- Thomas C. Corley spent five years studying millionaires and gathered his insights in several books, including “Change Your Habits, Change Your Life.”
- Corley interviewed 233 Americans with at least $160,000 in annual gross income and $3.2 million in net assets, 177 of whom were self-made.
- Corley found that in their pre-millionaire years, they started with the same goal: saving 10% to 20% of their income.
- They also used what he calls “the bucket system” to separate their savings into four categories.
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Whether you have a goal to reach $1 million or $10 million, you have to start somewhere.
Thomas C. Corley, a certified public accountant and certified financial planner, spent five years studying millionaires and gathered his insights in multiple books, including “Change Your Habits, Change Your Life.”
Corley interviewed 233 people with at least $160,000 in annual gross income and $3.2 million in net assets, 177 of whom were self-made. Through these interviews and analysis, Corley uncovered dozens of commonalities about rich people and their daily habits to piece together exactly how they got to where they were.
In his book, Corley wrote that 80% of the self-made millionaires he studied didn’t get wealthy until after age 50 — but that almost all of them started the same way.
“The self-made millionaires in my study all set a goal of saving 10 to 20 percent of their income during their pre-millionaire years,” Corley wrote. The average American has a savings rate of about 8%, according to the St. Louis Federal Reserve.
More important, the pre-millionaires were intentional about where they put their savings. Using a strategy Corley calls “the bucket system,” they siphoned their savings into four general categories: retirement savings, specific expenses, unexpected expenses, and cyclical expenses.
Retirement savings includes IRAs, annuities, 401(k)s, and other workplace retirement plans — that is, money invested for growth and to be spent later in life. Future education costs, wedding costs, a home down payment, and other big expected costs are part of the second bucket.
The third bucket is more or less an emergency fund, a separate account with cash to fall back on in the event of sudden job loss or a medical emergency. And the cyclical-expenses bucket contains savings for birthday gifts, holidays, and vacations.
This savings strategy proved crucial for almost half of the millionaires in his study, who he says followed the Saver-Investor Path. They eventually were able to live on 80% or less of their take-home pay, remained consistent and patient, and never flaunted their wealth. Above all, they used time to their advantage.
“Self-made millionaires make a habit of saving,” Corley wrote. “The more you are able to save at an early age, the more wealth you’ll accumulate.”