Self-Made Millionaires: How They Did It And How You Can Too
- Written by Candice Elliott
We’ve had more than a few self-made millionaires on Listen Money Matters. They did it and you can too.
We’ve introduced you to self-made millionaires who made their money blogging, investing, selling domain names, and consulting. They all made their millions a little differently, but there are some things they all have in common.
It Wasn’t Overnight
People who are self-made millionaires are probably are really annoyed when people call them “an overnight success.” You don’t go to sleep with $7 in the bank and $20,000 in credit card debt and wake up a millionaire.
That’s not to say that becoming a self-made millionaire means years of blood, sweat, tears, and eating ramen. It can mean that but what it mostly means is they kept at something. A business they started, investing, working their way up in their careers, gradually building a portfolio of rental properties.
What the public doesn’t see are the countless small successes and failures that added up to that seemingly overnight success.
Some self-made millionaires achieved that status at a young age, but that just means they started at something early and therefore had more time to keep at it than if they had started later in life. It doesn’t mean they made it overnight even if they were millionaires by age 25.
They Earned It
Well, obviously. We aren’t counting bank robbers or jewel thieves among our round up of self-made millionaires. What we mean is, you don’t become a millionaire by clipping coupons and skipping your daily coffee on the way to work.
Saving money matters of course but making money is what will make you a millionaire.
This can start in a number of ways in a number of places. Start investing early. Compounding interest is a magical thing, but it takes time. Here’s an example:
Three people each invest $12,000 a year for ten years. Person A invests from age 25-35. This person stops investing at 35 but leaves the money in a retirement account that gains an average of 7% a year. Person A leaves the money untouched until retiring at age 65.
Person B invests the same amount per year from age 35-45, stops and leaves the money untouched until 65.
Person C does the same from age 45-65.
At age 65 Person A has $1,444, 696.00. Person B has $734, 549.00 Person C has $373,407.00 Time is the magical ingredient when it comes to building wealth.
If you decide to go to college (and you don’t have to, plenty of self-made millionaires did not) make sure it’s a good investment. That means choosing a degree there is demand for, and that pays well, especially if you are going to go into debt to go to college. (You don’t have to. There are plenty of
ways to go to college without taking on tremendous amounts of student loan debt).
When you start working plan on moving around, a lot. The average raise is a paltry 3%, barely keeping you ahead of inflation. If you want to make more money in your career, you need to ignore the outdated conventional wisdom that says job hopping looks bad on a resume.
Those who stay in a job longer than two years will earn an average of 50% less over their careers than those who changed jobs frequently. Gone are the days of working for the same company for 30 years and retiring with a good pension. Companies don’t have that kind of loyalty to their employees, and you don’t owe a company your loyalty in return.
They Learn from Failures
Understand the difference between mistakes and failures. Mistakes can be corrected, a failure can’t be corrected, but you can learn from it, so the mistakes you made that resulted in the failure don’t happen again.
Know when to walk away entirely. Sometimes we pour good time and money after bad to try to save something that cannot or should not be saved because well, we’ve already spent so much time and money. This is a sunk cost fallacy. We know it’s hard to give up on something you’ve put so much effort into but sometimes it’s better to quit and move on.
They Keep Good Company
You are the average of the five people you spend the most time with. The people around us have a lot of power to influence us, both negatively and positively. Make sure those people are in line with who you want to be and what you want to do.
Spending time with people who are always negative or discouraging or have bad money and work habits can impact your behavior. You want to spend time with those who have similar goals and work ethics and spending habits to your own.
That doesn’t mean you surround yourself with “yes men,” who never question anything you do. You want people whom you can bounce ideas of off and get good advice from and who’s opinions and judgment you can trust. You want to be around people who challenge you and push you to be better.
If you don’t have any or enough of those in your life currently, go out and find them. That might mean joining a professional or social organization or a meetup group.
They Have Mentors
Some of that good company should be a mentor. No matter what you want to do, someone has probably already done it and been successful at it. Find this person and forge a relationship with them. They can give you information it might take you years to figure out on your own, saving you time and money.
A mentor relationship doesn’t always have to be conducted in person. Is there an author who has written books on your industry or on a more general topic like productivity or success? You can allow that person to mentor you through their writing. But you never know. If there is such a person, contact them and let them know you admire what they’ve achieved. They may reach out to you, and you might have the chance to develop a more personal mentor relationship.
They Love What They Do
For many people, the path to becoming a self-made millionaire is starting their own business. If you are going to invest enough time in a business to make it successful, it has to be something you are interested in and like doing. You don’t have to like doing every aspect of it, Gordon Ramsey probably doesn’t like going over food costs, but the guy really loves cooking.
Now, I wrote an article debunking the “do what you love, and the money will follow” trope. There are lots of things we love doing that we may not be particularly good at. If you really love singing but are a terrible singer, you can sing your heart out, but that is not going to be the thing that makes you a self-made millionaire.
You have to love what you do, but you also have to be at least a little good at it.
They Write Things Down
You should be a list maker whether you write things on bits of paper, in a date book or use an on-line program. Each night before bed write a list of what you need to do the following day. This not only helps make sure you don’t forget anything, it can help you sleep better because you’ve removed it from your brain and onto a piece of paper.
You should also have a list of goals, short, medium, and long term. You need to break those goals into measurable and actionable steps. It’s not enough to write down “Become a millionaire.” Becoming a millionaire happens when you set those goals and reach them through a series of smaller actions.
A short term goal to this end could be, “Save 20% of my income each month.” The steps you take to do that can be things like investing in your employer sponsored 401k and setting up an auto-deposit into your Betterment account each month (the money is gone before you see it which makes it easier to save, out of sight, out of mind).
They Guard Their Time
Rich or poor, we all have the same amount of hours in a day. Don’t waste your hours. There are so many time sucks that you can avoid.
People, are there people who you really wouldn’t miss if you never spoke to them again but they are somehow still in your life? Family that you don’t like, friends who are only around when they need something? You can jettison these people from your life. We tenuously cling on to relationships for a variety of reasons, habit, obligation, the inability to say no.
None of those are good reasons to stay in touch with people who don’t add value to your life. That’s not to say everyone in your life has to somehow serve your career ambitions. Some people are in our lives because they’re fun or because we love them. That’s not what I’m talking about. It’s those people who are a mental and emotional drain. Remember, you are the average of the five people you spend the most time with.
You don’t have to stay connected to them. I’m going to tell you something very powerful. No is a complete sentence. If someone you don’t particularly like asks you to do something you don’t particularly want to do, Just. Say. No. You don’t have to give a reason.
There are a lot of things that suck our time too. Have you ever finished a book, a TV series, or a movie that you didn’t like? Why did you do that? It’s the sunk cost fallacy again. You can put that book down, turn that show-off, and walk out of that movie.
The internet is a huge time suck. How many times have you fallen down a Wikipedia, Reddit, whatever weird conspiracy site you’re into rabbit hole? You can use a website blocker to restrict the time you can waste on certain sites when you should be working.
While there are just so many hours in a day, some of them are more hectic than others. Ideally, you want to carve out a few hours for yourself that are most free of distractions and interruptions. Usually, you can find these hours either early or late in the day.
Getting up or staying up even one hour earlier or later than the rest of your household will give you a bit of quiet time to accomplish some of your tasks.
They Make Decisions
We can become paralyzed by choice. That’s why when you walk into the grocery store with no idea what you want to have for dinner, you wonder around for three times longer than if you had a list of ingredients.
And that indecision is stressful. Having decided always feels better than having to decide. So make a choice and make it quickly. Do your research, your due diligence, you don’t want to make an uninformed decision, but make a decision. Don’t waste time and energy dithering.
That said, don’t waste time and energy making small, everyday decisions. We only have so much energy so automate things like what you wear every day, what you eat for breakfast. When those little decisions are already decided, you have more energy to devote to the decisions that matter more.
They Take Risks
Not placing their last twenty bucks on black in Vegas kinds of risks but if you want to be a self-made millionaire, you have to be willing to take calculated risks. When deciding whether or not to take a risk, ask yourself what is the worst case scenario? If you can anticipate the worst outcome, you can take steps to avoid it.
If you are unsure about taking a risk, run it by the people you trust, your mentors, your friends, your family, and get their opinions and advice.
They Make Passive Income
We’ve talked about this a lot. Everyone should have income from more than one source. If you lose or quit your job, you need to have money coming in from somewhere. There are many forms of passive income, dividend stocks, real estate, Fund Rise, peer to peer lending.
Ideally, at some point, your passive income is enough to pay first your basic bills and eventually to fund your entire lifestyle. Those are two of the steps on the road to financial freedom.
The Rich are Different Than You and Me
“Yeah, they have more money.” Scott Fitzgerald and Ernest Hemingway never actually had that exchange, it’s based on their writings. But it’s true. Self-made millionaires aren’t a species apart from the rest of us. They just do things differently than most other people.