Millionaire Myths Debunked

Many people believe that — while it’d certainly be nice — they’ll never become millionaires. That it’s an utterly unattainable dream.

The truth is: Hitting the $1 million mark is more attainable today than ever — and more important. That’s because, in order to live comfortably in retirement through your eighties, many people will need a nest egg of at least $1 million. “A general rule of thumb is that you need to save $1 million for every $40,000 of annual income you need to replace at retirement, not including Social Security, pension income or any other retirement income,” says David Fernandez, CFP, of Wealth Engineering in Scottsdale, Ariz.

Fortunately, there are a lot of ways to do it. While doing research for my book, “The Eventual Millionaire,” I interviewed more than 100 millionaires who came from all walks of life and made their first million in dozens of different ways, from starting their own businesses to investing in the stock market or real estate. And those aren’t the only paths to becoming a millionaire, either: Others hit the mark by simply living below their means and saving portions of each paycheck.

Before you can make a million, though, you need to get past the mystique and the myths surrounding it. Here are 6 common myths about millionaires debunked.

The Myth: Millionaires Live Lavishly
When you think of millionaires, you may picture people living in luxurious mansions and driving expensive sports cars. The reality? Millionaires are often the people next door: They drive Hondas and Volvos. They’re frugal (57 percent of the ones I interviewed described themselves as such). They often spend their money on necessities and a few things that are very important to them. Think Warren Buffett: The celebrated multi-billionaire famously still lives in the Omaha, Neb. house he bought in 1958 for $31,500.

In most cases, millionaires have gotten to where they are precisely because they've practiced excellent savings habits and live frugally. They learn to make smart choices, and they don’t stop just because they hit the $1 million mark. If anything, they’re validated by seeing the choices they’ve made paid off.

The Myth: Millionaires Are Smarter
People tend to put millionaires on a pedestal: They must be better or smarter than everyone else in order to achieve that goal. But that general statement simply isn’t true. Millionaires are ordinary people who have achieved extraordinary goals, but they make mistakes like everyone else. They may misspell words; they may even have learning disabilities. They’ve likely been in debt and had to dig themselves out. They’ve had ideas and businesses fail. Most of the ones I interviewed for my book have worked their way up the ladder, learning and stumbling along the way.

Rather than having lots of book smarts, what most millionaires have is a knack for setting goals for themselves and working toward them — without letting excuses get in their way. They, too, have to deal with unexpected expenses — plumbing leaks, health insurance increases, car trouble. They just keep moving forward despite the inevitable obstacles they have to overcome.