Who wants to be a millionaire? In 2018, there were 11 million millionaires in the United States, up 6% from 2016. Just like the hit television show, quite a few people want to be a millionaire. But did you know there are different types of millionaires, and not all are created equal? Here are the different ways people become millionaires:
Inheritance. These are the millionaires who inherited money from a rich relative. They may have been named in the will as heirs to receive a large sum of money, or simply inherited the family business. Their time as a millionaire may be short lived unfortunately, if they run out of their inheritance money or mismanage the family business.
Lottery winners. These individuals make their millions from lotteries like PowerBall and MegaMillions.
The saver/investor. These millionaires made their money via investments, such as the stock market and their employer’s 401(k). Their ranking as a millionaire could fluctuate, depending on stock market turbulence or fluctuations.
The net worth millionaire. This millionaire has a net worth of $1 million or more. In many instances, these millionaires will include their residence in their calculations. However, if the value of their home drops, they could lose their millionaire status.
The passive income millionaire. This millionaire receives their millions from passive income, such as from rental property and royalty payments.
High income earners. These are individuals who earn $1 million or more per year for their services: athletes, entertainers, doctors, lawyers, dentists, etc.
You Make the Million, But Can You Keep It?
As we can see, there are many ways to make a million, but how many of these individuals can keep those millions? Most people want to get that million, but what happens after you get it?
Sadly, many people who make that million eventually lose it:
- 60% of NBA athletes go broke within 5 years of retirement.
- 70% of lottery winners and individuals who receive a large settlement (lawsuit) go broke within several years of winning.
- 70% of wealthy families lose their wealth by the 2nd generation, and 90% lose it by the third.
- In some instances, large inheritances can be lost within 5 years.
- Millions saved via investments (home, stock market) can be lost due to market crashes and recessions.
Yes, you may want a million, but just as much thought should be put into keeping your wealth as well. Just because a person has seven figures now doesn’t mean they will always have that wealth. Financial education and having a millionaire mindset are the keys to preserving your wealth.
What’s Your Freedom Income?
While many of us are focused on achieving the magical 7 figure number, there’s another number that may be more important: Your freedom income. Freedom income can be best described as calculating the total of all your bills, and how much passive income needed to cover them.
Passive income is the money you make while sleeping.
If your passive income exceeds you monthly expenses, you are now financially free! In other words, you don’t have to work anymore, and you may not need to become a millionaire to live a lavish life:
Do you have what it takes to be a millionaire? Which of the above scenarios are your best chance at becoming wealthy? Can you keep your riches? Stay tuned for Part II on this special segment on millionaires and the millionaire mindset.
In addition to the classic books listed above, get more great tips in my books Invest For Success: Millionaire Wealth Strategies Not Taught in School,and Planting Seeds: the Children’s Guide to Entrepreneurship (also available in French.)