Let’s move on to Jesse S’s question. It says, “I keep hearing thrown around that millionaires have, on average, seven streams of income. Money Guy Show, does this track with your experience, and with your clients? And if so, what do they look like? I mean, you guys have a lot of interesting connections, you’ve worked with a lot of interesting clients, and you’re interesting people yourselves. What would you say to this?”
Yeah, it’s really interesting. First, I think what you have to define is how do you consider streams of income, right? Some people, obviously, like wages, W-2 income, that’s coming in, that’s a stream of income. Some people consider a stream of income as portfolio growth. Like, if my portfolio is growing and I’ve got dividends coming in, that’s a stream of income that’s also taking place in compounding. So I think you have to define that. I don’t think, and Brian, I’ll be curious for you to weigh in on this, I don’t think it’s uncommon for millionaires to have multiple streams of income. But I would also say, in our experience, it has not been a necessity.
You know, we have an annual wealth survey that goes out, and we ask, ‘Hey, how would you define your path to millionaire status? Are you an entrepreneur? Were you a virtuoso who has some unique skill and talent? Are you an executive? Or are you just a savvy investor? You have a job, and you save consistently.’ And it’s amazing that the vast majority, I mean, the vast majority of folks identify as savers and investors, not necessarily people who went out and found a bunch of different income streams and how to create these huge incomes. But they’ve figured out how to master deferred gratification, taking whatever their income is, whether it’s through multiple streams or a single stream, and consistently save through time.
So I think having additional streams of income can be helpful and can be valuable, but I would not say that having seven streams of income is a necessity to get to millionaire status.”
Well, I think it’s good clickbait titles, but I just sat here and I was like, ‘Let’s do this.’ So I was like, ‘Look, I’m going to go ahead and tell you, I think the majority of millionaires, I can count five very easily.’ And follow me through this. First, you’ve got your job, you know, what you do to get the W-2, or that’s one. I’ve got portfolio, well, I guess it’s saying passive or no, just streams. Okay, so the job counts. Portfolio, but portfolio is not one, because originally I was like, ‘Man, this is only going to be four.’ But no, it’s going to be interest, dividends, appreciation through capital gains. So those are all…see, I’m telling you, but this is how they had to have gotten to seven. Okay, so I know, I can see, you’re real estate. Well, when you say seven, what do you think they’re doing? Real estate is because, you know, typically, somebody inherits a house, or they get into owning, or they sold their first house, you never…there somehow you end up stumbling and tripling and falling, and you trip and fall into owning some real estate. So, there’s your fifth.
Now, I thought about that, because I think a lot of people feel a lot of pressure when they see a stat like that, where, you know, you’ve got to have seven streams. But this is no different, because there’s another book out there by a financial person that shows that they’ll post a stat like, ‘Our research shows that millionaires pay off their house in 10 years.’ And I’m always like, ‘Man, that’s an incredible stat that makes me feel like I have a lot of pressure on my shoulders.’ But then you go and you say, ‘What’s the asterisk? What’s the footnotes on that stat?’ And what you find out later is, yes, millionaires do pay it off, but this is not their first home. It might even be their second home because, realize, the average millionaire is like 49 years old when they cross that threshold. So you’re talking about people in their 50s who probably are in this mindset now, ‘Let’s pay off all the debt.’ So you can still have the stat without really getting the clarification of what nuances went into it.
And I think this is the same thing. Yes, probably millionaires do have at least five streams of income coming in, but that’s not necessarily where you’re going to end up. Don’t aspire to create streams so you can resemble a millionaire. I want you to aspire to get to the critical mass or the escape velocity point of how do you get to a million dollars? Because once you get your ass through saving, through investing, through automatic, for the people, making the good habit easy, that is actually what’s going to make it. And then all of a sudden, you’re going to find out once you cross that threshold, all of a sudden, all these other streams start showing up because you’re going to have a portfolio large enough that now when a real estate opportunity comes your way, you jump on it, you know, or some other side hustle comes on. ‘Man, that’s a great deal. I think that’s what I want to retire to. I want to get into content creation.’ There’s another hustle that jumps in. I would not aspire just to create seven streams of income. I would actually try to figure out what’s my entry point into seven-figure status and how do I hit it hard, hit it often, and make it happen.”
You know what? I think millionaires have more than streams of income. They have multiple savings streams. Because I was thinking through this when we think about the millionaires that we work with, if you look at the financial order of operations, they’ve got a stream that’s going into their 401(k), and they’ve got a stream that’s going into their Roth IRAs. They’ve got a stream that’s going into their HSAs. They’ve got a stream that’s going into their after-tax. These are saving streams where their money is going to invest. Way more important than where the money’s coming into them from. So, what you do with the dollars that come to you, I think is where the attention should be focused, not on the income that you’re generating.
Yeah, and if I was being honest, because I was stretching to try to get to seven here, here’s my own personal self-assessment. Multi-millionaires, job, portfolio, real estate, Money Guy Show. Yep. So, I mean, that was four. I don’t see it as seven. That’s why I had to get creative. Even though you didn’t have all of those at once, I think sometimes you see millionaires who do have that. Point is, stats never tell you where this is. They’re looking at the results after the fact. You need to figure out how do you get to the entry point, and that’s why I think these are distractions. Just like if you heard that stat on millionaires paying off their debt, their mortgage in 10 years, if you prioritize that while you’re in your 20s and 30s, you’ve missed the boat. You’ve lost the point. It’s still true, but that doesn’t mean that’s what you ought to be prioritizing. That’s why financial order of operations, go get it, because money.com/resources, we’re not playing around. This actually helps you to know what to do with your next dollar to prioritize the journey without all the distractions that crazy stats like that can tell you.