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Let’s Stop Envying Millionaires

This article was written by in Wealth and Affluence. 22 comments.


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.

Warren Buffett's House

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

Published or updated June 8, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 11 comments… read them below or add one }

avatar Mike

I think you mean “let’s stop envying millionaires.” If you “covet” a millionaire, that DOESN’T mean you want to be one; it means you want to possess one. (Read Exodus 20:17, for example, to see how “covet” is properly used; it really isn’t the same thing as “envy”).

Don’t “envy” millionaires; don’t “covet” what they have.

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avatar Luke Landes ♦127,455 (Platinum)

I realized this on the drive in to work today. I’ll see if I can edit the title from here. :-)

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avatar ObliviousInvestor

Agreed. Most everybody in my generation (Gen Y) will need far more than $1 million in order to retire comfortably.

That said, I’m a big fan of the “don’t retire” idea. Find work you love instead. Then plan to work as long as you’re capable (while maintaining disability insurance for the chance that “as long as you’re capable” isn’t very long).

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avatar UH2L

You can work forever, but I read that people who retire later in life die soon after retiring whereas those who retire earlier live longer. Work means stress, and older people should take it easy at some point. That said, I think hobbies are important for seniors. They need to keep active and busy to keep their minds and bodies fit.

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avatar dawn

That New Yorker story was written for New Yorkers, who have one of the highest cost of livings in the world. I think many people get by comfortably on $40,000 a year, assuming they’ve paid off their house and have no mortgage.

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avatar MyJourney

Flexo,

I think this post is really just splitting hairs. Whether my goal is to reach $1mil, Multiple Millions (as per my site lol), or a Billion – I think the important thing is people are striving for a better life.

Case in point, I have a negative net worth today (thank you mortgage and law school loans) the fact that I follow your blog and others like it – even though most are not anywhere near millionaires is still a step in the right direction.

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avatar John

The New York number is a much better “retirement calculator” than any other retirement calculator i’ve seen so far. Enough so that i blogged about it and posted a trackback link. Keep up the great work and thanks for the inspiration.

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avatar Jacob

I could see how living a house the size two barns and needing a car to drive between them in the picture above could require $40k, but otherwise I do not quite understand how it is possible to spend that money on two people unless it involves large amounts of consumption, buying stuff and replacing it every other year; maybe hence the need for barnyard sized housing? ;-) 40k is as far as I remember still the median household income, so half of everybody lives on less than that. In terms of moving to another country, the Millionaire Next Door book suggests that spending is not so much a function of which country you live in but rather which country you grew up in, so if you want to learn how to live comfortably without gushing money, ask any first-generation immigrant ;-)

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avatar MyJourney

Jacob,

I couldn’t disagree more; its about where you live. My Townhouse (yes, a condo not a dual barn like creation) costs approximately 23,000 in just mortgage and taxes. You think spending an extra 20K is tough? Cable/internet (1200/yr), food, Electricity/Gas (2400ish/yr), car insurance, car payments, STUDENT LOANS, etc.

I don’t think spending 40K between two people who are not “extreme” frugalists is crazy.

Yup, I am from New York.

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avatar Kevin M

@MyJourney – I think Jacob’s point is you don’t NEED any of that extraneous stuff – cable/internet, car, etc. Not to mention by retirement you should have your house and student loans paid off.

For example, our living expenses (2 adults, 1 toddler) are about $1,700 monthly/$20,000 annually not including mortgage payments. At a 4% withdrawal rate, I would only need about $500k to retire. And I’m not even as extreme as Jacob :-). That doesn’t even take into account any income from Social Security.

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avatar MikeS

I created my own retirement analysis, so I could factor in assumptions about increasing my savings (additional 1% of salary every year) and salary increases that outpaced inflation (I’m optimistic). My “number”, assuming I retire at 65, would be between $6.5 and $7.5 million. Do I need all of that? I don’t know, but I’ve got 30 years to find out. What I do know, is that if I use the 4% withdraw rate, I’ll be getting north of $100,000 a year. That’s more that I make now and when I retire, I won’t have a mortgage. If I can’t live on that, I’ve got some problems.

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