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

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

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?

By |2013-09-26T15:01:32+00:00March 10th, 2010|Rant|38 Comments

About the Author:

Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

38 Comments

  1. Daniel March 10, 2010 at 9:37 am - Reply

    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.

    • Evan March 10, 2010 at 10:07 am - Reply

      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. Financial Samurai March 10, 2010 at 2:12 pm - Reply

    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

    • Evan March 10, 2010 at 4:35 pm - Reply

      “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

      • Mike March 11, 2010 at 11:25 am - Reply

        That’s one hell of a magic bean! I could live without the giants though. 🙂

  3. Kevin M March 10, 2010 at 2:17 pm - Reply

    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.

    • Evan March 10, 2010 at 4:53 pm - Reply

      Not sure if you ever checked out Jacob over at ERE, Early Retirement Extreme. He is a fellow Yakezie Member, and a great blogger. It is no way I’d want to live my life but I think he lives on much less than the 40K interest.

      http://earlyretirementextreme.com/

      Check him out

      • Kevin M March 10, 2010 at 5:15 pm - Reply

        I’ve been reading his stuff for a long time. One of my favorites.

  4. Darren March 10, 2010 at 3:20 pm - Reply

    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?

    • Evan March 10, 2010 at 4:58 pm - Reply

      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. Darwin's Finance March 10, 2010 at 5:05 pm - Reply

    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.

    • Evan March 10, 2010 at 5:15 pm - Reply

      But like your post indicated today (yup I read you daily) 43% of Americans don’t even have 10K. I am sure you won’t mind a link drop:

      http://www.darwinsfinance.com/retirement-survey-savings/

      Granted the study doesn’t say anything about ages, but we both KNOW that all 8% is all made up of those nearing retirement and they are all part of the 57% you speak of.

    • Kevin M March 10, 2010 at 5:34 pm - Reply

      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. Financial Samurai March 10, 2010 at 7:16 pm - Reply

    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.

    • Investor Junkie March 11, 2010 at 12:13 am - Reply

      Sam, We are the minority. We are not the norm.

      • Evan March 11, 2010 at 9:49 am - Reply

        From reading your great site I will tell you that you aren’t the norm and considering this post and Darwin’s post THAT IS A GREAT THING

  7. Financial Samurai March 11, 2010 at 12:38 am - Reply

    IJ, we are everybody. We are the norm.

  8. Mike March 11, 2010 at 11:31 am - Reply

    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.

    • Evan March 11, 2010 at 11:51 am - Reply

      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

      • Mike March 11, 2010 at 1:06 pm - Reply

        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. 🙂

  9. Monevator March 11, 2010 at 7:25 pm - Reply

    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. 😉

    • Evan March 12, 2010 at 10:01 pm - Reply

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

      AMEN BROTHER!

  10. FinEngr March 12, 2010 at 1:04 pm - Reply

    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.

    • Evan March 12, 2010 at 10:02 pm - Reply

      FinEgr,

      Link Drop! I am always willing to support fellow Yakezie members.

      Internationally, that is a TON of Dough!

  11. Don March 14, 2010 at 9:33 pm - Reply

    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.

  12. Roger March 18, 2010 at 8:13 am - Reply

    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: http://en.wikipedia.org/wiki/Median_household_income

    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.

  13. The Rat March 18, 2010 at 10:28 pm - Reply

    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?!”

  14. Mrs. Accountability March 19, 2010 at 3:11 pm - Reply

    I think a million dollars is a lot of money! I’m sure I could live off it for the rest of my life. Now if I would just start playing the lottery…

  15. Financial Cents March 21, 2010 at 1:47 pm - Reply

    @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!

  16. Victorino April 1, 2010 at 9:32 am - Reply

    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.

  17. Broke by Choice April 13, 2010 at 4:57 pm - Reply

    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.

  18. Early Retirement Extreme May 30, 2010 at 7:03 pm - Reply

    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.

    • Evan May 31, 2010 at 12:23 pm - Reply

      Wow there is a TON of stuff on BLS.gov!

  19. Adrian June 19, 2011 at 6:44 am - Reply

    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

  20. Mr B January 25, 2013 at 2:26 pm - Reply

    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.

  21. Susan_B April 21, 2017 at 5:57 pm - Reply

    I am 55, and have 1.2 million in cash. I do not own a home, I rent an apartment. I do not think it is a lot of money because I foresee having a much lower income than I’ve had in the past until the anticipated retirement age of 65, or if necessary, 67. Sure, if you invest it “correctly” you could make a good return but since we’ve had interest rates at historic lows for the last 9 years, there is nowhere safe to put your money.

    If there is an economic event, i.e. stock market and/or housing market crash, I could stand to lose a lot of money since I have about 400,000 invested in stocks and bonds.

    I live way beneath my means because I feel I will have to stretch this money for a loooong time. If I owned a house in my area, it would be a lot different…I’ve be worth another 1/2 to 3/4 million more….but I missed that boat and now housing prices are through the roof. I don’t want to overpay for a house or condo that could potentially lose value.

    • Evan April 25, 2017 at 8:47 am - Reply

      Susan,

      Thank you for stopping by and the comment. There was a lot to digest in there – so it looks like you have a net worth of $1.2mil with $400k of it invested in the market and $800k of it in cash? That is a TON of cash with regard to your overall allocation (66%) for someone 10 to 12 years out from retirement. You also have 10 to 12 years to still accumulate.

      I am not sure if you not owning your house is actually a detriment. Maybe not owning that house is the reason you were able to accumulate since you weren’t paying for a new water heater, roof, or other issue for the past 3 decades. In addition if you owned that house the growth on that house may not have been equal to what you got in the market on an IRR basis so you wouldn’t be worth “more” but rather you’d have less in investable assets and more in the home asset line item.

      Have you given thought to a Deferred Income Annuity? It may be put your mind at ease. It is a product where you give $X to an insurance company or investment company and they’ll give you a guaranteed $Y per month for Z-years. If you know you are going to retire at 65 you can give them money today to know that you have created your own personal pension. Just a thought.

  22. Susan_B April 25, 2017 at 9:08 am - Reply

    Thanks so much for your reply, Evan. I did not mention my income was cut in half due to a disability a few years ago, but I am still working (self-employed) and not collecting disability….I am hoping to avoid it as long as possible. Anyway, the annuity is a good idea – I will confess I do not know how annuities work and should look into this. Several of my relatives have handed their money over to a financial advisor who takes 1% of something, I’m also not sure how that works.

    I agree with you that NOT buying a home could be why I have so much cash. There are other factors, including having very affordable rent in a *very* expensive city and a higher than average income for about 10 years prior to my disability. During that time I did sock a lot of if away (obviously), did not spend a lot on big ticket items like cars and furniture (all my stuff is salvaged or hand-me-downs, except I did lease a new car last year). It has been socially awkward at times because I did not have the beautifully decorated house to entertain in which many of my peers do, but that’s the off-the-beaten path I found myself on. Despite my frugality, I did take several wonderful trips abroad that mean more to me than material goods.

    Because of economic uncertainty, I have not been buying stocks in my IRA for the last several months. I do have a substantial cash position and when the next correction comes, I will buy more (I missed this opportunity after 2008 due to fear and inertia).

    I believe that health care costs will just get worse before they get better in this country. With an aging population, a universal Medicare-for-all health care system like most European countries have will eventually be instituted although it will be a long and arduous fight. Perhaps that is 10-20 years off. Since I do not have children, I believe that my long term care costs (if I am lucky to live into my 90’s like my mother!) will be enormous. I am hoping to have 2 million by the time I retire but that may be optimistic at my current income. Thanks again for your advice!

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