Tom Corley, an accountant and author, began interviewing wealthy individuals in 2004 as part of a five-year “Rich Habits” study. While studying the wealthy, which the financial advisor defined as those who had at least $160,000 in annual gross income and $3.2m in net assets, Corley identified a number of similar characteristics and habits.
The expert, who recently outlined three of the most common habits in a piece published in CNBC, says millionaires fall into four categories: “saver-investors,” who make saving and investing a part of their daily routine, “company climbers,” who make it their goal to climb the corporate ladder, “virtuosos,” who he noted “are among the best at what they do, and they’re paid a high premium for their knowledge and expertise,” and dreamers, who pursue a dream such as starting their own business.
While studying the millionaires, Corley found that, despite obtaining their wealth through varying methods, many of the individuals participated in similar habits. Those included saving and investing, which he noted can be adopted by just about anyone.
One of the habits common among the saver-investor millionaires he interviewed was a dedication to saving 20 per cent or more of each paycheque.
“Every saver-investor in my study consistently saved 20 per cent or more of their net pay, each paycheque,” he wrote, adding that the majority of millionaires did so by automating the withdrawal from each paycheque.
This money was then split up, with Corley finding that the wealthy individuals typically dedicated 10 per cent to retirement accounts and the other 10 per cent to their savings.
He found that it’s common for the millionaires to transfer the accumulated 10 per cent monthly savings into an investment account, which ultimately “compounded over time”. While in the beginning, this amount may not have been a lot, Corley found that the habit led the individuals to accumulate significant wealth.
Corley also recognised the habit of investing savings in the dreamer categories of millionaires, but only after a certain point. While dreamers typically did not have the ability to invest their savings early on in their careers, as they were investing the money back into their businesses, they immediately began doing so once they “achieved success in the form of available cash flow”.
During the five-year study, Corley also identified frugality as a common trait among the millionaires — the characteristic was displayed among all four types of millionaires.
“For these millionaires, frugality began the moment they received their first paycheque,” he said.
As for what it means to be frugal, Corley says it’s being aware of how one spends their money, spending money only on quality products or services, and bargain hunting so as to spend the least amount possible.