Author Topic: So, am I a millionaire?  (Read 9154 times)

AlexMar

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Re: So, am I a millionaire?
« Reply #100 on: January 23, 2019, 11:09:40 AM »

Assets - Liabilities = Net Worth.  Over $1M and you are a millionaire.  It's a standard, simple, and really non controversial thing.
...

That's multiple times you've tried to write off your preferred method as non-controversial, despite multiple other people in this very thread saying that's now how they view it.*  You've also referred to other methods as 'absurd' and 'clearly' your method is the 'obvious' and 'standard' one.    Frankly your dismissal of others is insulting.
Certainly many NW as the defining threshold for a millionaire.  Maybe even a majority.  But it's not universal, particularly among the broader non-mustachian public.

Consider another view.  In many parts of the country even modest homes can approach or exceed a million bucks. People who live there often have home equity in the high six figures  with years remaining on their mortgage.  On paper their NW shows they have over $1M in assets, but if you ask them if they consider themselves a millionaire they typically laugh and say no way.  Why?  Because they don't feel rich, they say they can't move because of their job, they have to car loans on newish cars (also adding to the NW). They can't FIRE because they're not mustachian and their expenses are ~$80k, and they've got three kids,  and no clear plan how or if they'll pay for college.  In short, they are still living paycheck to paycheck. This kind of situation is disturbingly common in HCOL areas.  There's even a popular term for this - paper/house millionaire.  As in, a millionaire by net worth but not someone who has a lot of money at the end of the day.

It's not the only way, and there doesn't have to be a consensus - that was the underlying driver for this thread - and that's ok.  But please stop telling people that their opinions are absurd and the your definition is the clear, simple, obvious and only acceptable one - and all others are absurd.

*about a dozen posters chimed in to say they personally exclude NW when determining whether someone has hit the millionaire mark.  Several others have said it's when whatever metric you choose crosses 7 figures.

So being a millionaire is all about "feels" - ok, gotcha.  By the way, you just admitted you agreed with me without even realizing it.... "There's even a popular term for this - paper/house millionaire." - ummm... yeah, MILLIONAIRE.  As I said, it's not a controversial thing.  You are just being contrarian.

How  certain funds relate to FIRE is a different topic.  This topic is "Am I a millionaire"....

EnjoyIt

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Re: So, am I a millionaire?
« Reply #101 on: January 23, 2019, 03:24:38 PM »
It is all just a label.  Who the hell cares.  Now we have internet millionaire police (IMP) to deal with as well.

All that matters is if you have enough money to be FI based on your own personal expenses. 

Boofinator

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Re: So, am I a millionaire?
« Reply #102 on: January 23, 2019, 03:42:32 PM »
It is all just a label.  Who the hell cares.  Now we have internet millionaire police (IMP) to deal with as well.

All that matters is if you have enough money to be FI based on your own personal expenses.

I, for one, care about the label, because it is a fucking cool label (even if it means different things to different people). No what's not a cool label? Internet Fill-in-the-blank Police. I get tired as hell of hearing this as the answer any time somebody wants to shut down a conversation.

I guess you can label me the Internet Label Police.

DreamFIRE

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Re: So, am I a millionaire?
« Reply #103 on: January 23, 2019, 04:14:23 PM »
It is all just a label.  Who the hell cares.  Now we have internet millionaire police (IMP) to deal with as well.

All that matters is if you have enough money to be FI based on your own personal expenses.

Yeah, that's why I don't concern myself with my net worth or include my home as part of my stash.  I take my 4% SWR multiplying it by the actual stash that I'm drawing down from.  The value of my house doesn't come into play since I plan to keep it.

But whatever makes people feel better, they can think of themselves as millionaires if they want, it doesn't affect me.

EnjoyIt

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Re: So, am I a millionaire?
« Reply #104 on: January 23, 2019, 04:20:14 PM »
It is all just a label.  Who the hell cares.  Now we have internet millionaire police (IMP) to deal with as well.

All that matters is if you have enough money to be FI based on your own personal expenses.

I, for one, care about the label, because it is a fucking cool label (even if it means different things to different people). No what's not a cool label? Internet Fill-in-the-blank Police. I get tired as hell of hearing this as the answer any time somebody wants to shut down a conversation.

I guess you can label me the Internet Label Police.

Well then for your own sake calculate it however the fuck you want. Itís your label. Make it as hard or as difficult as you want to tag yourself with it.


v8rx7guy

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Re: So, am I a millionaire?
« Reply #105 on: January 23, 2019, 04:50:36 PM »
Yes, of course you include the equity of your house in your net worth.  If you're not including this in your net worth, you're calculating something that is different than net worth (maybe some of you are confusing it with your "stache"?).  Which is fine... but to say the equity (what the home is worth minus what's owed) you have in your home is not included in your net worth is 100% wrong.

The only grey area here in my opinion is the College Savings Funds.  Personally, we don't.

jjandjab

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Re: So, am I a millionaire?
« Reply #106 on: January 23, 2019, 06:38:43 PM »
I agree that net worth should absolutely include your house if you have equity in it - it is net worth, not net cash. But we also do include college funds.

We have three kids and knowing we won't get financial aid, we have saved almost 520k for college. Until that is spent, I will include it because there are lots of variables.  For instance at the moment our oldest child is not planning on going to college yet, so his third of that is now hanging out and waiting and may be converted to cash depending on what happens there... And our middle child heading to college this fall has three choices for engineering which cost 28k, 36k and 58k per year, so his fund could have alot left over after four years or could be totally used up by year three... and who knows with child #3, shes so smart she could get a free ride or choose a school that costs 75k a year...

As far as I'm concerned it is our money until it is spent as my wife and I see fit, so why not include it?

AlexMar

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Re: So, am I a millionaire?
« Reply #107 on: January 24, 2019, 08:28:16 AM »
I agree that net worth should absolutely include your house if you have equity in it - it is net worth, not net cash. But we also do include college funds.

We have three kids and knowing we won't get financial aid, we have saved almost 520k for college. Until that is spent, I will include it because there are lots of variables.  For instance at the moment our oldest child is not planning on going to college yet, so his third of that is now hanging out and waiting and may be converted to cash depending on what happens there... And our middle child heading to college this fall has three choices for engineering which cost 28k, 36k and 58k per year, so his fund could have alot left over after four years or could be totally used up by year three... and who knows with child #3, shes so smart she could get a free ride or choose a school that costs 75k a year...

As far as I'm concerned it is our money until it is spent as my wife and I see fit, so why not include it?

I agree.  This is your money until it's not.  Just like I can take money out of my stocks and give it away.  You are just using a different way to store your money based on what you think it may be used for.  You can have over $1M and then give some away and not be a millionaire anymore.  But as long as you have control of the funds, they are yours and should be calculated as such.

Rosy

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Re: So, am I a millionaire?
« Reply #108 on: January 24, 2019, 08:56:01 AM »
I came here out of pure curiosity - WTH warrants a 3-page discussion?, when this topic can only be about numbers?
Now I see why there is dissension.

Like AlexMar said:
Quote
How certain funds relate to FIRE is a different topic. This topic is "Am I a millionaire"....

Since the question is "Am I a Millionaire" - the answer is yes.
Should you consider yourself a millionaire in terms of fire? perhaps not quite yet:)

Maybe the answer is it depends on your perspective. For fire, I tend to lean towards having $1M in "liquid" assets to draw 4% from.
Although, if given the choice and opportunity, I'd prefer a mix of liquid assets, passive income, and rental income etc. for diversification, but that is also a different topic.

Mississippi Mudstache

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Re: So, am I a millionaire?
« Reply #109 on: January 24, 2019, 09:26:30 AM »
I agree that net worth should absolutely include your house if you have equity in it - it is net worth, not net cash. But we also do include college funds.

...

As far as I'm concerned it is our money until it is spent as my wife and I see fit, so why not include it?

In my case, I've transferred the college funds to custodial accounts for the kids, so it's not actually mine to spend as I wish. But we don't have anything close to what you have tied up in college funds. Just a few thousand. And it's just money that the kids were given for birthdays/Christmas plus money that they've earned selling garden produce and eggs from our chickens. So I really don't feel entitled to it in any way. We anticipate that our kids will get mostly free rides to college, as my wife and I did. Our parents paid for housing and we covered the rest through scholarships, grants, and part-time jobs. Same plan for our kids. In state tuition is free in Georgia at public colleges if the students keep a B-average. If you can't keep a B-average, you don't belong in college.

arebelspy

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Re: So, am I a millionaire?
« Reply #110 on: January 24, 2019, 07:35:02 PM »
MODERATOR NOTE: Feel free to state your belief. If someone isn't convinced, okay. Don't be a jerk if they don't agree.
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the_FI_engineer

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Re: So, am I a millionaire?
« Reply #111 on: January 25, 2019, 08:12:23 AM »
Wow, lots of controversy here.

Personally, I use the terms pretty distinctly when discussing finances.

Net Worth - I use the pretty standard definition of assets minus liabilities, without counting depreciating goods or anything I'm not immediately willing to sell (vehicles, guitars, etc). So going back to the original post, I'd say option #1 is how I would define net worth. Include everything! Hell, MMM himself pretty much spells this out in his How Rich Are You? post. Not that we all need to agree with him on everything, obviously. But this is how most people would define the phrase net worth, even though it may or may not actually reflect how close you are to your FI number. I would say the OP is a millionaire!

http://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/

Stash - If you're in the FI community though, and you're asking how to define your stash - or how close you are to your FI number - I would only include accounts I planned on using to live on. Personally, I plan on having a stash of $1M, PLUS a paid off house. Meaning my invested/liquid stash would need to be >= $1M, and my house also needs to be paid off with zero mortgage.

So when I'm looking at my finances, I don't include my home equity in the calculation toward my number. But I do include it in my net worth. In my personal Excel sheets I made to track all this stuff, I actually have distinct rows for net worth, and stash. I want to know both, for different reasons.

oldtoyota

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Re: So, am I a millionaire?
« Reply #112 on: February 08, 2019, 09:46:27 PM »
It is all just a label.  Who the hell cares.  Now we have internet millionaire police (IMP) to deal with as well.

All that matters is if you have enough money to be FI based on your own personal expenses.

This sums up how I feel about it, too. =-)

PhilB

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Re: So, am I a millionaire?
« Reply #113 on: February 09, 2019, 04:52:01 AM »
If we are going to insist on a strict definition where you have to include the money you could raise from very 'asset' then congratulations - you are all millionaires - twice over!  A quick google reveals that in the US a human heart is worth $1M, your liver $0.5M and your kidneys $0.25M each.
What's clear from this thread so far is that everyone has their own ideas of what's right, and differing strengths of belief about how wrong other definitions are and it's highly unlikely that anyone is going to change anyone else's mind.
For me what's symbolic is when the number I track crosses £1m.  The market drops in 2018 dropped me back below that line for a few months, but today my second comma has returned!  Welcome back little fella, I missed you.

AlexMar

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Re: So, am I a millionaire?
« Reply #114 on: February 09, 2019, 07:37:12 AM »
If we are going to insist on a strict definition where you have to include the money you could raise from very 'asset' then congratulations - you are all millionaires - twice over!  A quick google reveals that in the US a human heart is worth $1M, your liver $0.5M and your kidneys $0.25M each.
What's clear from this thread so far is that everyone has their own ideas of what's right, and differing strengths of belief about how wrong other definitions are and it's highly unlikely that anyone is going to change anyone else's mind.
For me what's symbolic is when the number I track crosses £1m.  The market drops in 2018 dropped me back below that line for a few months, but today my second comma has returned!  Welcome back little fella, I missed you.


For what it's worth, a judge would certainly consider your home and vehicles as part of your net worth/assets, but probably not your liver.  When people start moving away from pretty well established definitions and invent their own, it's just venturing towards absurdity where nothing makes sense.

Accountants have basic guidelines for defining net worth, and it's in-line with the law, too.  But who cares!  I wouldn't sell my heart for any amount, so that makes me an infinityaire!

PhilB

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Re: So, am I a millionaire?
« Reply #115 on: February 09, 2019, 10:55:17 AM »
If we are going to insist on a strict definition where you have to include the money you could raise from very 'asset' then congratulations - you are all millionaires - twice over!  A quick google reveals that in the US a human heart is worth $1M, your liver $0.5M and your kidneys $0.25M each.
What's clear from this thread so far is that everyone has their own ideas of what's right, and differing strengths of belief about how wrong other definitions are and it's highly unlikely that anyone is going to change anyone else's mind.
For me what's symbolic is when the number I track crosses £1m.  The market drops in 2018 dropped me back below that line for a few months, but today my second comma has returned!  Welcome back little fella, I missed you.

For what it's worth, a judge would certainly consider your home and vehicles as part of your net worth/assets, but probably not your liver.  When people start moving away from pretty well established definitions and invent their own, it's just venturing towards absurdity where nothing makes sense.

Accountants have basic guidelines for defining net worth, and it's in-line with the law, too.  But who cares!  I wouldn't sell my heart for any amount, so that makes me an infinityaire!
The key thing for me is that, whatever definition you like, a fundamental part of the meaning of the word 'millionaire' has always been 'someone wealthy'.  As inflation continues to erode the value of a nominal $1M we have to choose between loosening the definition, or losing its colloquial meaning and ultimately its relevance.  Ultimately it will either become just a synonym for rich with no real tie to a particular dollar amount, or it will fall out of use as meaningless because $1M won't be a significant amount of money any more.  (The other option is that we knock some zeros off the currency when the numbers get too big and what does that do to your definitions?)
Personally I don't mind what definition anyone uses, but I think using one that uses £1m / $1m as a measure, but still has the connotations of 'wealthy' is probably most useful.  If you live somewhere where a basic house costs $1M, and have no intention of ever moving to a LCOL area to free up some of that equity, then a $1M paid off house doesn't seem to be 'rich' in the absence of other assets.  A $1M paid off house where you rent out half the rooms and live comfortably on the income does feel like 'rich'.  $1M in assets and no house may or may not feel like rich depending on the cost of renting in your location.

radram

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Re: So, am I a millionaire?
« Reply #116 on: February 11, 2019, 06:58:16 AM »

The key thing for me is that, whatever definition you like, a fundamental part of the meaning of the word 'millionaire' has always been 'someone wealthy'.  As inflation continues to erode the value of a nominal $1M we have to choose between loosening the definition, or losing its colloquial meaning and ultimately its relevance.  Ultimately it will either become just a synonym for rich with no real tie to a particular dollar amount, or it will fall out of use as meaningless because $1M won't be a significant amount of money any more.  (The other option is that we knock some zeros off the currency when the numbers get too big and what does that do to your definitions?)
Personally I don't mind what definition anyone uses, but I think using one that uses £1m / $1m as a measure, but still has the connotations of 'wealthy' is probably most useful.  If you live somewhere where a basic house costs $1M, and have no intention of ever moving to a LCOL area to free up some of that equity, then a $1M paid off house doesn't seem to be 'rich' in the absence of other assets.  A $1M paid off house where you rent out half the rooms and live comfortably on the income does feel like 'rich'.  $1M in assets and no house may or may not feel like rich depending on the cost of renting in your location.

I think you are on to something here. We need a term that will continue to mean what the term "millionaire" used to mean. Inflation will surely continue to degrade its meaning regardless of whether you include your house, rentals, 529's, etc.

We need a term that means we can sustain a Safe Withdrawal Rate. It will allow inflation to move the amount required upwards, yet still mean the same thing in the future. It can also be a different amount for different people who need more or less to live their desired lifestyle. It could also be a different SWR percentage from one to another to handle tolerance to risk.

I vote we call ourselves SeWeR people, but that is just a working title for now.

talltexan

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Re: So, am I a millionaire?
« Reply #117 on: February 11, 2019, 07:18:30 AM »
I do like "Sewer", but we already have a term like what you describe: "Financially Independent"

nereo

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Re: So, am I a millionaire?
« Reply #118 on: February 11, 2019, 07:24:51 AM »
An interesting tidbit from this discussion - increasingly the term millionaire is being applied not to assets or net worth, but to people that have annual earnings of $1MM or more.  It's the basis of the term "millionaire's tax' in places such as NY - where earnings above $1M are assessed an additional tax (in NY it's 8.82%).

Post from NPR's Planet Money correspondant Jacob Goldstein: https://www.npr.org/sections/money/2011/05/24/136461536/whats-a-millionaire

Approximately 1:300 US households have earnings exceeding $1M in the US in 2017.

Mississippi Mudstache

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Re: So, am I a millionaire?
« Reply #119 on: February 11, 2019, 02:05:28 PM »
An interesting tidbit from this discussion - increasingly the term millionaire is being applied not to assets or net worth, but to people that have annual earnings of $1MM or more.  It's the basis of the term "millionaire's tax' in places such as NY - where earnings above $1M are assessed an additional tax (in NY it's 8.82%).

Post from NPR's Planet Money correspondant Jacob Goldstein: https://www.npr.org/sections/money/2011/05/24/136461536/whats-a-millionaire

Approximately 1:300 US households have earnings exceeding $1M in the US in 2017.

Wow. That implies that more than 423,000 households in the U.S. have annual earnings > $1,000,000. That blows my mind.

nereo

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Re: So, am I a millionaire?
« Reply #120 on: February 11, 2019, 02:15:36 PM »

Wow. That implies that more than 423,000 households in the U.S. have annual earnings > $1,000,000. That blows my mind.

Mine too.  So much so that I dug a bit into the available data, and yes - it appears that somewhere north of 400,000 households earn at least $1MM each year.  The 0.25% (in terms of earnings).
...but then I thought about it, and realized this would include the CEOs of most large corporations, the starting players of each of the four major pro sports leagues, A-list celebs, hedge-fund managers, large real-estate developers...suddenly the list grows very long.

OurTown

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Re: So, am I a millionaire?
« Reply #121 on: February 11, 2019, 02:37:15 PM »
I do include home equity in net worth, but I don't include the value of any cars or other personal property.  If you have a mortgage you can hardly compute it any other way.  I will personally consider myself a millionaire when I am a "net worth" millionaire. 

talltexan

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Re: So, am I a millionaire?
« Reply #122 on: February 12, 2019, 08:53:18 AM »
It's crucial to remember that the $1,000,000+ incomes might not be sustained. The household might have that income for a year in which they sell a business or house or significant asset.

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Re: So, am I a millionaire?
« Reply #123 on: February 12, 2019, 11:24:03 AM »
If you were to FIRE today and could earn at least 40k annually, without having your networth drop.  I'd call you a millionaire.   

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Re: So, am I a millionaire?
« Reply #124 on: February 16, 2019, 07:11:39 PM »
If you were to FIRE today and could earn at least 40k annually, without having your networth drop.  I'd call you a millionaire.
Well only if he had $1mm invested and used the 4% rule. What if instead he had a pension worth $40k/year and a paid off house worth $100k with no stash? Or no house or stash and just a $40k/year pension? Or what if his NW was all in a million dollar house but he had nothing else so no income unless he liquidated the house? Lots of options to be a "millionaire" out there.

My personal view is that total NW may be a million but that isn't worth much retirement-wise unless some of it is liquid enough to live off investments at whatever amount you need to cover all your expenses.  When I FIREd I had no were near a million in liquid assets invested but had a paId off house worth a lot plus a future pension I would be able to tap once 50 to cover most of my expenses.  I personally didn't consider myself a millionaire but I suppose technically I was if I counted the value of everything I owned or would have access to at some point. But for early retirement and FI purposes I only counted the value of my stash which threw off much less than $40k but enough for my low expenses. Once I sold the house I did consider that money as part of my FI stash but before that it was just part of my NW not my FIRE stash.

Works for me.  No debt and a 40k stream coming in is millionaire status in my opinion.