Your definition of millionaire

[rcardin]

My wife and I were talking last night about the definition of millionaire. Can you be a millionaire buy holding a million in real estate but not a million in equity? Are you a millionaire when you have a million in the bank? Are you a millionaire when you make a million a year?

Thought it would be interesting to see other peoples views on what a millionaire is to them.

To me it would be 1 million in assets free and clear.

 

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[australianinvestor]

To me it would be 1 million in assets free and clear.

I mostly agree. Assets - Liabilities = what you actually own. However, there is also the fast lane method, where ownership is not everything. If you CONTROL the assets instead of own them, that might count too. After all, if you own nothing but totally control a million dollar business, I'd think you're a millionaire. I'd say it's more about who benefits from the assets rather than who owns them.

I'd love to hear other opinions!

Daniel.

 

[Russ H]

Hmm . . .

Robert Kiyosaki has lots and lots of rental RE, but none in his name.

Same goes for his wife, Kim.

Ever wonder why the Carnagie and Mellon families are not listed in the Forbes top 100?

Control everything.

Own nothing.

-Russ H.

 

[rcardin]

As always Russ you just changed my definition of wealth.

 

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[AroundTheWorld]

Assets (controlled) - Liabilities > 5 Million.

Why 5?

Inflation.

One million today is not what it used to be.

 

[mtnman]

Net worth must consist of 1 million +, liquid, by simple definition imo. But along with ATW in a way, I feel like being a millionaire ("A" = 1) isn't all it's cracked up to be anymore, simply because of the dollar in the coming years. Doesn't go very far if you really look at it and plan for the unexpected.

For myself, I want a net worth of at least 1 million, liquid, AND 100k/mo passive to be considered a millionaire.

 

[eTyler19]

Hmm . . .

Robert Kiyosaki has lots and lots of rental RE, but none in his name.

Same goes for his wife, Kim.

Ever wonder why the Carnagie and Mellon families are not listed in the Forbes top 100?

Control everything.

Own nothing.

-Russ H.

What does he mean by control everything own nothing....

 

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[HCBailly]

Does one’s net worth really matter? I heard an interesting definition of wealth, but I forget who said it:

“Your wealth is equal to the amount of time you could survive if you stopped working today.â€

To me, wealth is a function of time, not money. If someone is living in a 1-bedroom condo and doesn’t have to go to work for the rest of their life, they are wealthier than someone living in a 1-million dollar mansion, who’s working 60 hours per week with no passive income. At least, that’s how I see it.

As for controlling, but not owning, that has to do with corporations. Basically, you create corporations which own assets that you control. Thus, if someone files a frivolous lawsuit, they can only sue the corporation, not you. It’s more complex than that, and I’m sure I’ll get chewed out for oversimplifying it, but that’s it in a nutshell.

 

[andviv]

What does he mean by control everything own nothing....

I will try to explain it with an example.
Lets say that a "legal entity", lets call it "Acme, inc", owns a very nice house in a great location.
In this case Acme, inc owns the house.

Lets now mention that eTyler19 is the owner, president and CEO of Acme, inc.

eTyler19 does NOT own the house. Acme, inc does.
but eTyler19 controls what happens with that house. If it is going to be rented, or when it is going to be sold, or if Acme, inc provides its president a CEO with a place to live as part of his benefits.

Does this give you an idea of what this means?

In any case I strongly suggest you read Rich Dad Poor Dad just to start with the very basic concept.

 

[andviv]

I think the original question was about definition of Millionaire, not definition or "being rich" or being "wealthy".

Millionaire: a person whose material wealth is valued at more than a million dollars.

 

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[eTyler19]

I will try to explain it with an example.
Lets say that a "legal entity", lets call it "Acme, inc", owns a very nice house in a great location.
In this case Acme, inc owns the house.

Lets now mention that eTyler19 is the owner, president and CEO of Acme, inc.

eTyler19 does NOT own the house. Acme, inc does.
but eTyler19 controls what happens with that house. If it is going to be rented, or when it is going to be sold, or if Acme, inc provides its president a CEO with a place to live as part of his benefits.

Does this give you an idea of what this means?

In any case I strongly suggest you read Rich Dad Poor Dad just to start with the very basic concept.

Thanks! I have read Rich Dad Poor Dad. I am actually reading Own Your Own Corporation right now... I just didn't know if that quote implied something diffrent from just controlling a Corp. :smxA:

 

[australianinvestor]

[...] Lets say that a "legal entity", lets call it "Acme, inc", owns a very nice house in a great location. In this case Acme, inc owns the house.[...]

That's right, and I'd like to take this one step further. Even though Acme owns the house, it's really just putting the asset one step away from you, but you still own the stock in the company, which means anyone suing you might be able to access the house by taking your stock.

I'm not sure how it works elsewhere in the world, but here it's possible to use a trust to own the stock of the company. That way, the Trustee owns the stock, and you are merely a beneficiary. If anyone sues you, there's no stock and therefore no house to get. You truly own nothing, and control the Trustee who controls the company that controls the house. Another company can also be the Trustee as well. Complicated, but ensures you own nothing.

Daniel.

 

[andviv]

Thanks! I have read Rich Dad Poor Dad. I am actually reading Own Your Own Corporation right now... I just didn't know if that quote implied something diffrent from just controlling a Corp. :smxA:

Well, it kind of does. and like HCBailly, that is an overly simplified example.

During the B&P Meetup last March one of the participants presented something about this and, let me tell you, the concepts of asset protection, and own nothing but control everything had never been so clear in my life.

 

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[eTyler19]

Well, it kind of does. and like HCBailly, that is an overly simplified example.

During the B&P Meetup last March one of the participants presented something about this and, let me tell you, the concepts of asset protection, and own nothing but control everything had never been so clear in my life.

Where can I get more in depth information about this.

 

[andviv]

I don't have any information about any book in particular. Maybe others can add more info about it. Have you checked Amazon yet?

Do a search for Asset Protection strategies, that should be a starting point.

 

[fanocks2003]

My wife and I were talking last night about the definition of millionaire. Can you be a millionaire buy holding a million in real estate but not a million in equity? Are you a millionaire when you have a million in the bank? Are you a millionaire when you make a million a year?

Thought it would be interesting to see other peoples views on what a millionaire is to them.

To me it would be 1 million in assets free and clear.

My definition of a millionaire would be: "Holding $1million in tangible or intangible assets".

It doesn't matter if you have $1million cash in the bank or if you own a property valued at $1million net or if you own some intellectual assets valued at $1 million. Some people even own art valued at millions. That also makes them a millionaire by my definition.

J Paul Getty ones wrote a great self biography. In the beginning of the book he mentioned the misconception poor people have about wealthy people. He mentioned (not quoted) that many wealthy people do not have all their wealth and riches in the bank (liquid). Often you will find them having most of their wealth tied up in private shares (in private corporations that are not easily liquidated), public shares, real estate, intangible assets etc etc. He also thought this misconception was very high.

So when I mention that I do have millions in networth, people think I can buy luxurius houses and other high ticket items. But the sad fact is, I make approximately the same kind of income as a highly educated academic (though I make most of that money passively). Nothing more. Sometimes I do make great capital gains, but those are very soon tied up in interest bearing instruments (even though I could sell them easily, I wouldn't. Because they make up my income if I where to lose other types of earned/active income) or new start-ups.

For example if you create 4 art pieces today and sell of one of those identical art pieces for $400.000 (you never know, never say never) your other 3 art pieces would be worth $1,2 million, hence making you a millionaire by my definition. Wealth in itself makes it then possible to make passive income through smart income investments.

 

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[AlwaysCurious]

In my cultural context people call a "millionaire" someone who they admire or envy for their ability to spend money for luxury. (Sadly enough in Germany its more envy.) People just look at visible assets like houses, holiday trips and most important: cars. Nobody looks at income or the liabilities so just those visible assets are taken into account and how people throw money out of the window. So the common term "millionaire" seems to be far from beeing on fastlane. I personally know some millionairs by that definition, who got into real financial trouble after a divorce or after they lost their jobs.

A little off topic - I heard a saying how to stay a millionaire: "No third house, no second wife, no first boat" :smxB:

So earn more than you spend and get a (preferrably passive) income that grows faster than inflation. Whatever the "millionaire level" is, you will beat it sooner or later.

 

[fanocks2003]

A little off topic - I heard a saying how to stay a millionaire: "No third house, no second wife, no first boat" :smxB:

So earn more than you spend and get a (preferrably passive) income that grows faster than inflation. Whatever the "millionaire level" is, you will beat it sooner or later.

As long as you can pay for the luxuries without getting into financial hot water, then why not have a nice looking yacht or something? It won't be fun in the long term though (easy to get bored with things you buy. Can only speak for myself. I have never had any expensive toys like luxurius cars etc, but I would pretty quickly get bored. I know my nature pretty well by now).

I would rather rent the stuff if I where in the mood of spending a lot of cash and being a party animal. Then you can return the yacht, sports car or whatever after you have had your parties etc. Fun to show of from time to time, but taking care of the stuff is more headache than fun.

 

[AroundTheWorld]

One of the favorite sayings at a yacht club where I live...

"A boat is a hole in the water in which you throw your money."

It's true.
There are so many "things" we want to buy for our sailboat this spring that we could end up spending more than the boat is worth!

 

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[pikemike420]

To me a millionaire is 1 million liquid or more. Meaning not tied up in RE, stocks, boneds, funds, etc. Meaning this person has over 1 million in all of those investments, but keeps more than 1 million in cash handy at all times.

 

[fanocks2003]

To me a millionaire is 1 million liquid or more. Meaning not tied up in RE, stocks, boneds, funds, etc. Meaning this person has over 1 million in all of those investments, but keeps more than 1 million in cash handy at all times.

$1 million liquid in a savings account with a decent interest rate would be well enough for the small spender to live on without needing a job anymore. Doing what you please all day long.

I guess it would be harder in New York City (higher living expenses) or any other expensive city to live on a savings interest on $1 million only, but if you live in a cheap country like Sweden that would pretty much cover all your living expenses and still give you room to travel and do what you want to do all day long.

Why own a company when the money can do a great job at the bank? Less hassle.

So I do concur to your statement about having $1 million liquid. Most of the time liquid cash gives you a better flexibility.

 

[fanocks2003]

Formula for wealth by "The millionaire next door: The Surprising Secrets of America's wealthy" is:

Your age X Your pre-tax income /10 = Your expected networth.

If you are below the expected number you are not wealthy by the authors definition. Are you at least 2 times above the expected level of networth you are to be considered wealthy. I do qualify very much as a very wealthy guy with this formula. Because I do not spend a lot of money every month. My income has not really followed the surge in actual networth. But even if it did, I would not really spend a lot more money than I do now. I don't spend a lot of money and when I do spend money I usually find very great stuff at great prices any way. I should be very proud of myself.

But as always. Formulas are defined differently. I define this formula as a good one because it makes me look good...hehe. Why not showcase I thought:smxB:. Maybe someone have shown this formula in this very same thread. In that case I am sorry for not having given notice to that. But you can never have enough of the good stuff can you?

 

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[lightning]

I never really thought about the EXACT criteria, but I think my personal definition of a "millionaire" would be having one-million+ liquid, or a few million in investment holdings (NON-liquid).

I have relatives I wouldnt consider millionaires, but they do have over a million in assetts between 2 properties and other things in thier portfolios. Thier income is impressive as well, but I wouldnt consider it "fastlane" money by any means.

I have another friend who dosent have more then a few hundred grand in the bank, but I would consider him a millionaire as he owns about 30 properties throughout NJ, with quite a few commercial holdings. (Again, his bank account might not qualify him as a millionaire, but his net worth certainly would!).

Interesting topic indeed. A question like this will definitely vary from person to person so that is just my opinion.

 

[vietdiesel]

Easy. Combined assets totaling @ 1M USD minus all debts.

 

[Redshft]

I have actually asked this question to a couple of friends/acquaintances of mine, who are millionaires, mostly friends of my father; or my friends' fathers. The majority of them claim millionaires are people holding over $1M cash. They don't agree with the value of assets definition. They claim that someone can have a net worth of $1,000,000 today in RE holdings, stocks, etc, but tmw the values have dropped and they are no longer "millionaires". Their millionaire status has dropped, maybe temporarily or permanently, without them spending a dime. Paper millionaires also may have 1M in assets, but less cash in the bank than a fast food worker.

The definition will vary depending on who you ask. All are valid definitions, you just have to create your own standard.

 

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[msa1]

I'd have to say my defintion would be 1 million in assets/equity. I own about 600k in RE (not including my primary) but only own about 120k of it so i'm not quite there yet.

 

[australianinvestor]

Why own a company when the money can do a great job at the bank?

- Tax advantages (may or may not be the case in Sweden, but I assume it would be)
- Faster returns

So, reducing your biggest non-investment expense and increasing the rate of income are great reasons to me to own companies. Hassle? Yes, but it's not easy to get into the fast lane.

Once in the fast lane, it might be a different story. If investing only passively, I'd probably forego cash at the bank and buy T-bills or similar. One pay day each quarter, more secure than a bank, and no floating rate. Plus, it's cool to know that the government owes you money! Hehehe.

 

[randallg99]

Easy. Combined assets totaling @ 1M USD minus all debts.

its very possible to own 2mil worth of debt while owning 1mil worth of assets... does that qualify as a millionaire?

 

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[Bilgefisher]

Does it really matter? I know I am contributing to this thread and I'm just as guilty of wasting my time on it, but there is no purpose discussing it. I thought the purpose of the fastlane was utilizing your money in order to achieve a much higher quality of life. I feel talking about a millionaire like its some form of achievement is subconsciously setting yourself for the incorrect goals in life. You are pulling yourself back into that slowlane mentality. "If I had a million dollars, my problems would be cured."

I reread Biophase's success story again yesterday and found some powerful messages in there. He is not a millionaire but enjoys a comfortable lifestyle and is not strapped down by a job. If your passive income exceeds your expenses and you have enough of your comfort level safety net, it shouldn't matter if you have 50k dollars or 50 million dollars. You are now able to fully pursue your individual or family goals in life without having to worry about the next pay check. Money should be like a house plant. Its nice to have, makes a room look nicer and will wither if you don't look after it, but it shouldn't be the focus of your household or your day.

 

[Russ H]

Rep speed to you, Bilge.

Yours is the first post that asks "why?" instead of just reacting to the question.

Who cares about what defines a millionaire?

Is it part of your PLAN to do this?

A million US$ means FAR, FAR less today than it did 3 years ago.

I would venture a guess that it will be worth even less 10 years from now.

The real question is:

Why is being a millionaire important to the original poster?


There must be a reason.

Being a millionaire (or a ten thousand aire, or a billionaire) has NOTHING to do with my PLAN.

Achieving a predefined set of goals, and being able to live a certain lifestyle without having to work-- THAT is what is important to me.

Whether that takes $10,000 a year, or $1,000,000 a year (depending on inflation, etc) remains to be seen.

Don't tie your dreams to set money amounts.

If the money deflates, so do your dreams.

-Russ H.