6 ways to build wealth like a millionaire

A massive misconception is out there that millionaires are rich because of their parents, but it's just not true. In fact, many people who inherit wealth lose it because they don't have the mindset or habits to maintain it.

Most of today's millionaires didn't inherit their wealth. A study by analytics provider Wealth X found that 68% of those with a net worth of $30 million or more made it themselves. And according to financial planning provider Fidelity Investments, 88% of millionaires are self-made.

Self-made millionaires have been through the grind. They've built skills, businesses and investments, and they've learned how to grow and preserve their wealth. 

Here are some strategies that can help you build wealth over the long term.

1. Get your mindset right 

People around you can be very quick to jump on your ideas and ask, "What if it doesn't work out?" Instead, I think a better question to be asking is "What if it does work out?"

You will always have outside noise. Your success will come down to you making a decision that is in line with your own values and beliefs. It is not going to be easy - the path of financial freedom is not supposed to be - but that's why you must figure out what's most important to you. 

Vitally important here is the ability to take action now - whether it's reaching out to an expert for help or forging ahead and doing the research yourself. At the end of the day, the most important thing is that you use your financial education to take action. 

2. Diversify instead of concentrating your wealth 

If you look at how millionaires have built their wealth, you'll find that most of them have concentrated on one or two key areas of expertise - whether it's their business, investment style or a specific asset class - and this has delivered significant rewards for their efforts. 

For me, I think it's important not to put all your eggs in one basket. Even though I love property, at some point, I know I'll hit a wall, either with my borrowing capacity or with equity growth. So, I need to diversify. 

Sure, property might be your main wealth-building tool, but you should also consider shares, ETFs or even crypto. Personally, property is my core investment, but I invest in other forms such as collectibles and crypto. They might not make up a large part of my net worth, but they help me keep the money working. 

Diversifying gives you the benefit of managing volatility in the market, and the ebbs and flows. It will, however, come at the cost of having to do more with your time and being across more markets. 

3. Focus on logical rather than emotional investing 

Don't get emotions and logic mixed up. This can be especially true when it comes to the markets and items that are nostalgic or highly emotionally driven such as luxury items.  

You might purchase luxury items because they give you joy or help you achieve a certain status. Or you might consider them an investing class. However, it is important to know what your motivations are and be able to decipher between what is emotion and what is a data-driven decision. 

The same holds true for investing in property. You're not going to live in the property yourself and need to take all emotion out of the buying decision. Instead, look at the data only, set your maximum purchase price and buy based on this. 

People using their emotions to justify their investment decisions is genuinely how so many lose money in markets.  

4. Create multiple income streams (wisely) 

You've probably seen people on YouTube or other social media talking about having 10 or 20 income streams. While it's great to diversify, it's important to focus on your passion and what's working. Double down on the stream that's bringing you the most return.  

Passive income, whether through rental properties or dividends from shares, is crucial for financial freedom. But don't ignore your active income, which keeps you in the game while you build up that passive income. 

5. Live within your means 

This is such an underrated lesson. You've got to live below your means, no matter how much you make. 

During lockdown, people seemed to spend less, and suddenly everyone was talking about saving. But once things opened up again, the spending habits went right back to the fancy cars and holidays.  

It doesn't matter what anyone else is doing. Keep your expenses low and focus on building wealth. You don't need to keep up with anyone else's Instagram highlight reel. 

6. Focus on growing wealth 

A lot of people think saving is the key to wealth. But the wealthy think differently. They're focused on making more money, not just saving it.  

If you earn an extra dollar, sure, you'll pay some tax, but the rest is yours. That extra cash can increase your borrowing capacity, open up new investment opportunities, and push you closer to financial freedom. 

This is an edited extract from Retire Filthy Rich with Real Estate (Wiley $32.95), republished with permission and available at all leading retailers.