The Federal Reserve conducts a survey of Americans’ financial well-being every three years. The study, called the Survey of American Consumer Finances (SCR), provides a representative picture of wealth in the United States. It details the assets and liabilities of study participants and shows their income, demographic characteristics and changes in U.S. wealth every three years. So you might be thinking, if there are so many millionaires out there, why aren’t you a millionaire?
What does the average American millionaire look like?
According to SCR, American millionaires generally share a number of characteristics.
- Approximately 18% of U.S. households are millionaires (or approximately 23.7 million households)
- Millionaire families tend to be older – most are over 55
- Most millionaires are couples, or couples with children.
- Millionaires tend to be better educated, with college degree holders having an average net worth of $1.9 million, nearly four times that of those who never graduated from college
- Millionaires are typically self-employed (net worth $3 million) or retirees (net worth $1 million)
- Millionaires are more likely to own homes (net worth $1.5 million) than renters (net worth $150 million)
- Millionaires are more likely to own businesses, and business owners have higher income and wealth than non-business owners.
The Consumer Finance Survey also found that most millionaires own stocks, retirement accounts and pooled investments such as mutual funds or index funds.
Are Consumer Finance Surveys Accurate?
Since the Consumer Finance Survey only interviewed about 4,000 people, you may wonder whether the data is accurate.
This is.
The survey used a method called multistage area probability sampling, a statistical term that means the Fed selected study participants based on the survey’s annual reports so that they were representative of the country as a whole. The study intentionally excluded members of the Forbes 400 (a list of billionaires). As such, this study reflects the underlying picture of U.S. wealth. It is as accurate as large economic studies.
So why aren’t you a millionaire?
If you find that you are not one of the millionaires included in this report, there could be a number of reasons. Here is a list of common reasons why many people fail to become millionaires:
- You spend more than you earn every year
- You failed to pay yourself first
- You have many children but they are too young
- you have no home
- You don’t save or invest
- You keep replacing things until you need them
- your income is low
- you don’t live a healthy life
- you don’t study
- you divorce
- You have at least one bad habit that wastes money, such as smoking or gambling
- you are still young
- Your parents have no assets
- You wouldn’t negotiate the price on a high-ticket item like a car.
If you are not currently a millionaire, or will not become one, this is most likely due to the consequences of choices you have made in the past. The good news is that starting now, you can make different choices to create the wealth you want. It’s not necessarily easy, and you need to avoid making the mistakes that have limited you in the past.
Want to become a millionaire? – Here are some things you can do
Becoming a millionaire is easy but requires sustained effort over a long period of time. Here are some steps you can take right away to help get you on the right track.
- Start saving and investing as soon as possible. The Consumer Finance Survey data is clear – becoming a millionaire takes time.
- Maximize Contributions to Your Retirement Accounts. Nearly all the millionaires in the Fed study had retirement accounts. By contrast, the poorest people in the study had very few of these. So, if you don’t have an IRA or you haven’t signed up for a 401(k) through your employer, sign up and contribute the maximum amount.
- buy a house. Millionaires are more likely to become homeowners. Homeownership results in forced savings and tax benefits, and homes tend to appreciate in value. Renters don’t have these advantages, leaving homeowners with more wealth in the long run. If you don’t own a home, buy one you can afford.
- Start a business or leverage your knowledge. With a net worth of over $3 million as a self-employed person, even a modest side hustle can significantly increase your wealth.
- Health is wealth. Quit bad habits. Smoking can cost up to $2 million over your lifetime, while alcohol often adds to your grocery bill.
So by taking a few steps, you might be able to count yourself among the newly crowned millionaires in these reports in the near future. Remember, most millionaires didn’t inherit it – they built it by making good choices like you. And, no matter how old you are, you have experience. Track your progress quarterly and in 5-10 years you will join the 18%.
You may also like
- 10 Secrets to Becoming a Millionaire – Any Age
- 16 Habits That Turned 177 Ordinary People into Self-Made Millionaires
- The fastest way to accumulate the most money
- Here are the alarming signs of fake rich people
- Rich habits and bad habits
