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7 Secrets Of Self-Made Millionaires

Tuesday, June 4, 2013 - 10:00am

Many people have a false impression about the wealthy.

It's often believed that the rich are somehow different than the rest of us. The media places them on a pedestal as fortunate people who don't have any worries and spend their days in a fantasy world of luxury and pampering.

But nothing could be further from the truth.

Often, the greater the wealth, the larger the problems, worries and stress levels. The only thing that is different is the scale of the issues; otherwise the rich are the same as everyone else. So just what is different about those with self-made wealth and those without?

This subject fascinates me, so I decided to discover what characteristics and habits are common factors among the wealthy. Here are seven secrets of self-made wealth.

1. The Ability To Delay Gratification
This is truly a key to wealth. The wealthy are able to concentrate on the future along with their everyday tasks. The ability to understand how actions today will affect the future is a dominant characteristic of wealthy people.

Rather than spend money today on short-lived pleasure, the wealthy are able to make wise spending decisions with the future benefits firmly in mind.

For example: Rather than lease an expensive car right out of college, someone with a wealth-driven mindset might buy an inexpensive car with the goal that in a decade they will be able to afford a much nicer car with the money they saved.

2. Own Your Own Business
If you take a look at any list of the wealthy figures, one overwhelming theme emerges: The majority own at least one business. Even those who inherited their riches can probably thank a business owner somewhere in their past.

Rarely, if ever, can someone become super-wealthy by rising up through the corporate ranks. Even if you are currently a wage slave, you can start a business on the side with the goal of taking it full time once it earns enough to allow you to do so.

3. Buy "Forever" Stocks
Locating stocks with long-term growth potential is a key to prime your portfolio's way to wealth.

Regardless of the economy, forever stocks have proven to outperform the market over the long term.

4. Use A Roth IRA
It takes high-growth investments to rapidly decrease the time frame on your way to wealth. Taxes are a primary obstacle to wealth building.

Placing high-growth investments within a Roth IRA protects their growth from taxation, and as long as you wait until you're 59 1/2 years old, there will be no tax on withdrawals.

Roth IRAs are powerful tools used by wealthy entrepreneurs to protect their gains from the perils of taxation.

5. Incorporate Yourself
High-earners often form corporations to manage their income and expenses. This trick allows a high-earner to pay less in personal taxes.

Although not everyone can use this method, checking with your tax advisor about applying a similar strategy may be a wise move.

6. Use Trusts
Nearly every ultra-wealthy person is well versed in using trusts to preserve their wealth.

Trusts can help avoid taxes and protect your heirs. They also make good holding structures for hard to value assets like private company shares.

7. Make Like Hollywood's Smartest Superstars
While most everyone is familiar with investment flops of the Hollywood elite like the Planet Hollywood restaurant chain, the smarter movie stars have been quietly investing in master limited partnerships (MLPs) for years. MLPs are a mainstay of the wealthy due to their consistent cash flow creation.

Readers of Carla Pasternak's High-Yield Investing are familiar with the top names in this sector.

Risks to Consider: Whether or not you share these traits, you should be aware that there is no magic formula for completely eliminating the risks inherent in investing. However, these tips can give you a good start toward protecting what you've earned.

Action to Take --> By adopting a wealth-driven mindset, investors can take full advantage of these seven secrets to lay the foundation for their own personal fortunes.

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David Goodboy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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