The 80/20 Millionaire: The Few Habits That Create Most Millionaires

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2:47What's up, everybody? And welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be talking about the 80-20 millionaire. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co slash newsletter. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player.

3:23Now today, you know your boy is pumped because we you're going to be talking about things that millionaires do. And I love talking about millionaire habits because there are some very common themes that we can find when it comes to digging into what true, real millionaires do. And so the goal for this episode today is what I wanted to do is I wanted to find a way to figure out, okay, if we looked at millionaires, what are the things that millionaires do that really is 20 % of the effort that creates 80 % of the results. This is going to be one of those lessons where if you just do the 20 % of those things that are out there that most millionaires do, it will create 80 % of the results for you to become a millionaire.

4:05And overall, we are being thrown so many things at us when it comes to finance. The world is full of noise when it comes to financial products. You may be seeing people say, oh, life insurance is an investment. Go and buy an annuity. Go out there and buy these different mutual funds, go and buy individual stocks, go buy dividend stocks, and you have no idea what the heck people are even talking about or where to even turn. Well, my friends, today, we're going to be talking about what the 80-20 millionaire does. They focus on the 20 % of things that will actually result in 80 % or more of the results.

4:39And we're going to back this episode up by a lot of different statistics. So we dove deep into different millionaire studies to show you, hey, this is what true millionaires do. And so we wanna go dig in and find those specific things. So I am really pumped for this episode. I hope you get a ton of value out of this episode as well. And if you want our free guide to the 80-20 millionaire, we're gonna link that up down below in the show notes. So make sure that you check that out. We have a free guide that you can do. Just click that link below and we will send the 80-20 millionaire guide to you because these small side of behaviors are gonna explain the majority of millionaire outcomes.

5:15So if that's something you're into, Let's get into it. So number one is I want to make sure that we all understand one of the biggest myths that is out there with millionaires. And there's the myth of inheritance. So a lot of people will say, oh, most people became millionaires because they inherited a bunch of money or they won the lottery. That's how they became millionaires. That's the broke mindset. That's what broke people think. Because here's the statistic. 80 % of millionaires are self-made. And this came from multiple different studies that found this. Ramsey Solutions did a study, one of the largest studies of millionaires of all time.

5:49And it said that 80 % of millionaires are self-made. There was a national study of millionaires that found that 80 % of millionaires are self-made. Northwestern Mutual did a 2024 planning and progress study that found that 79 % of the millionaires studied were self-made. This comes up over and over and over again. Now, this is a beautiful stat. Why is this a beautiful stat? Because that means anybody in this world can build wealth. If 80 % of the people who were millionaires became millionaires on their own, what's stopping you? You can do it too. I know you can do it too. And that is the entire motivation and goal.

6:24And this is why we're talking about this at the top of the show, because I want you to understand that you can do this too. You just need to make sure that you have the right habits in place. Only 11 % of millionaires primarily inherited their wealth. So that means 89 % of them, the primary reason why they became millionaires was not an inheritance. Just 3%, according to Ramsey Solutions, inherited more than$1 million. That, my friends, is some of the most reassuring stats that you could ever have. Now, 80 % of millionaires grew up in families that were middle class or poorer and not wealthy. And so this is showing you, okay, a lot of millionaires did not come from wealth.

7:05They did not inherit their wealth, and only an extremely small portion inherited more than$1 million. This means millionaires don't start with a trust fund. They don't start with someone handing them a family business. They don't start with a safety net. Instead, they began in ordinary circumstances, just like you and I did, and built wealth through consistent financial behavior. So I want you to take some action steps based on this data. I want you to take some action steps based on what you just found out. Because I don't want you to wait for an inheritance. I don't want you to wait for a handout.

7:36I want you to focus on those things that you can control. So plan your wealth as if nothing else is coming. Nobody's gonna come and save you. The only person that is gonna save you is yourself. So what you need to do is say, I'm gonna do this for myself. I'm gonna do this for my family. I'm gonna do this for my kids and I'm gonna become a multimillionaire. One of our goals at Master Money Academy is to create a million millionaires. Why? Because we believe every single person in this world can do it. And I believe you can do it, which is why we're talking through this. Now, focus on the levers that you can control is number two.

8:07I want you to focus on saving. I want you to focus on investing. I want you to focus on career goals. And I want you to focus on debt management. We're going to talk about statistics around all those different areas coming up here in a second. But I want you to focus on those major areas that you can control. Also, I want you to teach your kids about this stuff. A lot of people who are listening have kids. A lot of people in Master Money Academy have kids. And I want you to teach your kids financial independence instead of expecting to just pass on wealth and handing them money. Why? Because it shows right here that doing it yourself is gonna be one of the most rewarding things.

8:41And statistically, most people who inherit money, they blow it by the third generation. So we wanna make sure that first, we are teaching our kids how to manage money. So if you have kids, making sure that you have a plan in place to teach them how to manage money so that when you do pass on wealth, if you decide to do so, then they know actually how to handle those dollars. Next, where do millionaires invest? This is the biggest question that I think a lot of people have because they want to learn how to grow their wealth. They want to understand where those dollars need to be going. Do I need to be buying businesses?

9:11Do I need to be buying annuities? Do I need to be buying all these different things? Or can I build wealth just at my nine to five? Well, that's a great question because eight out of 10 millionaires invested in their employer's 401k during their working life, according to Ramsey Solutions. And about 75 % also invest outside through IRAs and a taxable brokerage account. My friends, why do you think all the time we really harp on making sure that you try to max out those retirement accounts? The reason for this is because the data shows that most people out there who actually build wealth over time do so in retirement accounts.

9:47Why? Because the tax benefits are so spectacular. But in addition, this is a great place to just force yourself to save your dollars so that over time you can reap the benefits of compound interest and grow your wealth. Now, 75 % say consistent long-term investing was the single biggest driver of wealth. So you've heard me talk about this a ton of different times. We here at Master Money and the Personal Finance Podcast, we are long-term investors. We do not day trade. We do not get in and out of stocks. We buy things and we hold them for decades. That is the mantra that we harp on here. If you're a short-term investor, I'm just gonna tell you right now, our performance is gonna beat you in the future.

10:24Why? Because we stick with what the market does. and investor emotions will not outperform the market. In fact, 90 % of professional money managers do not outperform the market year in and year out. And of the 10 % that do, they are not the same year in and year out. They have Harvard graduates, they have Yale graduates, they have Princeton graduates, all working for them, and they still can't outperform the market. Why do you think that you can as an individual? Why? Because you definitely can't. And so overall, it is best for most situations to make sure that you are investing in things like low-cost index funds.

10:59Now, 90 % of millionaires own their primary residence. This is a very interesting statistic. And 20 % own additional investment properties such as rentals or vacation homes. So I think you hear a lot of people say, real estate has made most people millionaires. And it has because of primary residences. A lot of folks who have a net worth of a million dollars, especially early on, have equity in their homes. Now, you have heard me talk about this a number of different times. A home typically is not the best investment, but if you are gonna live somewhere, buying a home could be the best investment if you run the numbers.

11:32You need to run total cost of ownership before you ever buy a house, where a lot of people will say to you, hey, I am gonna go and buy a house because it is a fantastic investment. Well, if you look at the historical data, you may think that. It's ingrained in your brain, but you gotta go look at the data. And typically, the data shows that a home appreciates right around 3 % every single year after you factor in total cost of ownership and everything else associated with that house. So maintenance, repairs, capital expenditures, upkeep, all those different things are going to be really, really important to factor in.

12:00We have something called the total cost of ownership calculator. So if you go to mastermoney.co slash resources, we have a total cost of ownership calculator. It'll take you step by step on how to calculate total cost of ownership for a house. But when you start to get to that point in time where you want to buy a home, it is very beneficial to own that home because it's gonna build up equity over time if you own that home for long periods. Now, it doesn't always make sense to buy a house. In fact, the time I'm recording this, we're in a time where it does not make sense in most areas to buy a house when you run the numbers.

12:31But when the time comes where it does make sense, that's where you pounce on those opportunities and you can own your own home. In fact, this shows right here, 90 % of millionaires own their primary residence and 20 % own additional investment property. So if you think, ah, I'm not buying real estate, how am I gonna become a millionaire if I don't even own real estate? You're gonna hear people on social media, They're going to be leaning on a Ferrari or a Lamborghini, and they're going to say, you need to own real estate, 401ks are a scam or Roth IRAs are a scam. Guess what? Those folks are trying to sell you a course.

12:58I have owned a lot of rental real estate in the past. And let me just tell you right now, it is not a passive endeavor whatsoever. It is something that you are going to actively have to work at in order to make sure that you can become profitable with those properties. And so it is a great thing to own. I love real estate as an asset class. I love how real estate can produce cash flow. I love the tax benefits. I love the appreciation benefits long-term, and I'm talking ultra long-term, but in the short run, don't feel like you have to own real estate to become a millionaire because you don't. Now, one thing I want to note also is where millionaires invest is if you go and read that Ramsey study that he did, and it was the largest millionaire study ever, not one millionaire credit single stock picking, day trading, or timing the market for their success.

13:41Not one single person. And they surveyed over 10 ,000 different millionaires and not a single one attributed that to their success. What does that tell you? Is that you see all these people coming up and they're running ads for their day trading course or they're running ads for their stock picking courses. My friends, don't fall prey to this stuff. This is the stuff that's gonna get you into trouble. And instead we need to make sure that we are focusing on the things that are historically proven to work. So millionaires build wealth by using tax advantage accounts. They do this by investing in real estate.

14:13They do this by looking at index funds, and they do this by doing the boring stuff. Long-term investing over long-term time horizons. Boring builds wealth when it comes to investing. And you need to understand that, and I'm going to say this over and over and over again. Boring builds wealth. So what are some action steps you should take based on this information? Well, one is I would look at your company's 401k, making sure you get that 401k match. Then you can go to the Roth IRA, then back to the 401k once those are all maxed out. and then beyond that, going to your taxable brokerage account as well.

14:45Another thing I would do is prioritize low cost index funds like the S &P 500 or the total market index fund. There are low cost index funds out there, a ton of them that are absolutely fantastic. And the market has really shifted to index funds and ETFs, which I absolutely love because they keep your costs low. Morningstar just did a study and they came out to see what was the biggest factor to long-term market success. And the long-term market success that they found was keeping investment fees low. That was the number one factor to success, according to Morningstar, which is a really, really important statistic to understand.

15:18Now, if you're new to index funds or ETFs, we have a course called Index Fund Pro. If you go to mastermoney.co slash courses, or if you join Master Money Academy, it's actually in Master Money Academy there. Now, the next thing is to consider homeownership as a long-term asset builder, but only if you're financially ready. Again, you need to run the numbers on total cost of ownership. And when the time comes where it makes sense to buy a home, then that's the time to pounce and buy a home. I think home ownership is fantastic. I've owned a home for a very long time, but the numbers made sense. If I was looking at buying a home at this point in time right now, where interest rates are really high and affordability is at an all-time low, and there's a lot of sellers having to sit on the market because affordability is so terrible, I probably wouldn't even consider it.

15:59I'd probably consider renting because I've run the numbers before on total cost of ownership. And our calculator will do this for you. It will tell you, well, does it make more sense to rent or does it make more sense to buy? And that is one of the best things that you could do. Again, mastermoney.co slash resources, go run those numbers. But once it's time to buy, buy a house that you want to live in for a longer period of time and hold it for a long period of time. That's the way to go when it comes to home buying. So next, we're going to look at the professions of millionaires to see, are they all doctors and lawyers or what do they actually look like?

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21:19So number one overall were engineers. And if you've ever looked at the surveys of the highest paying jobs out of college, engineers always at the top of that list. That is something that I think is a really telling indicator. Number two was an accountant. So a CPA. So those two were like, yeah, I can see that. I mean, those are folks who understand numbers. They understand systems and processes, and they understand how to make sure that they keep a good portion of their income so they can invest it long term. So those two, you completely understand. Here's where it gets fun. Number three is teacher.

21:48Teacher was number three on all the professions. So there was a book that came out called The Millionaire Teacher. And this guy wrote this book talking about exactly how he actually became a millionaire because of a teacher. Stephen Chen, if you've ever seen him, Call to Leap, I think is his social or Instagram handle. He is a multimillionaire teacher that now teaches personal finance. There's a ton of teachers out there who have built a tremendous amount of wealth on a low salary. And these are really good examples of people who honestly are just really good at saving money and figuring out ways to save small amounts of money over time that are going to grow to very large amounts of money.

22:19Number four is manager. So a manager, a middle level manager at a corporate job was number four. And then number five is attorney. So those are the top five. You don't see doctors on this list, which is absolutely fascinating to me, but those are the top five. Now, only 15 % held executive roles such as a VP or a CEO. So if you have this preconceived notion that you need to be a vice president at your company or you need to be a CEO, only 15 % of them held those roles. One in three never earned six figures in a single year of work. So 33%, according to Ramsey Solutions, never earned six figures ever.

22:54And only 31 % average more than$100 ,000 per year during their careers. That, my friends, is a really telling stat because you can build wealth even if you don't make$100 ,000 per year. I think a lot of us out there, we think we need to make$100 ,000 per year or else, but a lot of folks never made$100 ,000 per year. Now, sure, the argument coming back would be these people work during a time where you didn't need to make$100 ,000 per year yet, and that may be true, but I want you to stop those limiting beliefs and understand that you can build wealth even on smaller amounts of money. Now, 88 % were college graduates.