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The Millionaire Myth: Why Everything You Think About Wealth is Wrong
The path to becoming a millionaire is not quick or easy.
Tim and Julie Harris
September 25, 2024
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When it comes to self-made millionaires and high-net-worth individuals (HNWIs), a lot of myths and misconceptions dominate public perception. From how they accumulate wealth to whether money can truly buy happiness, many of these assumptions are simply not true. Let’s break down some of the most common myths about the wealthy, using real data to separate fact from fiction.
Myth 1: More Money Doesn’t Make You Happier
Fact: More money does lead to greater happiness—especially by improving life quality and reducing stress.
While the old saying goes, “money can’t buy happiness,” recent research shows that wealth does contribute significantly to overall life satisfaction. Earlier studies suggested that happiness plateaus at around $75,000 a year, but more recent research from Matthew Killingsworth at the University of Pennsylvania challenges this. Killingsworth’s study found that happiness continues to increase as income rises beyond $100,000, and for many, it keeps rising well past $500,000
Why? Wealth offers greater freedom from financial stress, better healthcare, the ability to outsource chores, and more time for meaningful experiences like travel or hobbies. These factors improve life satisfaction and allow people to focus on personal growth and relationships.
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Myth 2: Millionaires Get Rich Quickly
Fact: Wealth-building is a slow, methodical process that often takes decades.
While it’s tempting to think that millionaires get rich quickly, the truth is that most build their fortunes steadily over time. According to a Fidelity Investments study, the average person reaches $1 million in net worth around age 37. Wealth accumulation continues over the following decades:
$1 million net worth: Typically achieved by age 37.
$5 million net worth: Reached by 50.
$10 million net worth: Typically achieved in the early 50s.
$30-50 million net worth: Often reached in their 60s
Building wealth through consistent saving, investing, and reinvesting takes time. Most millionaires work decades to achieve financial success, using long-term strategies rather than trying to get rich overnight.
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Myth 3: Millionaires Don’t Save—They Just Invest Big
Fact: Consistent saving is a cornerstone of wealth-building.
Despite what many believe, millionaires often start with small, consistent savings. A Ramsey Solutions study found that 73% of millionaires regularly saved part of their income, often through 401(k)s, IRAs, and other retirement accounts. Over time, these savings are supercharged by compound interest.
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Example: Saving $500 a month at an 8% annual return can grow to over $750,000 in 30 years. Many millionaires don’t make one huge investment; instead, they invest small amounts regularly and let the power of compounding work for them over time.
If you invest $1,000 per month with an 8% annual return for 30 years, you will have approximately $1,500,295.
If you invest $5,000 per month with an 8% annual return for 30 years, you will have approximately $7,501,475.
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Myth 4: They Get Rich Through Risky Investments
Fact: Millionaires prioritize low-risk, long-term strategies over high-risk gambles.
Although some think that the wealthy make their fortunes through risky, high-stakes bets, most millionaires favor diversified portfolios and steady, long-term investments. Vanguard found that the average millionaire holds a mix of stocks, bonds, and real estate to spread out risk.
Example: Warren Buffett, one of the richest people in the world, built his fortune through carefully selected investments in companies with strong fundamentals, holding onto them for decades.
Myth 5: Millionaires Don’t Track Their Spending
Fact: Millionaires are meticulous about budgeting and tracking expenses.
Millionaires keep close tabs on their spending. According to Tom Corley, author of Rich Habits, 93% of millionaires carefully track their expenses. This habit helps them save more, spend wisely, and invest more over time.
Takeaway: Even after achieving wealth, millionaires manage their money carefully, avoiding unnecessary spending and investing what they save.
Myth 6: Millionaires Only Make Money Through High-Paying Jobs
Fact: Many millionaires are self-employed or business owners.
While high-paying jobs help, many millionaires create their wealth through entrepreneurship. Thomas J. Stanley’s research found that two-thirds of millionaires are either self-employed or own their own businesses. Business ownership allows them to build multiple income streams and reinvest profits for growth.
Myth 7: They Got There Alone
Fact: Millionaires often leverage mentorship and networking to grow their wealth.
Wealth is not accumulated in isolation. Building a strong network of mentors and peers helps open doors to new opportunities, insights, and knowledge that accelerate wealth-building. Many successful people, like Richard Branson, credit much of their success to the people they surrounded themselves with.
Myth 8: Self-Made Millionaires Don’t Give Back
Fact: Wealthy individuals are often highly philanthropic.
Many millionaires and billionaires are major contributors to charitable causes. The National Philanthropic Trust found that high-net-worth individuals donate a much larger percentage of their income to charity than the average person. The Giving Pledge, started by Bill Gates and Warren Buffett, encourages billionaires to donate the majority of their wealth to charity.
Myth 9: Millionaires Don’t Pay Taxes
Fact: Millionaires pay a substantial portion of all taxes in the U.S.
Contrary to the myth that the wealthy avoid taxes, the top 1% of earners—many of whom are millionaires—pay nearly 40% of all federal income taxes according to the Tax Foundation. As wealth grows, so does the tax burden. Here’s how the numbers break down at various net worth stages, focusing on a state like Ohio:
$1 Million Net Worth:
Income: Around $150,000 to $300,000 annually.
Taxes Paid: $50,000 to $95,000 per year in combined federal, state, and local taxes.
Cumulative Taxes Paid by Age 37: Around $250,000 to $350,000.
$5 Million Net Worth:
Income: $500,000 to $1 million annually.
Taxes Paid: $200,000 to $420,000 annually.
Cumulative Taxes Paid by Age 50: Around $1.5 million to $2.5 million.
$10 Million Net Worth:
Income: Around $1.5 million annually.
Taxes Paid: $650,000 to $700,000 annually.
Cumulative Taxes Paid by Early 50s: Likely more than $3.5 million.
$50 Million Net Worth:
Income: Likely around $5 million annually.
Taxes Paid: Around $2 million annually.
Cumulative Taxes Paid by Age 60+: Over $10-15 million.
In Contrast: The typical American household making around $70,000 pays about $7,000-$8,400 in taxes annually, which totals about $210,000-$250,000 over 30 years. This means that by the time someone reaches $50 million in net worth, they’ve paid 60-70 times the taxes of the average household.
Additionally, it's important to note that about 8.8% of U.S. households—or roughly 11.6 million households—have a net worth of $1 million or more as of 2022. This illustrates that while millionaires represent a small portion of the population, they contribute a disproportionately large share of the country's tax revenue.
Conclusion: Wealth Takes Time, Patience, and the Right Habits
The path to becoming a millionaire is not quick or easy. It requires consistent savings, smart investing, and careful money management over many years. The myths surrounding millionaires, from their supposed avoidance of taxes to how quickly they get rich, don’t reflect reality. Wealth brings freedom and happiness, but it also comes with a substantial tax burden and a long journey of discipline and patience. By adopting these habits, anyone can start building wealth—just remember, it’s a marathon, not a sprint.