18% of American households are millionaires. Here’s why you’re not one of them.

Every three years, the US Federal Reserve conducts a survey of US finances. This study is called the US Survey of Consumer Finances (SCR) and provides a representative picture of America’s wealth. It describes the assets and liabilities of survey participants and also shows their income, demographic characteristics and changes in U.S. wealth every three years. You may be wondering: if there are so many millionaires, why aren’t you a millionaire?

What is the average millionaire profile in the United States?

According to the SCR, American millionaires tend to have a number of characteristics.

• About 18% of US households were millionaires (that’s about 23.7 million households)
• Millionaire households tended to be older; most were over 55 years old
• Most millionaires were couples, or couples with children.
• Millionaires tended to be better educated, and college degree holders had an average net worth of $1.9 million dollars, almost four times more than those who had never earned a college degree.
• Millionaires were typically self-employed ($3 million net worth) or retired ($1 million net worth)
• Millionaires were more likely to own their homes ($1.5 million net worth) than renters ($150,000,000 net worth)
• Millionaires were more likely to own their own businesses, and business owners had higher incomes and wealth than non-owners.

The Consumer finance research also found that the majority of millionaires owned stocks, had retirement accounts, and owned pooled investments such as mutual funds or index funds.

Is the research into consumer finances accurate?

Since the Survey of Consumer Finances only interviews about 4,000 people, you might be wondering if the data is accurate.

It is.

The survey uses so-called multi-stage area probability sampling, a statistical term that means that the Federal Reserve selected survey participants to be representative of the country as a whole, according to the the annual report of the survey. The survey deliberately excludes members of the Forbes 400, a list of billionaires. So the research reflects what wealth basically looks like in the United States. It is as accurate as great economic studies can be.

So why aren’t you a millionaire?

If you notice that you are not one of the millionaires included in this report, there could be a number of reasons for that. Below is a list of common reasons why many people fail to become millionaires:

• You spend more every year than you earn
• You don’t pay yourself first
• You have a lot of children, and you have them too young
• You do not own a home
• You don’t save or invest
• You’re constantly replacing things before they’re needed
• You have a low income
• You are not living a healthy life
• You don’t read
• You’re getting divorced
• You have at least one bad habit that costs money, such as smoking or gambling
• You’re young
• Your parents have no assets
• You don’t negotiate prices for expensive items like cars.

If you’re not currently a millionaire or on track to become one, it’s probably because of the consequences of choices you’ve made in the past. The good news is that from this moment on you can make several choices to create the wealth you want. It won’t necessarily be easy and you will have to avoid making the mistakes that limited you in the past.

Do you want to become a millionaire? – Here are some things you can do

Becoming a millionaire is easy, but it takes sustained effort over time. Here are some immediate steps you can take to help you get on the right track.

• Start saving and investing as soon as possible. The data from the Survey of Consumer Finances is very clear: it takes time to become a millionaire.
• Contribute the maximum to your retirement accounts. Nearly all of the millionaires in the Federal Reserve survey had a retirement account. In contrast, very few of the poorest in the study had these. So if you don’t have an IRA or you haven’t signed up for your 401(k) through your employer, do so and contribute the maximum.
• Buy a house. Millionaires are much more likely to be homeowners. Homeownership results in forced savings and tax breaks, and homes often increase in value. Renters have none of these benefits, meaning homeowners will have more wealth in the long run. If you don’t have one, buy a house you can afford.
• Start a business or use your knowledge. Self-employed people have a net worth of more than €3 million, and even a modest additional income can significantly increase your wealth.
• Health is wealth. Cut bad habits. Smoking can cost you as much as $2 million over your lifetime, and alcohol is generally an expensive addition to your grocery bill.

So by taking a few steps, you might be able to count yourself among the newly crowned millionaires in these reports in the not-too-distant future. Remember, most millionaires didn’t inherit it; they built it by making good choices, like yours. And no matter how old you are, you have experience on your side. Track progress every quarter and in five to ten years you’ll toast to joining the 18%.

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James Hendrickson is an internet entrepreneur, digital publisher, hunter, and personal finance nerd. When he’s not lurking in the coffee shops of Portland, Oregon, you can find him in the great outdoors of the Pacific Northwest. James has a master’s degree in sociology from the University of Maryland at College Park and a bachelor’s degree in sociology from Earlham College. He likes individual stocks, bonds and precious metals.