What Are Your Real Chances of Becoming A Millionaire?

May the odds be ever in your favour

Photo by Chronis Yan on Unsplash

The dream of becoming a millionaire appears to be the “new normal”. If you are not striving for a million dollars on your bank account, why do you even bother with your life. At least, that is the feeling you get with today’s hustle culture and with the onslaught of online coaches, who promise you that anyone who works hard (and according to their techniques, of course) is eligible to join the much sought-after 7-figure club.

But is working hard really enough to make you a millionaire?

That’s the million-dollar question, isn’t it.

According to a study by TitleMax, 6 out of 10 surveyed Americans believe that they can become millionaires if they were willing to work hard. At the same time, 9 out of 10 surveyed millionaires believe that their wealth is a result of their hard work.

However, according to the Global Wealth Report 2020 by Credit Suisse, only 1% of the adult population in the world have a household wealth of more than 1 million dollars. In the USA, there are 20.27 million millionaires, so roughly 6% of the population. Considering that there are billions of hardworking people around the globe, one can conservatively conclude that the 7-figure wealth status is still reserved for the few, no matter how hard you are willing to work for it.

I live in Switzerland, aka the country with one of the highest densities of millionaires. This is a country where a staggering 1 in 20 people (as per 2020) have at least 1 million dollars lying around on their bank account. Chances are that one of my neighbours down the street has achieved the much-desired net worth (whether in cash and/or in assets). This has truly made me wonder how on Earth these people managed to amass such fortune.

Self-made vs inheritance-based millionaires

One is tempted to assume that most millionaires were simply born rich. However, according to a study conducted by Fidelity Investments, around 88% of millionaires are self-made millionaires. On average, these current millionaires are about 61 years old with $3,05 million in assets. Consequently, about 20% or less are second-generation rich, meaning they have inherited their fortune.

This gives us mere mortals a more positive outlook on our chances; however, it is noteworthy to consider that the definition of “self-made” is under much scrutiny, and thus, this percentage needs to be taken with at least some grain of salt. After all, it has been claimed that Kylie Jenner is a self-made millionaire, which begs the question if her famous family background, existing fanbase and connections truly can be discounted in her success.

Since we only get limited data from official bodies like the IRS and not every millionaire is a famous person who talks about how they did it, it is difficult to statistically analyse the percentage of millionaires that truly went from “zero to hero”.

From the stories about self-made millionaires that we read about, it cannot be discounted that hard work played a large role; however, many of them were also lucky. This luck may be presented in the form of an angel investor, someone who loaned them some start capital or simply being at the right place at the right time. There are many “soft factors” that come into play, as to whether or not one is going to make it.

How did the self-made millionaires do it?

Since we are more interested in the self-made millionaires, let us look at some interesting findings from a study conducted by Tom Corley, who has spent 5 years interviewing and researching the habits, activities and traits of 233 wealthy individuals. Under wealthy individuals, these were people who earned at least $160,000 in gross annual income and had $3,2 million in net assets.

Here are his findings:

• The Saver-Investors path — less than 22% of millionaires in his study got rich by saving and consequently investing their money, having reached the 1 million mark in their mid to late 30’s. They typically had a middle-class income, lived an extremely frugal life, saved 20% or more of their income and started investing their savings very, very early on.
• The Dreamers Path — about 28% of individuals from the study became millionaires by following their dreams in whatever form — be it to become an artist, an author or a businessperson. In about 12 years, they have amassed an average net worth of $7,4 million. What these individuals had in common was their willingness to work hard (more than 60 hours/week) and denied themselves of many luxuries including weekends, vacations or buying a house. Some also liquidated their retirement savings. For most of them, the early years were the hardest, struggling to make basic ends meet.
• The Company Climbers Path — about 31% became rich by being employed, typically in a big company. Usually, they have devoted their life to the company they work for, as they steadily climbed the corporate ladder. It took them, on average, 22 years to accumulate a decent net worth of $3.4 million or more.
• The Virtuosos Path — about 19% of individuals from the study became millionaires by simply being the best of the best in their field, allowing them to charge premium rates for their knowledge and expertise. On average, it took the Virtuosos about 20 years to reach an average net worth of $4 million.

So what are your chances of becoming a millionaire?

If we are being truly honest, they are quite slim. Speaking from a purely statistical point of view, the 7-figure status is a dream that only few of us will ever achieve. There are so many factors that come into play, many of which being out of our immediate control. And while you may be laying down in your bed, looking as sad as this pug in the picture below, this doesn’t mean that you are wrong to aim for your personal understanding of financial freedom, regardless if you benchmark this at a million dollars or not.

Photo by Matthew Henry on Unsplash

How do you increase your chances of becoming a millionaire?

Based from various studies, the following are some factors that can increase your chances:

• Don’t give up — as you can see from the study of Tom Corley, if you want to become a millionaire, you need to be in it for the long run. If you think you can be an overnight success, do know that the vast majority toiled their way for at least 10 years. If you want to attain financial freedom, you need to be patient and persevering. Fact is that most people give up as soon as the going gets tough. If you are one of the few that are willing to hold it out for several years, some form of financial success is very high.
• Diversifying income sources — practically all rich individuals have more than one income source and don’t put all their eggs in one basket. The more “automated” their income sources are, the more time they have to venture into new opportunities. The diversification of income is also at the core of today’s hustle culture, as more and more millennials aim to find additional sources of money, aside from their regular income.
• Investing — to multiply wealth, most rich people have invested their money. If we study the ultra rich, you will soon realise that practically all of them invested in real estate, stocks and other opportunities.
• Thinking like an entrepreneur — regardless of which rich person you study, you will notice that they have all seen, whatever it is that they do, also from an entrepreneurial perspective. Even people who, at first glance, you will not put into the “businessperson category” like writers, athletes, singers and artists, rely on the fundamentals of business to succeed. They know how to identify demand, identify what they can deliver and know how to communicate this accordingly to their audience — and that’s business.
• Willingness to sacrifice and take risks for a long term vision — As you can see in the study above, many self-made millionaires have gone through extreme struggles in the beginning of their journey. You need to ask yourself if you are willing to sacrifice and also willing to take risks. Depending on your life situation, you may also need to consider how much risk you can take, especially if you have a family.
• Preparation — I am a firm believer that “luck is when opportunity meets preparation”. A lot of times when we say “ah, he was just lucky” or “she was just lucky to get this opportunity”, we often do a great injustice to this person. We don’t see the mechanisms behind the scenes that allowed this person to even being able to honour the opportunity when it came knocking on their door in the first place. For all we know, they have been preparing for years to be worthy of acting upon the opportunity when it finally came their way.

In conclusion

There are two schools of thought when it comes to goal setting. This also applies to financial planning. One is to “think big, because it gets small automatically”, so go aim for that one million. The second one is to aim for smaller, more realistic increments to achieve your personal financial goals. There is no right and wrong answer, as it truly depends on you as a person. It is also important to question one’s intentions — why do you want to become a millionaire?

For me personally, I aim for financial freedom because I want to be in full control of my time. I want to buy my time, so to speak. Having been around on the planet for quite some time now, I quickly realised that you either have time but no money, or money but no time. I want to get out of this unfortunate polarity, which is why I aim for financial freedom. If it’s in the form of a 7-figure wealth, then great. If not, then that’s cool as well.

Regardless of which category you fall into, we can still learn a lot from millionaires, and see how their practices can be applied in our lives. Needless to say, it is important to confront oneself with reality in order to not just merely be a dreamer but also a doer.

If you feel stuck with your financial goals, just remember that one step forward is better than not moving at all. Don’t compare your chapter 1 with someone else’s chapter 20. Go your path and go it with your head held high, and don’t surrender. And always remember:

Luck is when opportunity meets preparation.