7 Things Millionaires Understand About Money

 

Building wealth is often about thinking differently. Millionaires approach money, investing, and lifestyle choices with a long-term, strategic mindset that separates them from the average person. Here are 10 key money principles that millionaires understand and apply consistently.

1. It’s Not About How Much You Make

Millionaires focus on overall net worth — not how much they make annually. Your net worth is the value of all your assets (real estate, investments, retirement accounts, etc.) minus liabilities (debts). A six-figure salary doesn’t guarantee wealth if savings and investments aren’t more prominent than your spending habits or debt. In terms of spending, millionaires spend on things that grow in value, like real estate, and minimize their debt on things that don’t grow — like clothing.

Understanding net worth can help people focus on how to best accumulate things that appreciate — like real estate, fine art, education, index funds and businesses and avoid spending on lifestyle inflation — like expensive restaurants, bottle service, clothing and the latest and greatest of everything.

2. They Know the Power of Compounded Interest

Millionaires know the power of compounded interest — that investing consistently, even small amounts, builds substantial wealth over time.

For example, investing $250 weekly starting at age 28 in an index fund (Think: anything that tracks the S&P 500), averaging 7% annual returns can grow to over $2.2 million by age 65. Total amount invested: $481,000 — Total growth from compounding: $1,807,495

The easiest way to do this is to pretend this $ was never there. Have it deducted out automatically from your paycheck, set up your brokerage account to auto-invest the funds, and trust in the power of compounding. This strategy works regardless of income level. By automating investments into tax-advantaged accounts like IRAs or 401(k)s, you don’t have to be a millionaire to harness the power of compound interest.

3. They Invest in Their Health

Staying healthy is a wealth-building strategy many overlook. Millionaires understand that health problems lead to lost income, higher insurance premiums, and unforeseen medical expenses. Many invest in regular preventative care, fitness, and quality nutrition. In NYC, this is evident through the many executive health programs offered by city hospitals.

Executive Health Programs are comprehensive, personalized healthcare services tailored for busy professionals by leading city hospitals and medical centers like New York-Presbyterian Executive Health Program, Mount Sinai Executive Health Program and NYU Langone Executive Health Program. These programs are designed to offer efficient, preventive, and high-quality care like comprehensive health assessments, full physical exams and assessments for chronic conditions or cancer risks. They provide personalized care plans and get immediate access to specialists in cardiology, dermatology, orthopedics, etc. along with lifestyle and wellness coaching, fitness assessments, personal training advice, and recommendations for work-life balance. Staying healthy reduces long-term healthcare costs and keeps you productive for longer, allowing for continued income generation to build generational wealth and better quality of life.

4. They Marry Strategically

Divorce is one of the fastest ways to lose wealth. Millionaires approach marriage with love and with a healthy dose of financial pragmatism. Many make sure they are financially aligned before walking down the aisle, whether that means discussing finances openly with their partners, prenuptial agreements, or having shared financial values, understanding and goals.

A financially aligned partnership avoids costly mistakes like hidden debt, conflicting spending habits, or legal disputes. In NYC, where the cost of living is high, having a financially compatible partner amplifies wealth-building opportunities.

5. They Know Good Debt vs. Bad Debt

Millionaires differentiate between “good debt” and “bad debt.” They avoid consumer debt like credit cards with high interest but embrace low-interest debt for income-generating investments. Avoiding high-interest debt saves thousands over a lifetime. Using debt strategically for investments creates passive income streams and grows wealth faster without creating cash flow restraints.

6. They Understand Tax Efficiency

The wealthy understand that keeping more of what they earn is just as important as how much they earn. Millionaires utilize strategies like contributing to tax-advantaged accounts, taking advantage of real estate depreciation, and setting up LLCs or S-Corps to reduce taxable income. Reducing your effective tax rate can free up thousands annually to invest. Even middle-income earners can take advantage of tax deductions, credits, and retirement account contributions to grow their wealth.

7. They’ve Learned Impulse Control

Millionaires understand that wealth-building is a marathon, not a sprint. They stick to their plans even during market downturns or act hastily, they don’t sell investments in a panic during market corrections. A long-term approach avoids emotional decision-making and ensures steady progress..

Why Do Millionaires Know All This?

This information requires financial education and long-term thinking, which many lack due to immediate financial pressures, the financial mindset of parents who raised them, or a lack of exposure to wealth-building knowledge. Millionaires often had an important mentor or access to this information before building wealth and they continue to have mentors, financial advisors, accountants, attorneys and access to networks that prioritize these concepts.