18% of US households are millionaires. Here’s Why You Aren’t One.
Every three years, the US Federal Reserve conducts an analysis of American finances. The US Survey of Consumer Finances, or SCR for short, is a study that provides a comprehensive picture of America’s wealth. The study details the assets and liability of the participants, as well as their income, demographics, and the changes in American wealth over the past three years. You may wonder, why don’t I have a million dollars?
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
- 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 time 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 that non-owners.
- The Survey of Consumer Finances also found that the majority of millionaires owned stocks, had retirement accounts and many owned pooled investments such as mutual funds or index funds (Source: Survey of Consumer Finances). Is the Survey of Consumer Finances accurate? You may wonder if data are accurate since the Survey of Consumer Finances interviews only about 4,000 people.
It is. The survey is using a method called multi-stage probability sampling, which is a statistical phrase that means Federal Reserve chose study participants to be representative of the entire country. This was stated in the annual report. The study intentionally excludes the Forbes 400 list, which is made up of billionaires. The study reflects what wealth looks like in America. This is as accurate as a large-scale economic study 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. You may not be a millionaire or on track to become one because of past choices. It’s possible to make better choices going forward. Want To Be A Multi-Millionaire? Here Are Some Things That You Can Do
- Achieving the status of millionaire requires sustained efforts over time. You can get started right away by taking these immediate steps.
- Get started saving and investing immediately. It takes time to be a millionaire, according to the Survey of Consumer Finances. Contribute as much as possible to your retirement account. In the Federal Reserve study, nearly all millionaires had retirement accounts. The poorest participants in the study were the least likely to have these accounts. If you do not have an IRA, or if you haven’t enrolled in your 401(k), through your employer, then you should and you should contribute as much as you can. Buy A Home. Homeownership is more common among millionaires. Homeownership is associated with forced savings, tax advantages and an increase in home value. Renters do not enjoy these benefits, so homeowners end up with greater wealth over time. Buy a home that you can afford if you don’t already have one.
- 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.
- (Photo courtesy of Pamela Carls)
