About a year ago, my wife and I hit an incredible milestone that we’d been working on for 10 years: We became a millionaire family.
Through time, patience and a strong partnership with my wife, our net worth went from -$50,000 to over $1,000,000. There were many ups and downs along the way, but at the end of the day, we were very proud of our family accomplishment.
After having some time to reflect on this seven-figure moment, I’ve come to realize some things about myself and becoming a millionaire in general.
A Million Isn’t What it Used to Be
Growing up in the ’80s and ’90s, when someone talked about being a millionaire, it was a big deal. Awkward yet watchable kid movies like “Blank Check” and “Home Alone” left me with a feeling that if you got a million bucks, you’d be set for life.
At 40 years old, I’m realizing millionaires aren’t so rare.
According to a 2021 study by Credit Suisse, there are 22 million millionaires in the United States. This is about 8% of the US adult population (22 million out of 250 million).
Comparing this to my 10-year-old mindset, there were only around 3 million millionaires in the US in 1992. This was about 0.7% of the US adult population at the time (1.3 million out of 188 million) .
While becoming a millionaire is still an incredible accomplishment, it’s a lot more frequent nowadays. This is because one million dollars doesn’t go as far as it used to due to inflation.
So, the millionaire status I thought was so incredible as a kid is the equivalent of multi-millionaire status today.
A Lot Of Us May Need to Become Millionaires to Retire Comfortably
Our family spends between $60,000 – $80,000 per year to live our comfortable lives. If we want to continue living this way in retirement (adjusted for inflation of course), we’re going to need a lot more than $1,000,000 invested.
To retire traditionally and comfortably, we’re aiming for 25x our annual expenses invested. So for us, that’ll be around $1,500,000 – $2,000,000.
Using the same simple math formula, $1,000,000 invested at a traditional retirement age may provide around $40,000 of annual income per year. If you and your family need that amount or more to live comfortably and you won’t have other sources of income like a pension in retirement, then you’ll likely need to become a millionaire as well.
So in a sense, becoming a millionaire isn’t a monumental destination, it’s almost become a requirement for a comfortable retirement.
If you have a pension or other incoming producing assets in retirement, that’s a different story. But for the rest of us (including me), we’re going to need to keep growing our retirement portfolios!
I Still Need to (and Want to) Work
Even with a million dollar net worth, my wife and I are working to pay for our everyday living expenses.
My 10-year old self would be astonished! He’d wonder why I’m not sitting by the pool and ordering butlers around. (Side note: There must have been a lot of butlers in ’80s and ’90s movies.)
Since most of our net worth is allocated for our future retirement needs, we aren’t touching any of it today. That way, time and compound interest can do their magic.
I see how comfortable my parents are with their pension and social security in their 70s and, since I’m not banking on either of those, we need to let our accounts grow for decades.
Also, I want to work. At least, I want to do work that I enjoy.
So even with a million bucks, the work continues!
Compound Interest is Truly Magical
Since hitting the millionaire net worth mark, our net worth has grown substantially even though our income went down by half during the pandemic. The decrease in income was due to a career change on my part so that wasn’t surprising. What was surprising was seeing how compound interest will do wonders without our help.
Let me give you an example.
We have around $600,000 in retirement investments today. If we didn’t contribute another dime to our accounts, our balance could grow to around $3.2 million (with an assumed 7% interest rate) by the time we’re 65 years old. That is more than enough for us to have that comfortable retirement we’re looking for.
Compound interest is incredible; our money has the potential to make money. And then that money makes money. What a concept!
The Journey Was A Lot Better Than the Destination
Achieving a million dollar net worth was a big family win. But that awesome millionaire moment quickly faded and we went back to our normal life.
After that financial euphoria subsided, I had a realization that those other 22 million millionaires probably had as well. That’s recognizing the journey is much better than the destination.
Over the 12 years of our marriage, we’ve learned so much about how to build the kind of wealth that makes our family happy. That includes giving 10% in our own way, multiple annual family vacations and shorter-term savings for exciting home upgrades and updates.
Those wealth-building lessons, and the trial and error we went through to learn those lessons, are the true reward on this millionaire journey.
I’m Not a Self-Made Millionaire
While I didn’t receive a trust or inheritance (like 79% of other millionaires), this millionaire financial position would not have been possible on my own.
My parents provided me with the knowledge, confidence and education to succeed in life. They also paid for my undergraduate degree. Given the massive student debt in our country, that’s something that I definitely recognize as a privilege.
I also married an amazing woman who has partnered with me on this journey. So her success is our success. And my wins are our wins. I’m grateful for her love and support in the good times and bad.
So to say I’m not a self-made millionaire actually fills me with more confidence than shame. I hope to fill my kids with the same confidence as they grow up and continue this legacy of family wealth and happiness.