3 in 4 Millionaires Say This Is Key to Financial Success

Taking this one step can help you become a millionaire too.

Despite COVID-19, 1.7 million Americans became millionaires in 2020. In fact, 8.8% of Americans, almost 1 in 10 U.S. adults, are millionaires. This is up from 7% in 2015 and 3.8% in 2000. Many people believe that you have to come from money or have a large income to become a millionaire.

Ramsey Solutions conducted the largest survey of millionaires ever with 10,000 participants and found that only 2% came from wealthy families. The study also found that the key to financial success is not through inheritance, lottery tickets, or six-figure incomes, but through disciplined spending and consistent investing.

Regular, consistent investing

According to the survey, the key to financial success and becoming a millionaire was through disciplined investing. Eight out of 10 invested in their workplace 401(k), 403(b), or equivalent company retirement plan. Millionaires took advantage of the free matching from their employers and the tax benefits. In addition to their company investment plans, three out of four also invested in their brokerage accounts, Roth IRAs, or traditional IRAs.

"Three out of four millionaires (75%) said that regular, consistent investing over a long period of time is the reason for their success," the survey states. "So, the story about the young computer genius who developed an app that earned millions overnight is the exception, not the rule."

Millionaires are made, not born

Becoming a millionaire doesn't happen overnight. Only 5% of the millionaires surveyed reached that feat in less than 10 years. It took most of them 28 years to become a millionaire, with 49 as the average age they reached the milestone.

The reason it takes close to 30 years is because of compound interest. Your wealth grows faster over time through compound interest. Warren Buffett, considered the world's greatest investor, states that compound interest is an investor's best friend. He compares it to a rolling snowball going down a hill. By starting early, the snowball will continue to get bigger over time.

If you were to invest $350 a month and gain a 12% annual return, in 30 years you will become a millionaire. It doesn't take much to become a millionaire as long as you are disciplined and save regularly. That is how Buffett built his wealth. The world's 5th richest man, his net worth is currently $114.2 billion dollars. He started investing when he was 11 years old and didn't become a billionaire until he was 50. In fact, he earned 99% of his wealth after his 50th birthday, 39 years after he started investing.

Smart spending and saving

The survey found that 94% of millionaires live on less than they make by using a budget, and close to 75% have never carried a credit card balance. Becoming a millionaire isn't about how much money you earn, but how much you are able to save. By spending less than they earned, they were able to invest and build the foundation of their wealth.

The best thing about becoming a millionaire is that it isn't difficult to become one. It takes time, patience, and being disciplined. Eight out of 10 millionaires did not receive a dime in inheritance. Only 31% averaged more than $100,000 in salary earnings and one-third didn't make six figures in any working year at all. The millionaires in the study focused on staying out of debt, watching how much they spent, and investing a consistent amount regularly.