Millionaires: Seven Myths Completely Debunked

When most Americans think about how millionaires live, there is no shortage of mythology and toxicity. Jealousy, envy, and spite are frequent reactions during conversations about wealthy people with those who are not themselves wealthy. The worst part about it is that those attitudes and worldviews are some of the biggest impediments to creating wealth in the first place.

The prevailing mantra about millionaires is that they are destroying our nation and that they continue to amass and hoard wealth at the expense of the poor and middle class. Yet nothing could be further from the truth. Once you get past the platitudes and attitudes of the media, the facts paint a very different story about what American millionaires are doing with their wealth and how they got there.

The following seven myths are just a few of the many that pervade our culture today. But the data, from Ramsey Solutions’ survey of over 10,000 American millionaires, reveal an incredible picture of what wealth in America really looks like.

Myth #1: Millionaires are people who make over $1 million a year.

This is, by definition, incorrect. Millionaire status is a reflection of one’s net worth, not their annual earnings. One’s net worth equals what he owns minus what he owes.

The National Study of Millionaires reveals that one-third of American millionaires never exceeded a $100,000 annual household income in their working lifetime. Very few ever reached $1 million of income in any working year.

Myth #2: Most millionaires inherit their money.

Almost 80% of American millionaires did not inherit one dime; they created their wealth without a family member passing along anything to them. Only 5% received between $100k – $250k, and only 3% received $1 million or more (a statistically insignificant number).

Almost half (47%) of these people came from middle-class homes; 27% came from lower-middle-class homes. Only 21% came from an upper-middle or upper-class background. And get this: 47% of American millionaires’ did not have either parent graduate from college.  

What did these folks use to create their wealth? Was it real estate conglomerates? Day-trading? High-risk investments in new ventures?

Not even close. About 79% became millionaires through their company-sponsored 401(k) plan and IRA (hence my preference for the 401(k) and IRA over a pension). They made wise investments through thick and thin and did so consistently over their working lifetimes.

Myth #3: Most are high-earning CEO’s, doctors, or lawyers.

Believe it or not, none of the above three professions are the top three most common millionaires. Doctors are not even in the top ten. The top three occupations were engineer, accountant, and (brace yourself…) teacher!

I admit that when I saw that teacher was in the top three, I couldn’t believe it myself. But the data are clear. Engineer and accountant certainly make sense (after all, who wants to hire a broke accountant?). Millionaire teachers are something quite striking though. That’s completely contrary to the messages we see in society today, no doubt!

The most important thing is not making a bunch of money; even people with fairly average incomes can and do become wealthy. The important thing is to use what you have wisely and to do that over a lifetime.

Myth #4: They use leverage (a.k.a. debt) to gain their wealth.

Here’s a rule of thumb: millionaires and debt don’t mix that much. They are, statistically, like oil and water. American millionaires understand that debt is a thief and that it will hold us back from financial success. Just consider these numbers.

81% never borrowed money from friends or family.

73% never held credit card debt.

71% never had student loans.

56% have paid off their homes (and 14% never had a mortgage).

47% have no car payments (and 35% never had one).

Some keep a few credit cards open, but they rarely carry a balance. After all, they’re trying to earn interest, not pay it.

Myth #5: They live in large houses and drive new luxury cars.

Contrary to what you see on shows like World’s Most Extraordinary Homes and House Hunters, these large mansions are not what the typical millionaire lives in.

The median home value is about $450,000, and the median square footage is 2,500. These are fairly modest numbers. Sure, some have bigger homes, but some have smaller ones. Others live in places where even a 1,500 square foot home could be well over $500,000 (looking at you California!).

More than half of them live in neighborhoods where, the ZIP code data say, the average household income is less than $75,000. So they’re not all skipping town and moving to the East Side when they hit that seven-figure mark; these are people with deep roots in your community and who tend to stick around and live modest lifestyles.

Additionally, most millionaires do not drive the luxury brands like Lexus, BMW, and Mercedes Benz. Only 8% own a Lexus, 3% own an Audi, and 3% own a Mercedes.

You know what that means? Most people driving luxury cars are not wealthy!

The top car brands are Toyota at 16%, Honda at 15%, and Ford at 8%. They also tend to buy cars that are one to two years old. One of the advantages is that the car has already taken the hit on its KBB value and they can purchase a nice car for far less than the sticker price.

Myth #6: They tend to buy the expensive name-brand items at high-end stores and buy whatever they want.

This, again, is false. Most millionaires are thrifty people and continue to be long after they have that million-dollar net worth. What happens is they develop a habit of finding deals and using coupons, even shopping at places like Walmart and even thrift stores!

The study showed that 34% of the respondents had shopped at a thrift store in the past 12 months. The study did not ask what they purchased at these stores, but it’s remarkable that they still shop there even with a large amount of money at their disposal. (It shows the power of a habit!).

Additionally, 35% say they use coupons all the time, and 58% some of the time. When shopping, most of them use a list and stick to it. Over one-fourth (28%) adhere to their list strictly, and 57% make a list and generally stick to it. Only 15% don’t make a list at all.

Want to know a really fascinating fact about spending? The average American household spends about $582 a month on groceries. The average American millionaire spends only $412 monthly.

(Of course, this also could be that most people who have kids in the house will be spending more, but even into their 50s, 60s, and 70s, they keep good spending habits at the grocery store).

Myth #7: It’s not possible to become a millionaire these days.

This belief is one of the most frustrating things to me as a coach. When I work with clients who believe they cannot accomplish something, I come back to Earl Nightingale’s secret: we become what we think about. If we believe we can achieve something, we are much more likely to actually accomplish it. If we do not, we won’t even try.

We act in a manner that is consistent with our worldview and attitudes. As Henry Ford said, “If you think you can, or you think, you’re right.”

If you believe you can’t achieve this status, guess what? You won’t!

If you believe it is possible, that’s one of the first steps to getting there. It takes a lifetime of work, dedication, and consistency, but this study reveals that people from all walks of life have done this and still are doing it.

There are nearly 12 million American millionaires, and that number is growing every day. Are you willing to do what they did to get there?

With my coaching, you can get on that path and I will make sure you set yourself up for success. Use the button below to schedule your free call today and to start your journey to becoming an Everyday Millionaire!

This article was originally written by Financial Coach Seth Connell in June 2020. It has been modified and republished with permission.