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What Makes A Millionaire?
Education | 16 April 2010
By: jason.liew
Articles (66) Profile

Singapore, with a population of about 5 million, has about 61,000 millionaires according to the 13th annual World Wealth Report released last year. As I am in the asset management industry, I have seen a number of millionaires and realise that these people are typically different from the average joe. Although some millionaires have been born with a silver spoon, or get rich due to en bloc sales, most millionaires build their fortunes from scratch. How do those millionaires who started off with nothing build their fortunes? With regard to this, I have done research and have also talked to some of the millionaires who are in the 40-50 age brackets. The secret lies in their mindset.

Below are some examples of attributes that millionaires possess

1. Committed to become wealthy

Millionaires are willing to work hard, make sacrifices and step out of their comfort zone, in order to achieve wealth. For example, they are willing to sacrifice some of their leisure time, sleep time, or time spent with family and friends to build their career. In addition, some of them are willing to step out of their comfort zone and leave their fixed salaried jobs to start businesses on their own.

2. Set a clear financial goal, write out a plan and execute it to attain the goal

Setting a clear financial goal with a written plan forces one to focus and to think hard and in depth on the plan and the goal. This literally means that one has to set a specific amount and a reasonable time to achieve it. To know whether it is reasonable, a written plan is necessary. If person A has only S$30K in his bank account and he wants to achieve S$1m in a year’s time, he will know that it is extremely unlikely and unreasonable, if he writes a plan. A written plan also helps to foresee any problems and the ways to circumvent them.

After a plan is written, it is important that one has to execute immediately. Do not procrastinate. To paraphrase words from Adam Khoo “a goal is actually a pipe dream. With a plan, it is a possibility. Once you execute it, it becomes a reality”.

3. Be positive, focus on opportunities and take calculated risks

A positive attitude is important as the road to wealth is not a bed of roses. It is likely that one will meet several obstacles and setbacks. What is important is that one has to learn from the setbacks to improve himself. As Henry Ford aptly puts it, “Failure is only the opportunity to begin again, only this time more wisely”.

In addition, for every business venture, or anything which involves doing new things, or doing things differently, there will always be risks, opportunities and obstacles. One should focus on opportunities and be aware of the obstacles. However, we should not let the risk of failure (due to the obstacles) paralyse us into inaction. Millionaires typically take calculated risks. If they fail, they will try again via a better way. Taking a quote from the “Secrets of Millionaires Mind” by T. Harv Eker, “If you are willing to do only what’s easy, life will be hard. But if u are willing to do what’s hard, life will be easy”.

4. Ensure expenses < income and invest the surplus funds

Some people believe that if they can increase their income, much of the battle is won. However, there are people who earn S$30K per month and they are still complaining of being poor. As the saying goes, it is not “how much you make, it is how much you keep”. Millionaires strive to keep their expenses small while they expand their sources of income. What do they do with surplus money after setting aside emergency cash? Do they invest all of their surplus money in fixed deposit and Singapore government bonds? No, this is because the returns are too low to achieve enough wealth by age 40 to 50 years old. Usually, these people will invest in a portfolio of assets ranging from properties, stocks, bonds etc.

5. Delayed gratification

In addition, millionaires practise delayed gratification. This means that they can sacrifice short term benefits for medium to long term benefits. For example, if Couple A has some cash and they can plan either to stay in a private estate (where they will be tight for cash) or HDB (where they have surplus funds to invest), they should do the latter so that they can invest the surplus funds to generate higher returns. This will bring them one step closer to their millionaire goal.

6. Remember to reward yourself and your family

In order to adhere to the financial plan, positive reinforcement is required. This means that one has to remember to reward himself occasionally so as to create the motivation to adhere to the plan. For example, person B can set a plan whereby he will bring his family for a short trip whenever one of his milestones in his financial plan is reached. This has the effect of positive reinforcement and will create the motivation to adhere to the plan.

7. Contribute to society

This is important based on two reasons. One of the reasons is scientific, the other is not. For the scientific reason, it is important to contribute to society as once you can see the positive things that you can do with your wealth, you will have more motivation to continue to adhere to your financial plan.

The second reason is non scientific. Contributing to society builds good karma. I believe none of the readers here will complain of having too much good karma, right?

8. Insure your wealth against unforeseen circumstances

Most wealthy people would also make plans to protect their wealth. For example, they will buy insurances; recruit the services of estate planners; private bankers and lawyers to protect the wealth against unforeseen circumstances.

Conclusion – so how many do you have?

Having seen the eight mindsets, how many do you practise? If you have the majority of them, congratulations! You are almost there, provided that you continue to adhere to the mindsets.

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