I came across a very surprising Money Magazine article last week on the coming millionaire boom. There are over 10.5 million households in the United States that have a net worth (i.e., total assets minus liabilities/debt) of over $1 million. The definition of wealth included financial assets, such as stocks, bonds and other investments and non-financial assets like real estate, automobiles and art. Considering there are about 105 million households in the U.S., this means that approximately 1 out of 10 families have a net worth of at least $1 million. Japan, a country many people have written off, is still very wealthy and 11.6% of Japanese household (or approximately 5.8 million households) have net worth of at least $1 million. Canada has the highest ratio of millionaire households, with 12.6 out of every 100 households being in the millionaire club. The article points out that we’ll see these numbers almost double in the next 10 years.
With this many wealthy households, becoming a millionaire someday shouldn’t be some elusive dream. Of course, a million dollars isn’t nearly worth what it used to be, but it is still a benchmark that provides some level of financial security. Much of this wealth is concentrated in the older generation (55+), most likely accumulated over a lifetime by living within their means and making sound personal finance decisions. I would venture to guess that only a small fraction of these household became millionaires through the lottery, a large inheritance, or being lucky enough to have a unique talent or gift that commands a multi-million dollar contract. In fact, I think most of us would be shocked to know who the millionaires are in our neighborhoods.
Based upon extensive research, according the book “The Millionaire Next Door“, the major characteristics of a millionaire include the following:
- “More than 80% are ordinary people who have accumulated their wealth in one generation. They did it slowly, steadily, without signing a multimillion-dollar contract with the Yankees…”
- Fewer than 20% inherited more than 10% of their wealth, and more than half never received a penny of inheritance.
- They “wear inexpensive suits and drive American-made cars. Only a minority… drive the current-model-year automobile.”
- About half have lived in their current home for 20 years or more.
- 80% are college grads, and 38% have advanced degrees.
- 20% are retired. Of those still working, about two-thirds are self-employed — mostly entrepreneurs, but also self-employed professionals, such as doctors and accountants.
- On average, they invest nearly 20% of their household realized income each year
So, are you on the path of joining the Millionaire’s Club over the next few decades? Amazingly 1 out of 10 U.S. household are already there and the ratio is expected to increase. There are many paths to wealth, but it normally takes a plan, fiscal discipline, persistence, sacrifices and time.