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It's tough to make money with investments. As Fool contributor Selena Maranjian pointed out in an article last month, you have to consider inflation, taxes, and investment costs, all of which drag down your returns.
For instance, say you expect stocks to earn 10% per year. Once you subtract 3% for inflation, 2% for investment costs, and another 2% for taxes, all you've got left is 3% per year.
And numbers are even worse for bonds or money market funds.
Perhaps these assumptions are a tad pessimistic, but the general point remains valid: You can't count on 20% returns year in and year out, as investors got used to during the 1990s. As such, it's critical to have a backup plan for achieving your financial goals. For guidance on what such a plan might look like, let's see what we can learn from people who have already achieved a substantial degree of wealth: millionaires.
Characteristics of millionaires
According to a fascinating book I highly recommend, The Millionaire Next Door (published in 1996, so the statistics are dated, but the conclusions are not), here are some characteristics of millionaires that might surprise you:
"More than 80% are ordinary people who have accumulated their wealth in one generation. They did it |
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