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The Four Paths to Self-Made Millionaire

By Floyd Saunders, Founder at Really Simple Investing


Author Tim Corley outlined the results of research on self-made millionaires in his book, Change Your Habits, Change Your Life: Strategies that Transformed 177 Average People into Self-Made Millionaires. The results of this research show that people are most likely to follow only one of four paths to becoming millionaires.

The Four Paths to Self-Made Millionaire

"How much you earn has almost no bearing on whether or not you can and will build wealth. Regardless of the size of your paycheck, you probably already make enough money to become rich." — David Bach, the author of "The Automatic Millionaire"


The Four Paths to Self-Made Millionaire

The first path is from investing. Around 20 percent of millionaires in the study conducted by Corely made their first million in their mid-to-late 30s despite their middle-class incomes. They did so by living frugally and by saving and investing at least 20% of their income consistently from early on in their working lives.


"On average, millionaires invest 20% of their household income each year. Their wealth isn't measured by the amount they make each year, but by how they've saved and invested over time." — Ramit Sethi, author of "I Will Teach You To Be Rich"


With an historical average of return of the S&P 500 index at 8% it takes about $157,830 invested in the index, every year for five years to become a millionaire. Very few people can do that, but it is possible.


In order to hit a goal of $1 million in 10 years, you would need to save around $7,900 per month, if you are putting money into a high-yield savings account with an average yield of 1.10%. Not a very attractive return, but you can do better. Here are some examples of how much you’ll need to save per month based on what your rate of return might be.

• 3% Return: Save $7,200 per month.

• 5% Return: Save $6,500 per month.

• 7% Return: Save $5,900 per month.

• 10% Return: Save $5,000 per month.


Self-made millionaires put their money where it is going to grow. They are careful not to invest in items that will depreciate. A car for everyday driving will most likely lose value over time. Over half of self-made millionaires 55%, only buy used cars.


The key is to save money before spending it.


If your goal is a million dollars in 20 years, you will need to save $1,382 per month to hit the million-dollar mark, assuming a 10% return. At 6% you will need to save $2,195 per month.


According to 2022 Bank of America Private Bank Study of Wealthy Americans. Self-made millionaires keep their money is in retirement accounts (frequently taking advantage of employer matching contributions to get most out of their money in 401(k) accounts), stocks, mutual funds, and Exchange Traded Funds with over 55% of their wealth held in these investments. Over a third (35%) of millionaires invest in Real Estate Investment Trusts (REITs). Real estate exchange traded funds own the shares of real estate corporations and REITs. Like other ETFs, these trade like stocks on major exchanges.


Real Estate and Self-Made Millionaires

Real estate makes up about 40% of a typical millionaire’s net worth. The one asset that had uniform interest across ages was real estate.


Real estate tends to a great investment and because US property values are very high. There are now several ways to start investing in real estate that do not require direct ownership or large sums of money for things like down payments.


Many millionaires have a significant percentage of their wealth tied up in their primary residence. In California, for example, the average home value is $790,000


Careers and Self-Made Millionaires

About 33 percent of self-made millionaires entered careers in corporations to make their money while ascending the corporate ladder into executive positions. The average climber of the corporate ladder has a net worth of $3.4 million after 22 years.


The National Study of Millionaires is a research study conducted by Ramsey Solutions of U.S. millionaires to gain an understanding of personal finance behaviors and attitudes that factored into their financial success. The study used a third-party research panel and the Ramsey Solutions research panel. It is the largest, most statistically significant research project of its kind ever conducted.

  • Ramsey Solutions conducted the largest survey of millionaires ever with 10,000 participants.

  • Eight out of 10 millionaires built their wealth by simply investing consistently over several years of work in their company’s 401(k) plan.

  • The top five careers for millionaires include engineer, accountant, teacher, management and attorney. But the list of careers that can lead to you becoming a millionaire is longer that just these five.

  • The finance and investment profession have the most millionaires.

  • he food and beverage and real estate industries are at numbers six and seven in terms of creating millionaire.

  • A career in management can lead to you becoming a millionaire. 15% of surveyed millionaires hold senior leadership roles, such as CEO and CFOs as well as vice presidents.

  • Surprise, one-third of these millionaires have never made six figures, and less than one-third made an average of $100,000 a year throughout their career.


Then there are professions like law and medicine where you your knowledge and expertise will help propel you to become a self-made millionaire. About 1 in 5 millionaires takes this route and earns $4 million after 20 years of doing so. Many of those years are spent learning and becoming one of the best in a highly competitive and complicated fields, where they’re paid a handsome sum for their skills and knowledge.


"Let's set the record straight once and for all: Anyone can become wealthy ... Start by telling yourself that you deserve to be rich, have every right to be rich, and that being rich is an inside job. It's up to you and only you." — Steve Siebold


The hardest path, followed by about 28% of millionaires — is becoming a successful actor, athlete, musician or millionaire business owner. These millionaires found the path to becoming a self-made millionaire by beating the odds at a high-reward, low-probability endeavors. Their average net worth is $7.4 million.



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