Q. How is being a Billionaire better than being a Millionaire.
A: Being a millionaire ain't what it used to be
. In thinking about net worth, it's helpful to consider everything using a common denominator, such as your potential annual income based on the return that the wealth could theoretically generate. (Because otherwise, if you start spending your principal, you won't be a millionaire very long.)
So, for example, a million dollars put into the safest CD you could find, might, if you were lucky, generate 1.5% interest each year... which is $15,000!
Even if you had, say, $5 million, and were willing to take a fair bit of risk and put it all in the stock market where it might (with real luck) generate 4% annually, you'd still be making "only" $200,000 a year. Take out taxes (being generous, let's use the 20% rate at which Obama paid) and you're at $160k.
That's enough to rent a nice apartment (or pay the mortgage on, say, a +/-$1m house), take a nice vacation each year, and probably pay private school tuition for one or two kids... but you're certainly not going to be flying your own Gulfstream with only $5 million.
Next, if we skip over the run-of-the-mill deca-millionaires and jump to someone with $100 million in assets, NOW for the first time are we just getting to the point where you have a good bit of flexibility.
Assume that with this kind of cash you begin to have access to some good hedge and venture funds, so maybe you'll be able to consistently get 8% on your money. And now that you're in the privileged class, we'll figure you can match Mitt Romney's 13% tax rate. This means you'll net out to about $7 million disposable income annually.
At this level you can do pretty much anything you'd reasonably want. Pay the mortgage on a $10m mansion as well as a $5m summer place in the Hamptons, put four kids through Ivy League colleges, fly first class anywhere you'd like, make half a dozen angel investments at $250K each, eat out every night at five star restaurants, vacation on the Riviera, and have a full-time cook, butler, nanny and chauffeur. I expect you'd even tithe $1m annually to good causes, which probably gets you named Man of the Year for a big local charity.
All in all, not a bad place to be! But still no Gulfstream, no $35 million penthouse in midtown Manhattan, no building named after you at your alma mater, no mega-yacht docked outside your Riviera estate, no getting Justin Bieber for your daughter's quinceanera, no 24/7 security detail like the President, no executive-producer credit on Avengers 2, no invitation to the Allen & Co retreat, no mega-trophy-spouse.
All that needs to wait until you get your first billion and put it to work.
Here we'll assume that with enough portfolio diversification you'll finally hit a Google or LinkedIn, and be able to comfortably plan on >10% annual returns from your professionally-managed holdings. And since you're now an oligarch, let's say that your hardworking gnomes will figure out how you can limit your taxes to the same <10% that will likely surface once Mitt releases his older returns.
This means you'll now have close to $100 million a year after taxes, and FINALLY you can afford all those things you've always dreamed of! While you might not be able to pull off in the same year BOTH the $85 million pièd a terre in Manhattan that Russian guy bought for his daughter, AND the $150 million megayacht of the Sultan of Dubai, you'll be in pretty good shape.
However, those constraints DO make a difference when you're playing in the big leagues, so figure that you'll have to step up to the next category, before there really are NO practical limits to what you can do and how you can live.
Once you get above the $10 billion level, all is good, and you can both help change the world (viz. Bill Gates) AND indulge yourself in any way you desire (viz. Larry Ellison and various sultans). From this point on, it's simply a matter of score-keeping in the great Monopoly Game of Life. You'll need to decide for yourself how important your place on the Forbes list is, and whether you care about your standing relative to Mark Zuckerberg ($10 billion), Michael Bloomberg ($22 billion), David Koch ($25 billion) or Warren Buffett ($44 billion).
Q: What does it feel like to be a millionaire or billionaire?
A: I've been featured on the homepage of Yahoo! as a millionaire, offered 3 separate reality TV shows - including that terrible Millionaire Dating one on Bravo. I bought a luxury with cash on my 16th birthday, owned a house a few years later.
Hitting $1m was a non-event, I don't even know the exact date it happened. The dividends just all of a sudden added up, and it was there. I celebrated by buying myself a used Rolex. A few years later I also did a vacation where I "tried to spend as much money as possible" - but I still found myself gravitating towards "values" on the wine list rather than blowing it all out by spending thousands on a bottle, which I thought was silly.
Hitting 8-figures was a bit more substantial, I knew it meant I'd never, ever have to work again unless something went terribly wrong. The closing call with the law firm was one of the biggest anti-climaxes of my life. I had already "owned" the money in my head years before hand, so seeing it crystallize on my bank statement didn't make a huge difference, except that it freed me up to start tackling bucket-list items.
I had been postponing so many experiences with the idea of "doing it at some point in the future when I made it" that I just started tackling them one by one. Superbowl. Sundance. SobeFest. Africa. A month around Europe. 3-Star Michelin dining.
The only "awkward" thing I keep running into repeatedly, is other people's comments about wealth or money. Whether it's a tour guide pointing out a hotel that costs $1000/night and everybody in the tour bus gasps (and it's where I'm staying) or taxi drivers making snarky comments about millionaires, or people suggesting it's my "lucky day and I should buy a lotto ticket" - I run into it repeatedly and predictably, but I always tend to keep my mouth shut and not say anything.
Along the way, the most interesting phenomenon has been "adaptation". Moving from a $300K apartment to a $1m one barely made a difference after the first month.
Jumping from that to something 60% bigger, and oceanfront (on the beach) that was worth over $2m barely made a blip after the first few weeks.
Buying a fancy, fast sports car - yes, I did it, but again people tend to massively overestimate the "joy" or "happiness" that a particular item will give them vs. reality. After a few weeks, it just sits there. The anticipation, wait and planning is almost better than the realization of the event itself.
When they say "it's all about the journey, rather than the destination" that's absolutely true. The part that I've most enjoyed is hanging out, meeting and become friends with amazing, successful, smart and ambitious entrepreneurs. It's inspiring, invigorating, and just plain fun.
I still don't have a private plane or NetJets card, I fly economy-class around North America most of the time, I don't even have a maid to do my cleaning. I prefer to buy clothes when they go on sale, and I cringe at people who waste thousands on Gucci-this or Prada-that. I upgrade my MacBook every few years, not every model. I still use an original iPad. I've never bought a new car (except for my parents). The biggest TV in my apartment is 42".
Experiences, even when they cost thousands of dollars a day, so far have been my best investments. I've stopped postponing as much as I used to. The best time is "now", but to be honest, I could have done many of these things much earlier, and on a lower-budget, and probably still had a great time.
Try this as a test--
Make a list of all physical things you would buy if you had $10 million. Let your mind roam free. Don't limit yourself to the reasonable.
It's not that long, is it?
And if you worked a decade, or more to earn that money, you'd cross 90% off the items off that list anyway. There's amazingly few physical things that are worth spending money off once you've covered the basics. If I gave you $100K in cash and told you to spend it in a day, you'd be hard pressed unless you bought jewellery, or a car.
Gadgets? Clothes? A bigger TV? Unless money fell from the sky into your lap, you're probably going to be quite pragmatic about what you invest in. There's a reason why most lottery winners end up bankrupt within a few years.
The utility of money once you get past a certain threshold is very limited. And I honestly think that most people who want to be "rich" don't really mean it. What they are really saying is that they'd like someone to hand them a check.
But when push comes to shove, and there's hard work, sacrifices, and tears involved, they'd rather spend 4-hours a day watching TV along with the rest of America.
