In a recent video, financial expert Dave Ramsey shared some key insights from his 2024 study on how people achieve millionaire status. According to Ramsey, two main factors are significant in reaching a net worth between $1 million and $5 million: consistently investing in retirement accounts and owning a paid-for house.
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1. Investing Consistently in Retirement Accounts
Ramsey emphasizes regularly investing in retirement accounts like 401(k)s and IRAs. His study found that eight out of 10 millionaires participated in their company's 401(k) plan, and 75% also invested outside these plans. This consistent, long-term investing strategy allows individuals to take advantage of compound interest, which can lead to substantial growth in their retirement savings over time.
Avoiding Single-Stock Investments: The study also highlighted that none of the surveyed millionaires attributed their financial success to single-stock investments. Instead, they focused on diversified portfolios and mutual funds, which are less risky and provide more stable returns.
Regular Contributions: Three-quarters of the millionaires cited regular, consistent investing over many years as a major factor in building their wealth. This disciplined approach contrasts with the notion of getting rich quickly through high-risk investments.
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2. Owning a Paid-For House
The second major factor Ramsey identifies is homeownership – specifically, owning a home free and clear of mortgage debt. The typical millionaire in his study had a net worth ranging from $1 million to $5 million, with about $500,000 to $600,000 tied up in a paid-off house. Owning a home outright boosts net worth and provides financial stability and security.
Equity Building: By paying off their mortgage, these individuals build significant home equity, which becomes a substantial part of their overall net worth.
Financial Security: Owning a home outright reduces monthly expenses and provides financial security, allowing more resources to be allocated toward investments and savings.
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Profile of a Typical Millionaire
According to Ramsey's study, the average millionaire is around 51 years old. Here's a quick look at their financial profile:
Net Worth: Typically between $1 million and $5 million.
Home Value: Around $500,000 to $600,000, fully paid off.
Retirement Savings: Between $700,000 and $900,000 in 401(k) accounts and other retirement funds.
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More Insights from the Study
Living Below Their Means: Ninety-four percent of millionaires live on less than they make. They're careful with spending, often using coupons and keeping dining-out expenses under $200 a month.
Debt Management: Nearly three-quarters of the millionaires have never carried a credit card balance, highlighting the importance of avoiding high-interest debt.
Self-Made Wealth: A significant majority (79%) didn't inherit their wealth. Most millionaires come from families at or below middle-income levels, debunking the idea that wealth is primarily inherited.
Education: Eighty-eight percent of millionaires graduated from college, with many attending public state schools rather than elite institutions. Over half (52%) earned a master's or doctoral degree.
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Dave Ramsey's findings reemphasize the importance of disciplined financial habits in reaching a net worth between $1 million and $5 million. Consistent investing in retirement accounts and owning a paid-for house are two of the most significant factors contributing to financial success. Individuals can build substantial wealth over time by living below their means, avoiding debt, and making smart investment choices. Ramsey's study offers a practical road map for anyone aspiring to achieve financial independence and security.
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This article Dave Ramsey Reveals The 2 Simple Things People Do That Get Them To A $5 Million Net Worth – Can You Guess What They Are? originally appeared on Benzinga.com
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