A million dollars. Has a nice ring to it doesn’t it? A common goal in the United States among people saving for retirement is to reach that magical mythical figure of a million dollars. Frankly, when I hear a million dollars i immediately jump to the scene from the movie Austen Powers where Dr. Evil wants to blackmail the world for a million dollars. No. 2 reminds Dr. Evil that in 1997 a million dollars isn’t a lot of money anymore. That is true, a million dollars isn’t certainly what it used to be.
However, becoming a millionaire, besides being the subject of a great song by Bare Naked Ladies, seems to be illusive dream of many. it is often a benchmark that financial planners use to discuss what a safe withdrawal would be if/when you retire. It becomes a benchmark for many to suggest that is when they truly reach financial independence or even wealth. A million dollars is the benchmark many people use in America to suggest the United States is a great land of opportunity (which I do think it is for many, but not for all and there are other places as well). There are dozens of articles in finance magazines about the “The mindset of a millionaire” or “The characteristics of a millionaire“. Financial guru Dave Ramsey argues that everyone can become a millionaire in America. I fully admit I have a desire to accumulate a million dollars in assets and believe that I will within a few years. Although, as No.2 points out, a million dollars isn’t necessarily a lot of money nowadays.
So I really have two questions? First, why do we use the benchmark of a million dollars to calculate wealth? What would you do if you become part of the two comma club?
I think the reasons behind continuing to use the millionaire benchmark are fairly obvious. A million dollars is still a considerable amount of money these days. For example, if you retired a millionaire today, had all of your debts paid off, and lived off 4% of that million dollars (see this article for why 4% is considered a good withdrawal rate), plus social security, you would probably have a fairly comfortable retirement no matter whether or not the stock market went down or not. Being a millionaire gives some people a sense of security.
Second, becoming a millionaire has been the benchmark for measuring wealth in the United States for decades. Being a millionaire conjures up images of fancy cars, big houses, and luxury living. The old Robin Leach canard of champagne wishes and caviar dreams (I like caviar, but am not the biggest fan of champagne).
Finally, being a millionaire communicates, in some respects, some form of status. It says that you must have some intelligence in investing, business, or some other aspect of finance. As President Coolidge once said, “the chief business of the American people is business.” Many people still argue this one of the fundamental truisms of America and if you are a millionaire then you must be a good American.
I am sure there are a number of other reasons, but it is Sunday morning when I am writing this and I am tired.
The other question: What would I do if I had $1,000,000? First, thing I would do would be to pay off all of my debts including my house. That would leave about $750,000. Then I think we would finish our third floor/attic and make it a fourth bedroom. That would cost about $50,000. I think I would donate about 10% of that money to various causes. I would like to take some of that money and go on a really nice trip around the world. Although that might be difficult because our dog would have separation anxiety. The rest of the money (about $600,000 or so left) I would invest it. Put that money into good index funds, perhaps buy another piece of real estate (e.g. a two or three family home or maybe even a vacation home near water) and watch it grow.
I wouldn’t be able to quit my job. Although I might be close because I could potentially live off of the savings. But I love what I do so I think I will stick with it for a few more years at the very least, if not for a long time.
I hope to join the two comma club someday. I fully admit it would be nice to say I am a millionaire and I think I will get there like a lot of people. Most important to me, however, is creating greater financial security for myself, Mrs. ROB, and our families. I don’t know what that magic number is, but a million dollars, as No. 2 put it, isn’t a lot of money nowadays, but it certainly better than nothing.
What would you do if you had a million dollars? Do you strive to be a millionaire? Why?