Comparatively Speaking A Million Dollars is Still a lot of Freaking Money

I read a news story recently that reminded me that I hate when I hear, “a million dollars is not what it used to be.”    Well duh!  But come on it is still a lot of money, and it is hard to save and frugal yourself to a Million Dollars.

Increase in Millionaire Households in America in 2010

The article, “More Americans Can Call Themselves Millionaires” highlights how more people are millionaires today and how the number is growing.

    • The number of U.S. households with a net worth of at least $1 million, not including primary residence, increased 16 percent to 7.8 million in 2009, according to the group’s press release.
    • The number of households with a net worth of at least $5 million, known as Ultra High Net Worth households, surged 17 percent to 980,000 in 2009.
    • The broader affluent population, with a net worth of at least $500,000, also increased in 2009. This population increased by 12 percent to 12.7 million.

I am going to ignore the recent run up in the market (68% from the low in March 2009) and the devestating affect of the housing market on net worths of millions of people (just because it doesn’t include primary residence doesn’t mean it doesn’t include investment property).

But what I can’t ignore is if we look at the numbers a bit differently, if we have 100,000,000 households (2000 Census information, I am sure we have much more today), and only 8,000,000 have more than $1,000,000 in net worth (not including primary residence) doesn’t that mean $1,000,000 is still a lot since the other 92,000,000 households, or 92%, don’t have it?

I know it has to do with inflation and purchasing power, but I think the ratio 8:92 still makes $1,000,000 a really good goal, at least to start with.  It is my goal to be above that top 7.8% and even in to that top .98% stratosphere (I mean the blog is named My Journey to Millions) and as anyone reading my blog is well aware, I am not looking for everyone to be equal.  But when people say a $1,000,000 is not what it used to be it kinda makes me annoyed thinking hey buddy are you in the top 8%, yet?

Is this a weird feeling? I am being too *gasp* sensitive?  Am I downplaying inflation and purchasing power?

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35 Responses to Comparatively Speaking A Million Dollars is Still a lot of Freaking Money

  1. How many millionaires are thinking this? If a million isn’t a lot of money, can we get a billionaire to send me a couple mil? I mean, I guess it’s like chump change to him.

    • See I don’t even think it is JUST millionaires who think a million isn’t a lot – it is every day peeps that make me go nuts…

  2. E-San, it’s not a lot of money. The reason is, there are a lot more people with a lot more money than you can ever imagine. It’s not just 8%.

    Look around the blogosphere. Almost everybody makes a lot of money, and never lost money in the stock market.

    It is what it is. $1mil just provides $40,000/yr at a 4% interest rate.

    That said, I’d love to have an EXTRA mil! :)

    Best, Sam

    • “Look around the blogosphere. Almost everybody makes a lot of money, and never lost money in the stock market.”
      And there is a magical bean that will bring to a land of giants and semi-clothed women

  3. A million is still a lot of money – I could probably live off it for the rest of my life if I wanted to.

    I’d be willing to try if someone is in the mood to give it to me, anyone?…Buehler?

    I think part of the problem is all the financial gurus that say you need at least $2 mil plus to retire comfortably. Also, most people know they’ll never amass that much wealth so they downplay it.

  4. As you hinted at, when they say that a million dollars isn’t what it used to be, I think that what they mean is that the amount doesn’t take you as far as it did before. Inflation, and longer lifespans due to better health and medical advances not only translate into less real dollars, but also less dollars that need to be streched out longer.

    With that said, I still think a million dollars in today’s money is still a lot. I could purchase a decent home, save some money in a college fund, and do some travelling.

    What else would you do if you had all your expenses paid?

    • I understand inflation and longer life span it just gets me going since 92% Don’t have it, and yet people are talking like it is common place

  5. I think people say a mil isn’t much any more because you can’t comfortably retire on it any more. Most people don’t expect much from SS, pensions are reduced when their companies fold and health care costs are skyrocketing while people are living longer. I think a million is a lot for a young person but not all that much for someone nearing retirement.

    • If I was nearing retirement and had $1M I’d be set.

      No mortgage, no more retirement or college savings, no commuting costs – I bet I could live on $1,500 a month without any drop in lifestyle. Invest that $1M in stocks and I could easily get 4% yield, or $40k. With a -0- tax rate on qualified dividends, I’d have a nice cushion of $12k a year.

  6. It is not true that 43% of Americans have only 10K.

    I bet EVERYBODY reading this post has $10Kin the bank.

    Nobody looses money E-dog, and everybody is rich. Trust me on this one. There are a lot of giant beans.

  7. I agree the number of millionaires has increased, but while a million dollars is certainly a tidy sum of money…it just isn’t what it used to be. The cost of living is a lot more these days. Everything costs more. When my father-in-law bought his house 30 years ago he paid about $35,000. To buy that same house today would cost 10 times as much and saddle me with a killer mortgage.

    • Cost of Living is a HUGE factor and I get the responses I am receiving, but ask your Father in Law what he was making back then

      • My point exactly…I don’t know what he made off hand but it was certainly less than I’m making now. A million dollars to him then would probably be like 5 or 10 million today.

        Still, a million is nothing to sneeze at. :)

  8. Evan, if you had one million dollars right now, it would be a pretty good amount of money, whatever Sam Rockefeller says. 😉 (He’s going all Samurai Zen on our asses).

    However it’s not the ‘millionaire’ status we grew up with, it’s a fact.

    Moreover it won’t be anything when you retire. If I recall correctly, you’re in your late 20s. By the time you retire in your 60s (ceteris paribus) a million will be worth about half what it is now, and perhaps substantially less.

    Try to replace your income with passive income from dividends/cash/rental returns/royalties etc. Much more durable goal.

    Just my two cents, inflation adjusted of course. 😉

    • “Try to replace your income with passive income from dividends/cash/rental returns/royalties etc. Much more durable goal.”


  9. Actually, did a guest post on Eliminate the Muda about this very topic.

    Possibly discounting purchasing power and inflation, but also neglecting savings potential and healthcare costs (first brought up by Darwin).

    I wrote a post a while back about first setting your age to retire, then setting your age to die. Won’t delve into it here, but basically talks about end of life costs (expensive!). Check it out and let me know what you think.

    For simple numbers, let’s say you start earning $100k when you turn 30. If you save 25% of your gross annually in a tax-exempt acct, you’d have $1mil at age 70. This is excluding many factors, but even reasonable expectations should lead you north of that mark.

    Whoever brought it up about WHEN you have the million is more accurate. When and under what conditions are both big factors. One of my first posts was about this (comparing $500k to $2mil).

    I think your key word ‘comparatively’ is key. Compared to global statistics and even local US, that still is a lot of money.

  10. I understand what everybody is saying about 1 million not being what it use to be, but I agree with you Evan! Everybody where I live acts like it’s nothing too. And I live in the boonies compared to most of bloggers posting here.

    I think the bigger city dwellers (NY, SF) are feeling the hit now, their cost of living is high in those big cities. But where I live, $1 million will buy you a mansion (easily up to and over 5,000 square feet).

    The problem is that most people are brainwashed by the media, and they just regurgitate what they hear. Most of the local people I know will never have a investment portfolio that’s worth a million (heck, if things go bad for me somehow in some way, I won’t either).

    Great post with some great outlooks! I found a lot of the comments both entertaining and interesting.

  11. One million dollars is still a heck of a lot of money. The median US income in 2007 was around 50,000, if wikipedia is to be trusted:

    One million dollars (properly invested) could provide for $50,000 a year (if we’re willing to take a slightly larger than the recommended 4% withdrawal rate), meaning that half of the households in America could completely replace their income with the returns from one million dollars (again, properly invested). I don’t have too many hard and fast rules about what constitutes a ‘lot’ of money, but enough to enable much of the country to instantly retire seems to hit the mark.

  12. A million bucks is a boatload of cash if you ask me and it bothers me too when you hear statements such as ‘it’s not like it used to be’. Chances are the person never had a million to begin with so how would they know?

    I also don’t like it when banks assume you’re in the money as if there are no financial worries in the world. Every time I go to an ATM at the Bank of Nova Scotia, the screen says, “You’re Richer Than You Think”…I feel like telling someone, “How in the hell do you know?!”

  13. @Evan,

    I would agree with you. 8:92 is still a huge ratio and a mil. is still a large sum of money, all things being equal!

  14. There is still a lot you can do with a million dollar – especially if its a net worth. It just means you can enjoy your proceeds from debts and enjoy a million dollar net worth or net assets after deducting all of your liabilities.

  15. I am so with you $1M is alot of money. Anyone who tells me that it isn’t alot, is crazy. It may not be enough to live the life of luxury, but I am sure it is enough to live a quality life of comfort.

  16. Check out the BLS (I believe) statistics to see the average net worth for various ages and incomes. It is shockingly low, typically 4 figures or low six figures. It may be that a million isn’t what it used to be but most people still aren’t millionaires. If we take out home equity, the average numbers are downright pathetic.

  17. I’m just amazed at the high proportion of high income earners compared to New Zealand . Would be interested in further insights into how this was achieved

  18. Having saved almost $2M the hard way, not including my paid for home or investment property or other non stock/cash assets. I can tell you that as far as I’m concerned, it’s a lot of )*#@$ money.

    54 and retired, yes it’s quite enough.

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