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High incomes don’t always add up to wealth

The top five list came out of a survey of millionaires that drew upon answers from 10,000 participants. The majority — 79% — had not received inheritance. Eight out of 10 had invested in a 401(k) plan. And contrary to expectation, most millionaires surveyed didn’t have high-salary jobs. Instead, 93% said they’d created wealth simply by working hard.

Only 15% held senior management jobs, such as at the VP or C-suite level, and only 31% made an average of more than $100,000 in annual income at any time in their career. One third of those surveyed never achieved six figures.

“In other words, you can’t earn your way out of stupidity,” Ramsey said of the study results on a recent episode of The Ramsey Show, his syndicated radio program.

He’s quoted in the text of the study as saying something similar: “It turns out that math works for all of us, especially when you understand your income is your most powerful wealth-building tool.”

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Slow and steady wins the race

They might not work at high-paying jobs, but millionaires are an educated bunch, with 88% having graduated from college. However, few went to elite schools (only 8%). And 52% earned a postgraduate degree, the study shows.

What they have in common is the steadfastness to invest in the long term and stick with it. They’re also methodical shoppers: 85% of respondents use a grocery list. Nearly a third (28%) always stick to their list, while 57% sort of stick with it.

“They are systems people. They work with a set of principles and they don't have free rein to make up their own rules,” Ramsey said in his on-air review of the results. “When you are a lawyer and you go before the judge, you have to follow exact procedures. … You don’t have a choice. You don’t have a choice when you are designing a bridge. There is one way; otherwise it falls.”

Passion finds a way

It’s likely that teachers love their jobs and they’ve figured out a way to create a lifestyle to support their work — not the other way around.

“Don’t pick your career based on how much money you can make only,” Ramsey says. “Also don’t pick a career that says you will be happy but broke. That won’t work either. You should make more money if you are doing something you love, because you are good at it, you care about it, and you are creative and you have energy. You should make more money, not less.”

More: Teacher making $60K needs homebuying advice

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Pent-up need to spend

The average physician comes out of medical school with $200,000 in debt, and takes 13 years to pay it back, according to Brent Lacey, who hosts the podcast The Scope of Practice, which coaches physicians on their finances.

Consequently, doctors can miss out on years of investing as they work towards establishing themselves and eventually commanding a big salary.

And even when they get the payday, they might feel pressure to buy the big house and the fancy car, Lacey said on a recent episode. After so much sacrifice, a young physician might think, "It's my turn.”

In contrast, Lacey said, his own grandmother was a frugal public school teacher who retired a millionaire.

On the same episode, Sarah Stanley Fallaw, author of The Next Millionaire Next Door: Enduring Strategies for Building Wealth, said that people with high incomes, such as physicians, can think their big paycheck is automatic wealth.

“It’s very easy to be distracted and not be able to focus on things like finances, especially if you have a high income,” she said. “You think, ‘Everything is OK … that’s my security, I don’t need to worry about having a budget. Why do I need to know about my cash flow?’”

“A lot of us are making consumer decisions that are influenced by the people around us,” she said, “and certainly with that high income and the influence of other people — especially if those other people have really high incomes, too — we tend to do things that are not in our financial best interest, especially early on.”

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K.E. Gold Freelance Contributor

Kerry is a freelance contributor to Moneywise. She has written a housing and real estate column for 15 years for the Globe and Mail and has written several investigative features for the Walrus.

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