How To Become A Millionaire? First Understand What It Means…
How to become a millionaire?
I believe almost everybody wants to be a millionaire, I guess you would agree. But what exactly a millionaire is? Actually, this is not a very simple question…
If you take a $1 000 000 loan are you a millionaire? You have a million in this case, you have that amount available for spending, but you owe it to the lender, too. So probably no, you’re not a millionaire in this case. A similar situation is if, let’s say Sarah, has a house worth a million but she lives there and doesn’t plan to sell it, how about that, is she a millionaire? She owns the house but in the same time she might be struggling to pay her bills or even buy food because some liquid cash is needed for this. Is Sarah a kind of a poor millionaire? There are three controversial definitions for a millionaire:
1. Net assets for more than a million – this means every person for whom:
total assets – total debt > $1 000 000
2. Net financial assets for more than a million – in this calculation your home, car, and furniture are excluded from the equation, too, as living assets:
total assets – total debt – living assets (first home, car, etc.) > $1 000 000 .
3. Net investable assets (working capital) for more than a million – to be a millionaire according to this definition, a person should have 1 000 000 of a currency to invest. This rule is used for the creation of the so-called World Wealth Report every year, by Capgemini (www.capgemini.com), which offers insights into the size, composition, geographic distribution, and investing behavior of the world’s
population of high net worth individuals (HNWIs)—those with US$1 million or more than 1 at their disposal for investing. You can see the report from 2018 below.
For example a person with:
– a house worth $200 000
– a car for $50 000
– credit card debt for $50 000
– other debt for $500 000
– vacation home for $300 000
– liquid investments for $500 000
– a bank deposit of $600 000
1. IS a millionaire according to the first definition:
200 000 + 50 000 + 300 000 + 500 000 – 50 000 – 500 000 + 600 000 = $1 100 000
2. IS NOT a millionaire according to point 2:
500 000 + 300 000 – 200 000 – 50 000 – 500 000 – 50 000 + 600 000 = $600 000
3. IS a millionaire according to 3, because the money available for investments are:
500 000 + 500 000 + 600 000 = $1 600 000
The most widely accepted definition of a millionaire would be a person, whose net worth is more than a million – 1.
So how to become a millionaire? Make your net assets exceed $1 000 000 and you’re done!
How many millionaires are there in the US and around the world?
Here is a nice page where you can understand more about world millionaire and their number in each country. I will just summarize here.
According to point 1, there were around 36 million millionaires on the planet in 2018
According to 3, there were around 12 million millionaires in 2018 in the world.
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