It is a shame that people are still fascinated with the idea of being a millionaire. According to an online etymology dictionary, the word “millionaire” was first seen in print in 1826, a year when having a net worth of one million dollars was an amazing accomplishment. An inflation calculator puts this into perspective; $1,000,000 in 1826 has the same buying power as $19,359,086.05 in 2009. There is nothing wrong about aspiring to become a millionaire as long as you realize that over time, the cachet of this status decreases and the number of millionaires increases.
Financial authors still look to millionaires as examples for the rest of us. Books like The Millionaire Next Door by Thomas Stanley and William Danko point out that most millionaires have self-made wealth, are business owners, and have a mostly frugal attitude towards spending.
A net worth of one million dollars in 2009, even if this does not include money tied up in the value of a primary home, will not provide financial independence for most people in United States. Assuming the one million dollars is invested in the stock market, and assuming financial planners’ recommendation of a safe withdrawal rate of 4% for maintaining value, a retiree or retired couple would be living on $40,000 each year. Considering families in this economy may be wary of investing their total nest eggs in the stock market, 1% or 2% may be a safer withdrawal rate.
One million dollars is not going to provide enough income each year for full retirement unless investment income is augmented by income from working, which defeats the purpose of traditional retirement, drastically reducing expenses to the point where retirees might need to redefine their planned retirement adventures, or moving to a country with a lower cost of living. For these reasons, my Number is well north of the one million figure. Note that I don’t call any certain number a goal, a real goal is not a number but the purpose behind acquiring wealth.
Rather than looking at the habits of millionaires, many of which are helpful but commonplace, I’d like to see more books focusing on the habits of those who have amassed wealth in the eight or nine digits. A quick look at the list of the world’s top billionaires (see Wikipedia) shows that like millionaires, the richest people in the world built their wealth by being atop the world’s largest corporations, and in Warren Buffet’s case, great investment prowess.
I prefer to focus on those who have achieved my Number, somewhere above “millionaire status” but below the stratospheric net worth enjoyed by the richest in the world.
Photo credit: TEDizen