It doesn’t take a corporate executive job or a lottery win to grow your wealth. It just takes discipline, frugal living, and smart investment decisions.
These secret millionaires fit few, if any of the cultural stereotypes we associate with the wealthy. Often they are teachers, nurses, janitors and even your local librarian.
They Don’t Gossip
Many people who become millionaires do so quietly and without the help of a big media splash. These people are called secret millionaires. They don’t go around advertising their wealth, they don’t flaunt it and live a simple lifestyle that doesn’t change much when they become rich. These people are not oblivious to their net worth however, they keep growing it and they understand that investing is the path that leads to financial freedom. They follow basic investment techniques, get sound investment advice and do what they have been doing year after year. For those looking to emulate such disciplined strategies, LevelFields offers tools and insights tailored to help investors stay ahead in their journey to financial independence.
They Don’t Have a Lot of Money
The get-rich-slowly crowd takes a very conservative approach to investing. They focus on building wealth through the power of compounding. They invest in low-risk securities like money market mutual funds, certificates of deposit and treasury bills. They favor low-cost index investments from Vanguard and Fidelity. And they eschew private equity investments and hedge funds that tend to charge high fees and have a higher risk of losing principal.
While the invisible rich sometimes receive a fortuitous windfall, most of their financial wealth is self-made. They are very careful not to overspend and instead make it a point to be cash flow positive every month. Carl and Colleen use budgeting software to review their household spending each month, and they try to keep a 6-month emergency savings fund in a high-yield bank account while also “paying themselves first” by automatically depositing money into their 401(k)s, Health Savings Accounts and taxable brokerage accounts each month.
They also spend a lot of time researching consumer electronics and other goods and services that they plan to purchase. This way, they can find the best possible price and minimize their out-of-pocket expenses. They avoid buying things on credit or with a mortgage and instead buy them over time in cash, using a bank loan if necessary. They also choose to rent rather than own a home, which allows them to use their equity as rental income.
The invisible rich also take a very disciplined approach to reinvesting their profits and savings. They don’t spend their windfalls or play Powerball. Rather, they use their wealth to improve their lives in small, gradual ways. For example, they may buy a new car or a better apartment. They might hire a professional to help them with their finances or purchase a life insurance policy that will protect their family should something unexpected happen.
They do everything they can to maximize their tax advantages. They make sure to max out their 401(k)s and take advantage of any employer match they might offer. They take a very conservative approach to asset protection, as well, and carry umbrella liability coverage that goes beyond the auto and homeowners policies they already have. This can help them to preserve their hard-earned wealth in the event of a lawsuit, as opposed to losing it all to a judgment.
Despite their humble beginnings, the invisible rich understand how to have their money work for them and how to make it grow slowly over time. They follow simple investment techniques; seek sound advice when needed; live within their means; and never give up on their goal of becoming financially independent. It’s a formula that almost anyone can apply to their lives and reach the $1 million mark, even if they don’t have an inherited fortune or a successful lottery ticket in their pocket.
They Don’t Have a Lot of Time
If you want to become a millionaire, it takes more than just saving money in a checking or savings account. You have to invest your money to make it grow. And, fortunately for many of us, there are ways to make the money work for you without having to sell your soul to a hedge fund manager or invest your life savings in a start-up that may or may not fail.
For example, my friends Carl and Colleen, self-made millionaires with a combined net worth of over $30,000,000, both started their careers with modest salaries and modest college debt. But they both practice the principle of “paying themselves first,” putting their own savings before all other expenses every month. They do this by setting up their 401ks and health savings accounts to automatically deduct from their paychecks before they even see their money. Then, they automatically transfer that money into their taxable brokerage account.
They also have the discipline to stick with low-risk investments, such as money market mutual funds, certificates of deposit (CDs), municipal bonds and treasury bills, which provide an interest rate that keeps up with inflation while keeping their principal safe. They avoid risky options like initial public offerings, structured notes and hedge funds unless their net worth makes them eligible for these investments through a private investment firm or their broker has an introduction.
In addition, the invisible rich save as much as they can from their jobs, maximizing tax-advantaged retirement plans like 401(k)s and taking advantage of employer matches. They take the time to research and select stocks that have good fundamentals and growth potential. They also take the time to talk to a certified financial planner or wealth manager and get sound advice before making any major investment decisions.
Finally, they keep their expenses low by avoiding expensive dining out and other luxuries, shopping for bargains on clothing, electronics and other items and buying used instead of new. Their modest lifestyle allows them to put the majority of their income toward investments and growing their net worth slowly, steadily.
While some of these secret millionaires have inherited their wealth, most of them are self-made. They are the “secret millionaires” that do not flaunt their wealth, but quietly build up their net worth over the long term by investing and living within their means. They follow simple investment techniques, seek advice when needed and, most importantly, take the time to make their money work for them.
So, what are your secrets? How are you going to use your resources to grow your net worth? Let me know in the comments below.