Has this ever, in the history of the world, happened?
Definition of a Millionaire
- Thread starter HotRod
- Start date
Has this ever, in the history of the world, happened?
Just because it hasn't happened doesn't mean it cannot happen. My point might be an exaggeration but it's still valid. Net/Gross income should not be the determining factor to define your net worth.
Cheers,
Oracle.
Warren Buffett is worth around $46B. More than 98% of his wealth is tied to Berkshire Hathaway. The company doesn't pay any dividends. His salary in 2007 was $175K, that is 0.0004% of his net worth.
Based on the definition of $1m net/gross income. Even Warren Buffett doesn't qualify as a millionaire
Wikipedia article
Based on my example above of $20m assets...0.0004% would equate to $80 (yes eighty dollar per year only).
Cheers,
Oracle.
Yes I also thought it strange that the OP's definition of net worth would take income into account. To be technically defined as a millionaire means you have net assets worth 1 million dollars and this includes your PPoR. Of course 1 million doesn't buy much these days so 5-10 million would be the new millionaire.
Warren Buffett is worth around $46B. More than 98% of his wealth is tied to Berkshire Hathaway. The company doesn't pay any dividends. His salary in 2007 was $175K, that is 0.0004% of his net worth.
Based on the definition of $1m net/gross income. Even Warren Buffett doesn't qualify as a millionaire
Wikipedia article
Based on my example above of $20m assets...0.0004% would equate to $80 (yes eighty dollar per year only).
Cheers,
Oracle.
I see your point. Very well illustrated point, by the way.
I agree that income is a poor measure of wealth.
There was a similar thread to this one in the coffee lounge a while back re: the definition of a millionaire. To be honest, these threads seem like humblebrag orgies to me.
I'm not a millionaire, by any definition, so of course I'd say that. Now where's my chainsaw? I think I just sighted a poppy in the distance...
If I had $1.0M in cash to spend on anything I wanted, then I would consider myself a millionaire......anything else is rubbery figures and anally retentive forensic accounting!
I can tell you who aren't millionaires.........all the 'young guns' and many of the 'real life cases' in the property magazines! Amazing how the 'inspirational' stories play with peoples heads......and those articles never ever talk about the exit costs in attempting to realise an asset into net cash.
2 x IPs worth $1.7M with loans worth $1.2M then potential sales costs, CGT, adding back depreciation claimed and repayment of loans .......walk away with $120 thou if they're lucky........sorry they're not millionaires by a long shot.
Do the exercise........pretend you sell all your holdings, pay out all the agents costs, CGT and discharge fees & bank loans......and see what you have left......scary!
Better go smash out a few more IPS as I've got a long way to go!
Cheers,
Ian.
I can tell you who aren't millionaires.........all the 'young guns' and many of the 'real life cases' in the property magazines! Amazing how the 'inspirational' stories play with peoples heads......and those articles never ever talk about the exit costs in attempting to realise an asset into net cash.
2 x IPs worth $1.7M with loans worth $1.2M then potential sales costs, CGT, adding back depreciation claimed and repayment of loans .......walk away with $120 thou if they're lucky........sorry they're not millionaires by a long shot.
Do the exercise........pretend you sell all your holdings, pay out all the agents costs, CGT and discharge fees & bank loans......and see what you have left......scary!
Better go smash out a few more IPS as I've got a long way to go!
Cheers,
Ian.
According to this definition, I don't know anyone who is not a millionaire.
No, in sydney, many crappy houses cost way over a million and therefore, owning one outright (net asset) does not make one wealthy by any definition.
Agree. Everyone is a millionaire these days if you look at the technical definition but it doesn't mean you're wealthy unless you think outside the box and live in SE Asia or Sth America. I heard Panama is one of the cheapest places in the world to live so I might give it a try and live like a billionaire.
Ian you are spot on.
I am finding that a lot of people in YIP and API are not really Millionaires.
A lot of the stories seems to inflate the value of the investments and do not have reaslistic cash flow positions.
You are also correct most people have not built very much wealth. There are exceptions...but most have not quite made it. I guess it takes time for things to grow.
Believe it or not....the fundamentals today are the same as yesterday. Things like savings, cash flow, time for growth, due diligence, and patience are still relevant today. This is what separates the fly by nighter riches to sustainable riches. Oh on more thing......the rich know the value of a dollar....you won't seem them driving a luxury car unless it is a miniscule value of their networth. They don't care what other people think of them...they are prettty grounded and do not seek approval from people who have very little.
I am finding that a lot of people in YIP and API are not really Millionaires.
A lot of the stories seems to inflate the value of the investments and do not have reaslistic cash flow positions.
You are also correct most people have not built very much wealth. There are exceptions...but most have not quite made it. I guess it takes time for things to grow.
Believe it or not....the fundamentals today are the same as yesterday. Things like savings, cash flow, time for growth, due diligence, and patience are still relevant today. This is what separates the fly by nighter riches to sustainable riches. Oh on more thing......the rich know the value of a dollar....you won't seem them driving a luxury car unless it is a miniscule value of their networth. They don't care what other people think of them...they are prettty grounded and do not seek approval from people who have very little.
Agree with the above too, except the first million was the hardest. I am not sure on your last statement though with 8 figures, why would it be different
?Some of us felt no difference, honestly.
Agree with the above too, except the first million was the hardest. I am not sure on your last statement though with 8 figures, why would it be different
Some of us felt no difference, honestly.
Ooops... sorry meant 9 figures - was refering to that piece I grabbed from another forum.
The Y-man
And yet, no many are anywhere near that magic net figure. Scary stuff
One third of aussie homeowners own their house outright.
Ian I would agree with most what you said except why you have to assume to "the exit costs in attempting to realize an asset into net cash"? It took me some time to realize the impact of IPs over long term investing. I will illustrate with my personal experience.
I just recently refinanced 5 loans on 5 IPs. I was also able to pull out a title on the very first property and direct its loan onto the 2nd IP I had purchased.
The reason for that was that the second IP grew enough in equity to cover both loans.
It sort of opened my eyes, that even though I never paid $1.00 of equity, the time and market enabled me to have a paid off house title in my hands. Honestly, that was a revelation to me.....
I did however, provide around 50% deposit into my first two IPs, so that perhaps helped or really I was able to pull out that title much sooner out.
With number it looks like that:
1IP Purchase Date: 2000 Purch Price: $246 Loan: $144
2IP Purchase Date: 2000 Purch Price: $182 Loan: $106
then last month revalued by the financier to:
1IP Value: $450K - assumed since I took the possession of the title
2IP Value: $400K - now I have 2 loans against it to the value of $250K above
representing 62.5LVR.
So really my loans have not changed just the security over the loans has.
What I wish to illustrate is that if your IPs over time, in well bought places grew enough in equity, you can exit or obtain the title on that property. Obviously, you can sell it and then you are right you would need to pay all CGT, etc.... Instead I would rather give the title back, draw 80% equity and use that for living as that would be Tax Free. Yes, the interest would accrue, as you use it, but if you had a large enough portfolio, with lower LVR over time, it may be the alternative way to live....
I realize it's not for everyone and it is risky if you do not really know what you are doing, or do not have a big enough portfolio, but it is possible and there are alternative ways to live....
Just imagine how else can one amass a NET $10mill portfolio as mentioned by someone above without OPM and strategy and risks and buffers in place? I doubt that earning first, then paying tax, then investing would be a faster strategy for that...... OR and by the way, you need timeeeeeeeeeeeeee for that. I always understand it's a long term investment asset for me, as I really never plan to sell.....
I like your reasoning too, especially in terms of what our $$$ can buy, or have the purchasing power in today's terms.HotRod, perhaps you should rephrase the question to something like:
What would it take for you to consider yourself truly a "millionaire"? Are you happy with the formal definition or would it be something else?
Or you could just ask what it would take for you to consider yourself "a rich millionaire" or just "rich"?
Because the reality is that having a million dollars in net worth, while very welcome, doesn't really allow for the same lifestyle we have normally associated with the term, which is historically based.
So we need to pick a time when the term was worth what we really think it is worth. For me that would be around 1980. According to the RBA's inflation calculator, $1m dollars in 1980 is now worth approx $3.7m. So for me, being a millionaire would "really" mean having a net worth (per point 2) of $3.7m or more in 2012.
But to be truly "rich" would require $1m in net income for me. To be "comfortable" (particularly with retirement from full time employment with a family to support), $1m in gross income or $10m in gross assets in a diversified portfolio that is comfortably cashflow positive (ie not all in Pilbara real estate!
Also, I think for me to feel truly rich I do like someone elses definition, where it was mentioned that as long as my income was more than my expenses than I should feel rich. This would imply that I can have whatever I desire and if at the end I still have money left over than I am really rich.
I also like the book I read, "The Millionaire Next Door: The Surprising Secrets of America's Wealthy". It is such a great eye opener and a very interesting read full of myths on some stereotypes we hold. I highly recommend it...
Some have made the point that you don't really have a million dollars until it's actually sitting in your bank account and you have no debt to boot. To me that would imply that cash earning circa 5% is somehow a better asset to have than quality property earning say 10% net.
To my way of thinking I would feel far wealthier with the $1m of property rather than the cash but it's probably just me...
To my way of thinking I would feel far wealthier with the $1m of property rather than the cash but it's probably just me...
I agree with you. $1m of property earning 10-12+% (CG & Yield) over 10 years is far superior to $1m of cashing sitting in a term deposit over the same period.
Its a no brainer.
