Have you ever assumed that millionaires sit around and wait for a hefty inheritance check to come their way? While it’s no secret that wealth can open up many opportunities, one crucial factor is often overlooked: where does all this money come from?
To shed light on this misconception, several studies have been conducted by institutions such as the Bureau of Labor & Statistics, Capital One, and Dave Ramsey, each highlighting different nuances of the topic.
This article will delve into the truth behind millionaire inheritance and provide helpful advice on making smart investments to build your own fortune.
Did Millionaires Inherit Their Wealth?
Most people have a definitive pre-conceived notion and misconceptions about how most millionaires do their business, particularly regarding inheritance. However, according to a Dave Ramsey study on 10,000 millionaires, only 21% inherited any money.
It’s a common misconception that most millionaires inherit their wealth. Most millionaires have earned their fortune through hard work, investing, and making intelligent financial decisions. While some may attribute their success to luck, it’s essential to recognize that dedication is often the critical factor that sets millionaires apart. So for those aspiring to achieve similar levels of success, it’s crucial to stay focused and dedicated to your goals.
And surprisingly, only 16% inherited more than $100,000. Far from what most people think, right?
How Many Americans Receive an Inheritance?
Contrary to popular belief, most millionaires are self-made. While some may have received an inheritance, the truth behind many of these cases is a combination of hard work and good luck. In reality, the range of inheritance amounts isn’t as significant as one might assume.
According to a study by the Bureau of Labor and Statistics, around 30 to 40 percent of households will receive some form of inheritance. However, this figure includes both intentional and accidental legacies, with the latter being twice as common as the former.
That same study, while a little dated, showed how the number of households that did have some kind of monetary transfer in the study, actually dropped by 2.5% from 1989 to 2007.
It’s worth noting that while receiving an inheritance can undoubtedly provide a financial boost, it’s not necessarily a guarantee of long-term wealth. Studies have shown that many inheritors squander their windfall and fail to achieve financial freedom.
On the other hand, those who have built their wealth through hard work and wise investments are often better equipped to manage and grow their money over time. Ultimately, the key to building lasting wealth lies in adopting a disciplined and strategic approach to managing your finances, regardless of whether or not you receive an inheritance.
Who Typically Inherits Money?
For those not sitting on their inherited wealth, it can be easy to wonder where all the money comes from. But according to a white paper from United Income from Capital One, understanding the real story behind millionaire inheritances is key.
The lucky recipients of great wealth are typically aged between 51 and 61 – meaning that most of us have little hop for an overnight fortune. Additionally, 25% of all inheritance goes to those over 61.
This age typically lines up when people need the money later in life to supplement retirement.
Where Do Millionaires Get Their Money?
The cliche of a millionaire inheriting wealth from their wealthy parents may sometimes be accurate, but the real story behind most millionaires is much more complicated. In fact, according to that same Dave Ramsey study mentioned above, the top five career paths for people who acquire substantial wealth are engineer, accountant, teacher, management professional, and attorney.
Most of these careers should come as no surprise — those with extensive education and expertise play essential roles in various industries that can lead to financial success. While there is no one-size-fits-all path to becoming a millionaire, understanding how most millionaires acquired their money can be helpful when considering how you might get there yourself.
However, the exception to that rule is teaching, hardly a high-paying profession. Teaching may not be the highest-paying field, but it offers many fulfilling opportunities to positively impact students’ lives, which is often the real reward.
While roles like accountant or engineer may not immediately come to mind when considering high-paying careers, these positions often offer generous salaries and valuable benefits, providing individuals with stability and financial security. With determination and hard work, these fields have many paths to success and economic prosperity.
However, one key to success for millionaires is having an intelligent investing strategy and thinking less about your profession.
Paying off debt and learning smart money habits are essential foundational steps, but having an eye for investments will maximize your saving power and take you further than you ever imagined.
Choose wisely, as there are always risks when you put your money down; study the market carefully and understand what works with your financial situation before making significant commitments. Millionaires get their money by doing all they can to ensure they make wise investments over the many years they plan for long-term success.
How Can You Become a Millionaire?
Becoming a millionaire has been romanticized in recent years, and people often only focus on stories of people who got wealthy through inheritance or winning the lottery.
However, the reality is that these cases are few and far between.
As stated above, the most common path to becoming a millionaire is working in one of those above professions and old-fashioned investing. From stocks to index mutual funds to 401ks, numerous paths are available for anyone interested in becoming a millionaire, as long as they stay diligent and make wise decisions when putting money into potential investment opportunities. Such a powerful accomplishment calls for precision and caution, but with careful planning and budgeting, even young adults can earn their first million one day.
Of course, everyone has different wealth-building goals and paths they can choose, but if you want to become a millionaire, we recommend pursuing real estate investing, which is what we do ourselves. Specifically, buy and hold investments, meaning owning single-family homes as rental properties, have proven to be incredibly lucrative opportunities with high revenue margins and long-term stability over time. These are the core of what we refer to as our financial freedom plan.
An investment that puts your capital work for you over time can help create a long-lasting legacy of generational wealth and success.
It’s All About Putting Your Money To Work For You
The reality is that most wealthy people have done so by putting their money to work for them. This means investing in businesses, stocks, bonds, mutual funds, and other income-producing investments, such as real estate.
It takes knowledge, skill, and hard work to select suitable investments and monitor their performance over time. While some inheritance may boost your accumulated wealth, it is ultimately wise investment choices that will allow you to grow and maintain wealth over time. If you want to become one of the many successful individuals who have achieved millionaire status, start by informing yourself about investing success strategies.
To put this another way, we look at it as investing in assets that produce cash flow.
A famous quote from one of my financial mentors, Robert Kiyosaki, states, “Savers are Losers.” While this quote might initially be offensive to people, it makes sense when you think of it in the intent that it’s given.
Kiyosaki means that you will never be able to save your way to wealth. Putting money aside for a proverbial rainy day won’t get you anywhere, let alone become a millionaire.
My mentors at Cashflow Tactics introduced me to the “Financial Freedom Formula” for becoming wealthy. This formula aims to invest so that, eventually, your investments produce cash flow, which will exceed your expenses.
A corollary to this is when you reach that point; you are highly likely to be a millionaire.
The Notion of Inherited Wealth is Dangerous To Think About
It’s natural to feel intimidated when we compare our financial standing to those who have what appear to be lofty aspirations. However, it’s essential to recognize that many of the wealthiest people in the world today got there through hard work and intelligent decision-making, not simply because of inherited wealth.
The notion of inherited wealth can be dangerous because it paints an incomplete picture and implies that anyone who comes from money is fated for success regardless of their effort. In reality, finances are a bit more complicated than that – if you want something, you must take the necessary steps to find success.
There’s nothing wrong with using resources like familial connections or financial tutors as part of your journey toward prosperity. In most cases achieving success means sacrificing convenience for determination and perseverance. With enough dedication, you can make almost anything happen — positivity and a drive to succeed are often much more powerful than luck or inheritance.
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