A self-made millionaire who interviewed 100 other millionaires found there's one surprising habit many have in common
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- John, who runs personal finance blog ESI Money, has spent the past few years interviewing millionaires.
- One common trend he found surprised him: Most millionaires don't have a budget.
- Millionaires spend relatively little compared to what they make because of their self-control, rendering a budget unnecessary, he said.
Turns out, many millionaires have more than huge bank accounts in common: They also don't have a budget.
That's what John of personal finance blog ESI Money, who retired early at the age of 28 with a $3 million net worth, found after interviewing 100 millionaires over the past few years. Forty-six of the 63 millionaires he asked don't have a budget, which he said surprised him.
"While it was not expected, the reasons millionaires don't need a budget makes sense - they make a lot and have self-control," he wrote in a blog post. "In other words, they make a ton, spend only a portion of it, and have plenty left over. Who needs a budget?"
The median net worth of millionaires John interviewed was $2.3 million. While 90% of them were men, 93% were married, so John said he considers the women millionaires as well. The median age was nearly 50.
John interviewed one millionaire who spends $90,000 a year. He only buys necessities and only books vacations with a deal.
"I track our accounts using Mint and Personal Capital, and use cash back credit cards exclusively for every possible expense. But, we have never made a formal budget," the millionaire told John.
He added: "Every few months I look to see if my cash balance is bigger than it was a year ago. If it has grown, I invest the money. If dropped, I try to hold off on discretionary expenses. Last year according to Mint, we spent $90,000, including $13,000 on home improvement projects."
John wrote that this is similar to his personal experience - he and his wife had a budget early in their marriage to give them more control when tracking spending habits until they "developed our moderately frugal lifestyle to the point where it was second nature" and knew they wouldn't overspend.
They didn't have a budget for 15 years until approaching retirement.
"This is the experience most millionaires have," he wrote. "Their incomes have grown, they don't spend a lot relative to those incomes, and so they don't use a budget. Yet many still track spending in one way or another."
It makes sense considering another common trait among self-made millionaires. Thomas C. Corley, who studied rich people for five years, found that the majority of them considered themselves frugal. They also keep their expenses low and avoid the "lifestyle creep," or the tendency to spend more whenever they earn more.
It seems that a budget may be good for becoming a millionaire, not for being one.
United Income CEO Matt Fellowes previously told Business Insider that making a budget is an effective way to identify and reduce unnecessary spending, and that it will help one retire as a millionaire.
As John puts it: "A budget is great for the early phases of a financial plan, but if you can grow your income and develop self-discipline not to spend, it's not vital to your success later on."