What images do you conjure up when you think of millionaires? Champagne, mansions, fast cars, South of France?
Not me. I think of a modest man who still lives in the same house he bought in 1958 and drives a modestly-priced car and rarely changes it. I’m talking of ace investor Warren Buffett, of course. Aspiring to his lifestyle will be more likely to get you to a wealthy retirement than trying to emulate the more obvious of the “rich and famous.”
But what habits do millionaires tend to have in common? Here are five:
Financially successful people frequently look for multiple sources of income. When their main day’s work is done, they don’t just sit back and watch the telly — they work second jobs, adopt hobbies that can generate income, or put time in on other personal efforts.
There are professional photographers, for example, who earn extra by running YouTube channels, submitting microstock work, or even hiring out equipment. During some of my software career, I wrote for The Motley Fool in the evenings (though I haven’t quite made it a millionaire just yet, but it’s made a difference).
Get up early
You might not think it would make much difference, but waking up early is a common habit among successful people. Being up a couple of hours ahead of work sets you up to be on top of everything, and can help you keep ahead of things all day. Do you ever have those days when there doesn’t seem to be enough time and every task seems to leap out at you before you’re ready? I do, and it’s usually when I start the day too late.
Write things down
Do you have a written-down monthly budget? Do you keep a record of all your expenditure? It’s frequently said (and it’s quite right) that if you don’t measure something, you have no idea how well or badly you’re doing it, and you have no real chance of improving.
I confess I only intermittently keep financial records. But in periods when I do record everything I spend, I find I spend significantly less. And in months when I’m watching my finances, I tend to work harder and get more paid work done.
Pay off debt
It’s said (though sadly unconfirmed) that Albert Einstein called compound interest the eighth wonder of the world. “He who understands it, earns it; he who doesn’t, pays it,” he is alleged to have said — and whether or not it was actually him, it’s absolutely right.
The most successful folk understand the full cost of every penny that’s borrowed, don’t take on any unnecessary debt, and pay off unavoidable debt (like their mortgages) as quickly as they can.
Invest in stocks
What do potential millionaires do with all the money they’ve earned and saved by following these (and other) habits? They don’t leave their money in a bank savings account or stick it in a cash ISA, as that would only earn pitiful rates of interest.
There are an estimated 250 ISA millionaires in the UK, and the bulk of their cash goes into individual company shares, followed by investment trusts. And they leave it there for decades, reinvesting all their dividends.
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Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.