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One Million Dollars Isn’t What It Used to Be

This article was written by in Featured, Wealth and Affluence. 23 comments.


There was a time the word “millionaire” carried cachet. According to the Oxford English Dictionary, the word was first used in French in the early eighteenth century and in English nearly a century later. Regardless of your station in French society in 1719, you would recognize a net worth of one million livres being notable. The same would be true for one million U.S. dollars a century later. Only a small percentage of society could be listed within a roster of millionaires.

Millionaires are easier to find today. Inflation and the erosion of the value of a dollar over the course of two or more centuries has put the goal of having a financial worth of one million dollars within reach for more Americans, but the club is no longer the exclusive party it once was. When the term became popular in American print, the persons most likely to be millionaires were the heads of large, multinational corporations. These are the same folks who are most likely to be multi-billionaires today.

Scrooge McDuckOne million dollars is still an admirable financial target, and I say “target” because I’m hesitant to call any financial milestone a goal. Goals are related to why one might set a financial target, not the target itself. Outside of real estate equity, most households won’t have assets worth one million dollars. It may sound odd considering this is a country where 50 million people are living in poverty according to the U.S. census, but a net worth of one million dollars isn’t a demarcation line between the rich and the not-rich.

Retiring with a net worth of one million dollars in investable assets might allow you to withdraw $50,000 a year for 20 years — using the simplest calculation — but an annual income of $50,000 while living in the United States would probably not provide the lavish lifestyle historically associated with the idea of the millionaire. If you want to live the life of the upper class, you’ll need a net worth well north of one million dollars to generate annual income in six or seven digits.

Yet the concept of the millionaire still carries some mystique. The success of the book The Millionaire Next Door by Thomas J. Stanley and William D. Danko is evidence of this. The 2010 edition of book is ranked 29th in personal finance by Amazon.com. The book’s subtitle is, “The Surprising Secrets of America’s Wealthy,” but the authors didn’t seek out the wealthy for their advice and tips for this book, they interviewed mere millionaires. The premise is that today’s millionaires achieve their status by living below their means, spending less than they earn, and making financial choices that weigh future possibilities against today’s media-driven desires.

The authors show that the neighbor with an old car still running well is more likely to be financially secure than the neighbor whose fancy car requires unaffordable lease payments. People become millionaires by owning small businesses rather than working for a large corporation in middle management.

There is nothing wrong with this advice. It may inspire some readers to get started making better financial choices, but it won’t lead to wealth as represented by the socially-inherited concept of the millionaire. If we want the best advice for creating a lifestyle in which money is no longer a concern and the fulfillment of desires is not limited by wealth, ignore the millionaires and look to the multi-billionaires.

Forget about the neighbor who owns the auto repair business. Don’t waste your time looking for advice from financial bloggers like me. While keeping in mind that wealth itself is not a goal — your goal should be what you want to do with your life when you have access to as much capital as you need — take a look at the Forbes list of the wealthiest Americans. Two categories stand out.

First, there are the business owners who started their businesses small. Millionaires kept their businesses small, while these individuals, like Bill Gates, Larry Ellison, and the Waltons, took their businesses a few steps farther.

Next, the list includes people whose business is investing in businesses, like Warren Buffett and George Soros. Use your money — as well as other people’s money — to create wealth. This is easier when you have a lot to give. Warren Buffett gets sweetheart deals on his investments because a billion dollars from Berkshire Hathaway is more newsworthy, media-positive, and encouraging to other mimicking investors than a billion dollars from a conglomerate of Chinese or Middle Eastern investors. Don’t be fooled. You’ll need to work incredibly hard and be blessed with an inordinate amount of luck using the same tactics to become wealthy at this level. Paving your way to one million dollars, however, isn’t quite the challenge it once was.

“Aim high” was the recruiting slogan for the U.S. Air Force, and it applies here. Lionizing millionaires seems like a good way to come up with financial advice that applies to a mass audience, but I can almost guarantee that today’s recent college graduate planning to retire with assets worth one million dollars forty years in the future will be gravely disappointed — not because he or she couldn’t meet that goal, but because the sum isn’t going to provide the financial security expected.

Updated May 30, 2012 and originally published May 28, 2012. 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 .

{ 23 comments… read them below or add one }

avatar Lance@MoneyLife&More

Great points. I don’t think you have to be a multi billionaire to not have to worry about money anymore but it does drive the point home. I think $1 billion would do it easily or even $100 million as long as you don’t go crazy and buy a new Ferrari every day and a crazy expensive house. Being in my mid twenties I’ll have to be a multimillionaire to be able to retire comfortably and that is my goal.

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avatar krantcents

The very rich understand this concept, but you would expect that! Frugal living has only been admired in the last few years. The new rich and the wannabe rich, which covers just about everybody think that a display of wealth is more important than actually having it. I used to teach in a very poor school where the poorest families drove new cars. They live in a garage, but they have a new car. It doesn’t make sense, but there is a logic behind it. It is a display of perceived “success”, however false. I grew up with owning things rather than the bank owning it.

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avatar bn

very well-thought-out response. if you can own anything without having a middleman involved, that is success.

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avatar Cejay ♦1,521 (Half-Dollar)

I must admit that I still have a “target” of a million dollars to retire. I am not sure if I will make it by the time we want to retire. I have got to say that I sometime find the net worth of my boss or others and I am surprised at how many are at that enviable state of millionare. Most of them do live frugally and are interested in making their business grow along with their income. Hopefully, one day I can join that “club”

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avatar bn

you’ll make it or should if you don’t have a vehicle. live close enough to work to walk. and stay healthy, or whatever you’re trying to accomplish will be fruitless.

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avatar Ceecee ♦796 (Dime)

I think you could live pretty well with a million in the bank if you didn’t buy into all the conspicuous consumption traps. That is, unless you reach the point where you need a nursing home. You could go through a million bucks in a few years there. Although it is interesting to note that the residents on Medicaid get the same care as those paying privately. I imagine that some day there will be “boutique” nursing homes which only the wealthy will be able to afford—–ones that only take private pay patients.

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avatar investlike1percent

i believe a study was done. anything over 13 million and a person’s lifestyle doesnt change.ie doesnt manner how many homes you own, you only sleep at one place.

i dont think the number matters. just satisfaction in doing what one knows one should be doing. the numbers work themselves out.

targets are fun. i am aiming for 100m. crazy part is, i think i can get there.

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avatar bn

if you think you can, you probably will. kudos!

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avatar Forest

I absolutely don’t want to be a billionaire. If it happened by some miraculous slip up I would start pillin the money into places where it is needed (I hope!). A million is still a decent goal though and $50k a year (or whatever the equiv is when I get to that age) would do me more than adequately.

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avatar Financial Advice for Young Professionals

A million dollars might not be as much as it used to be, but it definitely has the same allure. I strongly believe that you can become a millionaire working a regular job at a large company if you start early. If you start saving as soon as you graduate you don’t need to go out and make a ton of money.

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avatar Luke Landes ♦127,373 (Platinum)

I’m sure you can, but that’s the point of this article — if you can become a millionaire just by doing what anyone can do, then there’s really no prestige in the idea of being a millionaire.

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avatar Sara

Well there was a time when millionaires were known and were famous among other people because of their wealth, but now one who posses’ a home at a good location with a smart car is a millionaire. Rich people are becoming more n more rich because of their investments and businesses whilst poverty is also increasing day by day and it’s a fact that nowadays a millionaire is considered in middle class.

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avatar bn

poverty increases due to socialism. when people think they can live off other people, that’s the destruction of humanity.

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avatar Mike Collins

A million dollars is certainly not what it used to be, but the principles and values laid out in The Millionaire Next Door will still be relevant in the future even if the value of a dollar decreases. Perhaps Stanley and Danko will have to change the title to The Decamillionaire Next Door for future volumes.

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avatar Luke Landes ♦127,373 (Platinum)

It’s a matter of degrees. The Buffetts of the world won’t improve their financial condition by the frugal concept of reducing daily lattes. The small changes that the rest of the world needs to focus on to build wealth over time becomes less relevant as wealth grows to the point of complete irrelevancy. For Gates, frugality is not taking the private jet to New York to see a Broadway show every week, so perhaps the concept still applies, but the details for a multi-billionaire are so far removed than those for an everyday millionaire that the way the concepts are laid out in The Millionaire Next Door is a waste of mind-time for those who are truly wealthy.

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avatar Simon@FinestFinances

Flexo, check out this book (if you didn’t already) – Millionaire Fastlane by Mj Demarco. It’s not on Amazon bestsellers as far as I know, however, it’s really a good read for everyone with aspirations to be a rich in the future.

I totally agree with your point. Old 1 million is like 250’000$ now. And yes, nowadays, so many people are ‘milionaires’ with their daily job or small business only. However, are they really living their life as ‘old milionaires?’ Obviously not!

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avatar shellye ♦107 (Cent)

Great point!

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avatar Tony

Flexo, I believe about 3 million people in the US have investable assests of $1,000,000 or more. That’s only 1% of the total population. To me $1,000,000 is still a good target to aim at, I want to be part of that 1% club, call me crazy but I’m on my way.

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avatar Luke Landes ♦127,373 (Platinum)

The number is pretty close to 1%, you’re right. But as you start narrowing down your field from “all Americans” to “Americans who are most like me,” the club gets less and less exclusive. Just the fact that you’re reading Consumerism Commentary puts you in a demographic that doesn’t represent the entire United States. The one hundred Americans of which a millionaire represents one include people who haven’t had the same opportunities that most readers here most likely received. It’s a good target to start, and a good milestone to pass along the path, but I would say aim higher. Be in the top 1% of people who are most like you… not just for the money but for the good things you can do.

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avatar Evan

I don’t think there is anyone reading your blog that wouldn’t want to “aim higher” but if Tony’s numbers are correct, getting to that 1% is an amazing GOAL (or target if you will). I can’t imagine anyone reading your blog in particular giving up once they see 7 digits in their account.

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avatar bn

beautifully spoken!

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avatar qixx ♦1,816 (Half-Dollar)

1 Million is a much higher amount if you live in a small town or foreign country when you retire. Living in rural USA i’d expect would make that money go further. I see articles on why you should retire to somewhere outside the US often siting your money going further. That million mark is still the sweet spot for a good portion of the world.

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avatar Kolton @FMT

Honestly, I am aiming to have my net worth much, much higher than a million at my retirement age. It’s like the saying goes “shoot for the moon and you’ll land among the stars” and that’s exactly what i’ll be doing and hopefully I actually hit the moon! But, the thing is I believe it’s possible to achieve and become as wealthy as I want to be. And, that’s the biggest most important thing right there.

I’m a big fan of financial advocate Robert Kiyosaki and he teaches to build businesses and invest profits in the stock market to create even more passive income. It’s one thing to build a business and make a lot of money, but in order to meet the financial status I want I’m gonna have to make sacrifices by living below my means for 10+ years, so i can invest and make money money work me.

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