made their fortune by investing in the next big thing, most don't get to where they are by trying to beat the market. Instead, they make smart investments based on their risk tolerance. Many choose to invest in index funds because they are a low-cost way to diversify an investment portfolio and they typically have solid rates of return, often averaging 10% or more per year over several decades.

Many millionaires first hit seven figures by investing in their 401(k)s. With regular contributions and a well-diversified portfolio, it's possible to save $1,000,000 over time, especially if you begin saving early on in your career. Your early contributions will be worth more than your later ones because that money has more time to compound.

3. They have fancy degrees and high incomes

While it's true that the majority of millionaires are college-educated, you don't need an Ivy League diploma or an advanced degree to have their kind of success. In fact, over 15% of the 400 wealthiest people in the U.S. don't have a college degree at all, according to Forbes. What's more important is drive and smart financial planning.

Featured offer:save money while you pay off debt with one of these top-rated balance transfer credit cards

A six-figure income could easily turn into six-figure debt in the hands of a spendthrift. But someone who's willing to work hard and prioritize saving can turn even a modest salary into a substantial nest egg over time. The key is to have a plan, both for where you'd like to go in your career and how much you would like to save each month, and then do your best to follow through.

4. They live in luxury

When most people think of millionaires, they envision mansions and sportscars, but the lifestyle of the average millionaire isn't that different from ordinary Americans. Most drive ordinary cars and live in homes they can comfortably afford. They may buy the occasional new toy or take a vacation here and there, but by and large, they're frugal. Warren Buffett, one of the richest men in the world, still lives in the home he bought in 1958 for $31,500.

Living below your means is crucial to financial wellbeing, especially if you're trying to increase your wealth. It will help you to avoid going into debt and grow your savings more quickly. If you don't have a budget already, now is a great time to start one. Aim to set aside at least 10% to 20% of your salary for savings each month, if you can afford to do so, and then invest the money you won't need to use within the next three to five years to help your nest egg grow even faster.

5. They don't need to work

In the past, having $1,000,000 in the bank meant you were set for life, but today, that amount doesn't go nearly as far. A million-dollar investment portfolio will only last the average retiree between 13 and 25 years, according to HowMuch.net, and for younger adults with children and higher expenditures, it might not even go that far. The truth is, most millionaires still get up and go to work every day and they still have the same financial concerns as everyone else -- trying to save for their children's college education, pay the bills, and save for their own retirement.

When you actually look into the lifestyles of most millionaires, you find that they're actually not that different from those with average incomes. There are no special secrets to their success, and that's encouraging because it means that with a budget, the right investments, and a healthy dose of discipline, just about anyone can join their ranks.

These savings accounts are FDIC insured and could earn you 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

Two of our top online savings account picks:

Rates as of Sep 18, 2023 Ratings Methodology

Advertisement

American Express National Bank	SoFi Checking and Savings

Member FDIC.	Member FDIC.
Rating image, 4.00 out of 5 stars. 4.00 stars Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.	Rating image, 4.75 out of 5 stars. 4.75 stars Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Open Account On American Express' Secure Website.	Open Account On SoFi's Secure Website.
Read Review	Read Review
APY: 4.25%	APY: up to 4.50%
Min. to earn APY: $1	Min. to earn APY: $1

Our Research Expert

Kailey Hagen

Kailey Hagen has been writing about small businesses and finance for almost 10 years, with her work appearing on USA Today, CNN Money, Fox Business, and MSN Money. She specializes in personal and business bank accounts and software for small to medium-size businesses. She lives on what's almost a farm in northern Wisconsin with her husband and three dogs.

Share this page

View All Articles

4 Little-Known Perks of a Costco Membership

By: Dana George | Updated July 25, 2023- First published on July 25, 2023

Costco has a faithful legion of fans -- otherwise known as members. There are 123 million of them, to be precise. Throughout the years, Costco has added new membership benefits, some less well-known than others. Here are four that members may not realize exist.1. RV parkingWhether you spend part of each year visiting the highways and byways of North America or you're hoping to rent an RV for your next vacation, it's good to know that some Costco locations allow RVs to park overnight in their lots. Free overnight parking can certainly cut down the cost of travel.Consider the convenience. You arrive near closing time, pick up all the items you've already burned through or forgotten to bring, and spend the night in a well-lit lot. Granted, pulling an RV into a (typically) packed Costco lot may not be the easiest thing you've ever done, but once the lot clears out, you may even hear the sound of crickets.Notice we said that some Costcos permit overnight parking for RVs. When a store does not, it's often because local ordinances don't allow it. However, with so many Costcos scattered across the country, you should have options.The easiest way to determine which Costcos allow overnight RV parking is to check this Costco locations finder. Once you see one near where you plan to stay, call that store and ask to speak with the manager. Once you have them on the line, ask about their overnight policy. If the store does permit overnight parking, ask for permission to stay. According to the Camper Report, Costco has rules for campers, so you may want to ask where you can get a copy of those.2. Home, auto, renters, and specialty insuranceIn the back of our minds, most of us realize that Costco offers insurance, but we're not sure of the details. Partnering with CONNECT, powered by American Family, Costco members receive discounted rates on many of their insurance needs. Beyond the initial discount, CONNECT allows you to add more. For example, you may qualify for a safe driving, multi-policy, or student discount.And if you're an Executive member, CONNECT sweetens the pot even more by providing you with benefits like roadside and lockout assistance.At a time when many people are unhappy with the insurance industry, 9 out of 10 members who sign up for CONNECT coverage go on to renew their policy with the insurer.3. Home and business suppliesWhile it may occur to you to pick up envelopes and printer paper at Costco, have you ever taken advantage of the low prices on items like checks, ink stamps, and address labels? Many of the supplies you need to take care of business -- at home or in the office -- are available for up to 50% off.Executive members enjoy an even deeper discount.4. Floral deliveryOnce you factor in delivery costs, sending a lovely bouquet of flowers to someone can cost a small fortune. That's not the case at Costco. Costco's online floral department offers everything from anniversary and graduation bouquets to bulk flowers. And here's where the real savings come in: Delivery is free. The price you see listed on the site, plus tax, is the price you pay.Few things are more frustrating than typing your credit card number into a florist's site, only to learn that delivery costs nearly doubled your purchase price.As Costco layers on new perks, keeping track of them may become even more difficult. It's a good idea to check periodically to see if there are any you're not taking full advantage of.

SNAP Benefits Will Increase in 2024. Here's How Much a Family of 4 Will Receive

By: Emma Newbery | Updated Aug. 7, 2023- First published on Aug. 7, 2023

Are SNAP benefits enough?A monthly payment of $973 for a household of four equates to around $8 per person per day. While SNAP benefits aren't designed to cover everything, it isn't easy to feed a family on around $2.66 per person per meal. Indeed, research from the Urban Institute showed that the maximum benefits often don't cover a family's food costs. "Amid inflation, SNAP benefits did not cover the cost of a meal in 99 percent of counties in 2022," said the report.The new benefit amount -- a monthly increase of $34 for a household of four -- is roughly in line with cost-of-living increases measured by the Bureau of Labor Statistics (BLS). Its latest Consumer Price Index figures show that the cost of all items in June, 2023 was up 3% over the year before. However, inflation does not impact all aspects of life equally.The BLS data also shows that food at home increased by 5.7% year over year. The new SNAP benefits do not match this. Hypothetically, a 5.7% increase in benefits for a family of four would mean a new monthly payment of $992, rather than the planned $973.In addition, this year brought the end of the pandemic-era emergency food benefits throughout the country. According to CBPP calculations, this meant the average person received about $90 a month less in SNAP benefits. Even factoring in the increased SNAP benefit amount, many households have seen a significant drop in their food benefit amount, and the revised 2024 payments will do little to close this gap.How to make your SNAP benefits go furtherIt can take time and energy to provide healthy food for your family on a strict budget. The challenge is that in a busy household, time and energy are also limited resources. Even so, if you can carve out some time to plan your grocery-shopping trip, it can make a big difference.Here are some ways you might stretch your SNAP benefits a little:Use cash back apps and coupons: Look for cash back apps that work in stores that take your EBT card. You'll usually need to download an app and then scan your receipt after you've been to the store. Pay attention to coupons, whether in store or online as these can often carry hefty discounts.Always shop with a list: Planning your food shopping is one of the best ways to reduce costs. Even more so if you use a cash back app or coupons. Check what offers are available on items you normally buy before you go shopping. Mark the items that qualify for rewards or discounts on your list, so you don't miss them when you're shopping.Look for double up programs: There are Double Up Food Bucks or other programs in various states that essentially give you two for one on all produce at participating farmers markets and stores. It's a great way to get more fruit and vegetables for your SNAP dollars.Buy in bulk and batch cook: It isn't always easy to find the extra cash for bulk buying when you're eking out every cent. However, if you can manage it, you may be able to save both money and time. You might, for example, batch cook a stew and freeze portions for future meals.Unfortunately, food insecurity still impacts many American households. If you don't have enough money to feed your family this month, look for additional help. Find out what food pantries and soup kitchens are operating in your area on which days, and whether you'll need to present any documents. Call United Way at 211 for information about assistance programs in your area.

Does Your Income Make You Upper Class, Middle Class, or Lower Class?

By: Christy Bieber | Updated Sept. 5, 2023- First published on Sept. 5, 2023

Incomes vary widely across the United States, with some people making many times the amount that others earn. If you've ever wondered how your personal finances stack up, and what "class" your income officially puts you in, here's what you need to know.What income do you need to be upper, middle, or lower class?Based on 2021 data, here's what you would need to earn in order to be in each class:Lower class: This is defined as the bottom 20% of earners. Those in the lower class have an income at or below $28,007.Lower middle class: This is defined as individuals in the 20th to 40th percentile of household income. Earnings among this group are between $28,008 and $55,000Middle class: The middle class is officially those whose earnings put them in the 40th to 60th percentile of household income. The income range is $55,001 to $89,744.Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131.Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.Take a look at these numbers and see where you fall based on your own earnings. And remember, this is a snapshot in time -- your earnings can change throughout your life, and so can your class designation.Will your success be determined by your income and class?It's probably not a surprise that those in the upper classes or in the upper middle class do have a higher net worth than those in the lower class or the lower middle class. But the disparity is greater than you might think. While the median net worth of those with incomes of $149,132 or higher is $805,400, the median net worth of those in the lower class is just $12,000.Your income impacts how easy it is for you to build wealth. If you make more money, it is easier to save it and invest it in a brokerage account where it can work for you. If you make less money, then you may struggle even to cover the necessities out of your checking account, much less to buy valuable assets that help you grow richer over time.But that doesn't mean people who don't make a lot of money can't be a financial success. A lot depends on what you do with the money you actually have, including how much you spend and how much you save.There are plenty of people who make over $100,000 a year who live paycheck to paycheck, and plenty of people with incomes that put them squarely in the lower or lower middle class who have diligently saved and grown quite wealthy over many years.Here's how you can improve your standingDon't be discouraged if you aren't in the class you hope to be. For one thing, you have opportunities to increase your income by taking the following steps:Learning new job skills: You could obtain a certification, take part in a management training program at work, or take some classes to develop skills that may help you get promoted (such as computer training courses or public speaking classes), depending on your industry.Take on a side hustle: The average side hustle brings in $483 per month, which is a good amount of extra money that could make a meaningful difference in your income.Work some extra hours: If your company allows you to work overtime, take advantage of it, as many people are paid time and a half for overtime hours.Negotiate your salary: According to Pew Research, when workers negotiated for higher pay, 28% said they received the extra money they asked for and 38% indicated they were given more than originally offered but less than their ask. Whether you are getting a new job or staying at your current job but feel you're underpaid, it doesn't hurt to make a request for more money -- especially if you can find salary data to back up the fact that others in your industry are paid more.And even if your earnings never put you in the top 20% of earners, you can still have a rich life and end up with the financial security you deserve -- especially if you prioritize saving as much as you can for as long as you can.

3 Reasons I Don't Like Aldi as Much as I Used To

By: Maurie Backman | Updated Sept. 13, 2023- First published on Sept. 13, 2023

At some point in 2022, I discovered Aldi and began shopping there weekly. I found that I was able to save money on my grocery bill by purchasing certain produce items there. And since I happen to have an Aldi adjacent to my local Costco, it wasn't particularly out of my way.But over the past few months, I've become less enamored with Aldi. Here's why.1. The selection is just too limitedAldi -- at least near me -- is a minimally stocked grocery store. The shelves aren't loaded the way they are at my nearby ShopRite and Stop & Shop.To be fair, this was the case when I first started shopping there. But because there's just not a lot of selection, I'm generally limited to only buying a few items when I pop into Aldi.Not so long ago, I was running into Aldi for some fruit, which I usually buy there, and I needed to grab shredded cheddar cheese. Normally, I get that at Costco, but I didn't want to run next door to Costco and wait in a line for cheese alone. Unfortunately, though, Aldi didn't have the cheese I needed, so I had to make an extra stop anyway.2. The inventory is too inconsistentNot only is there a limited selection of food items I can buy at Aldi, but sometimes, I can't even find the five or six things I'm looking for. Aldi was once my go-to source for avocados, since it's an expensive purchase and Aldi tends to sell them for less than Costco (at least in my area). But the last few times I stopped at Aldi, avocados weren't in stock.And that's happened to me with other things, too. Over the past several months, I've struggled to find everything from cucumbers to strawberries at Aldi as well.3. What the store saves me on groceries, I lose via lost working hoursShopping at Aldi still has the potential to save me a little money on groceries. At a time when supermarket prices are up 3.6% on an annual basis, that helps.The problem, however, is that even though Aldi is right near Costco in my neighborhood, thereby allowing me to combine those trips, it still takes time to visit an extra supermarket. I have to find parking, wait in a checkout line, and spend time searching the shelves.While it's nice to save $2 here and $3 there, the reality is that a stop at Aldi might cost me 20 or more minutes of work -- especially when I don't manage to find the things I need. And losing out on that work time often means forgoing more than $2 or $3 of income. So from a time perspective, it's just not worth it.Shopping at Aldi could make sense for a lot of people. If you're someone with flexibility in your schedule and grocery list, and you're not so picky about the brands you bring home, then it could pay to spend the time visiting Aldi, even if you don't always manage to find all the things you need. But I've reached the point where shopping at Aldi makes less and less sense for me, so I'll most likely stop going there unless it's a one-off basis.

7 Everyday Essentials on Sale at Costco for September 2023

By: Brittney Myers | Updated Sept. 14, 2023- First published on Sept. 14, 2023

A big part of the personal finance draw of Costco is that its regular prices are already lower than you'd pay in other stores. But that doesn't mean you have to forgo sales altogether. Costco has extra deals each month on all kinds of products.For September, the biggest deal on everyday essentials is a rebate offer from P&G (though there are some hoops). A few other household necessities are also on sale. And, surprise of surprises, a lot of deals are also available online (though they'll likely cost more than the in-store versions). These deals are valid through Sept. 24, 2023.1. Up to $50 back on P&G select productsDiscount: Spend $100, get a $25 Costco Shop Card; Spend $200, get a $50 Costco Shop CardEligible items: Participating brands include: Align®, Always®, Bounce®, Bounty®, Cascade®, Charmin®, Crest®, Dawn®, Downy®, Downy® Unstopables, Febreze®, Gain®, Gillette®, Gillette® Venus, Head & Shoulders®, Metamucil®, Mr. Clean®, Olay®, Old Spice®, select Oral-B®, Pantene®, Pepto Bismol®, Prilosec OTC®, Secret®, Swiffer®, Tide®, Tampax® Pearl and Vicks®Details: Purchase qualifying items at Costco, then scan your receipts at getpgoffer.com. Max $50 in Costco Shop Cards per membership number.Availability: In-store and Costco.com2. $15 off: Philips Sonicare Replacement HeadsEligible item: DiamondClean or Premium Plaque Control, 8-count packDetails: Max 5 per memberAvailability: In-store and Costco.comPrice online: $49.99 after discount3. $13 off: Gillette ProGlide Plus Razor RefillsEligible item: 16-count packDetails: Qualifies as part of the P&G offer. Max 3 per memberAvailability: In-store and Costco.comPrice online: $39.99 after discount4. $10 off: Gillette Venus Comfort Glide Razor & RefillsEligible item: Sunny Citrus, 1 handle plus 12 cartridgesDetails: Qualifies as part of the P&G offer. Max 3 per memberAvailability: In-store and Costco.comPrice online: $21.99 after discount5. $8 off: Kirkland Signature Motor OilEligible item: Various oil types, selection varies by locationDetails: Max 5 per memberAvailability: In-store6. $5 off: All Free & Clear Plus+ laundry detergentEligible item: 237 fl. oz. (158 loads) jugDetails: Max 5 per memberAvailability: In-store and Costco.comPrice online: $16.99 after discount7. $4 off: Crest Complete + Scope toothpasteEligible item: 8.2 oz., 5-packDetails: Max 2 per memberAvailability: In-store and Costco.comPrice online: $11.99 after discountDon't forget to stack with your cardWhile these are all decent deals on their own, don't forget your shopping secret weapon: credit card rewards. Although Costco's somewhat limiting restrictions mean you can only use your Visa credit card, there are still plenty of solid rewards options within the Visa family. This includes Costco's own Costco Anywhere Visa® Card by Citi.Folks looking to really maximize their return should be using their favorite points card. These are my top picks:Capital One Venture X Rewards Credit CardBank of America® Customized Cash Rewards credit cardChase Freedom Unlimited®The last one may seem like it earns less than the others, but it's actually part of the larger Chase triumvirate. You use your Chase Freedom Unlimited® for your Costco spend. Then, move your rewards to your Chase Sapphire Preferred® Card so you can use the points for free travel.