Every three years the US Federal Reserve conducts a survey of Americans’ finances. This study is called the US Survey of Consumer Finances (SCR) and it is a representative picture of the wealth of America. It details the assets and liabilities of participants in the studies and also shows their income, demographic characteristics, and changes in American wealth every three years. So you may be wondering, if there are so many millionaires, why aren’t you a millionaire?
What Is The Average Millionaire Profile in the United States?
According to the SCR, American millionaires typically have a number of characteristics.
About 18% of US Households were millionaires (that’s roughly 23.7 million households)
Millionaire households were usually older – most were over 55 years of age
Most millionaires were couples, or couples with children.
Millionaires were usually better educated, with college degree holders having an average net worth of $1.9 million dollars, nearly four times more than those who never graduated college
Millionaires were typically self-employed ($3 million net worth) or retired ($1 million net worth)
Millionaires were more likely to own their homes ($1.5 million net worth), rather than be renters ($150,000 thousand net worth)
Millionaires were more likely to own businesses and business owners had higher incomes and wealth than non-owners.
The Survey of Consumer Finances also found that the majority of millionaires owned stocks, had retirement accounts, and owned pooled investments such as mutual funds or index funds.
Is The Survey of Consumer Finances Accurate?
Since the Survey of Consumer Finances only interviews about 4,000 people, you may be wondering if the data is accurate.
It is.
The survey uses something called multi-stage area probability sampling which is a statistical term that means the Federal Reserve selected study participants in a way to make them representative of the country at large, per the survey’s annual report. The study deliberately excludes members of the Forbes 400, which is a list of billionaires. So, the study is reflective of what wealth basically looks like in the United States. It is as accurate as large economic studies can be.
So, Why Aren’t You A Millionaire?
If you find that you’re not one of the millionaires included in this report, there could be a number of reasons for this. Below is a list of common reasons many people fail to become millionaires:
You spend more than you make each year
You fail to pay yourself first
You have a lot of kids, and you have them too young
You don’t own a home
You don’t save or invest
You continually replace things before you need to
You have a low income
You don’t live a healthy life
You don’t read
You get a divorce
You have at least one bad habit that’s a money drain, such as smoking or gambling
You’re young
Your parents have no assets
You don’t negotiate prices for high ticket items like cars.
If you currently aren’t a millionaire or aren’t on course to becoming one, it’s likely due to the consequences of choices you’ve made in the past. The good news is you can make different choices from this point forward to create the wealth you want. It won’t necessarily be easy and you’ll need to avoid making the mistakes that limited you in the past.
Want To Be A Millionaire? – Here Are Some Things You Can Do
Becoming a millionaire is straightforward, but it requires sustained effort over time. Here are some immediate steps you can take that will help get you on track.
Start saving and investing as soon as possible. The Survey of Consumer Finances data is very clear – it takes time to become a millionaire.
Contribute the maximum to your retirement accounts. Nearly all the millionaires in the Federal Reserve’s study had retirement accounts. In contrast, very few of the poorest in the study had these. So, if you don’t have an IRA or you haven’t signed up for your 401(k) through your employer, do it and contribute the maximum.
Buy a home. Millionaires are far more likely to be homeowners. Homeownership results in forced savings, and tax benefits, and homes often appreciate in value. Renters have none of these advantages, leaving homeowners with more wealth in the long run. If you don’t have one, buy a home you can afford.
Start a business or leverage your knowledge. Self employed people have net worths over $3M, and even having a modest side hustle can greatly improve your wealth.
Health is wealth. Cut bad habits. Smoking can cost as much as $2M over your lifetime, and alcohol is generally an expensive add on to your grocery bill.
So, by taking a few steps, you may be able to count yourself as one of the newly crowned millionaires in these reports in the not-too-distant future. Remember, most millionaires didn’t inherit it—they built it through making good choices like yours. And, regardless of how old you are, you’ve got experience on your side. Track progress quarterly, and in 5-10 years, you’ll toast to joining the 18%.
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