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December 01, 2012


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Not yet a millionaire at 28, nor am I a homeowner, so my own comparable numbers aren't particularly relevant. However the one thing that surprised me on this list was the debt below 5% of net worth. I wonder how that stat varied among the millionaires Dr. Stanley surveyed? The millionaires I know have lots and lots of loans on profitable assets - well over 5% of their net worths, probably approaching 40-50% in some cases. In the name of maximizing return on capital (why pay off a property loan charging 5% when you can instead turn around and make 15% by reinvesting the available cash?)


That is because the vast majority of millionaires are not business owners. They are people with middle class jobs spending far below their income for 30+ years thus the 57 year old age.

A million isn't what it used to be. If you surveyed people worth 10 million+ I suspect the statistics would look much different. Anyone making median income can reach millionaire status if they structure their life appropriately but almost no one making median wage can reach 10 million. That takes a business and thus the debt.

I think the statistics here are relevant for most people because it is the path most people would take to get there. As real estate investors we are on a different path. An accelerated path due to the leverage of debt.

I still have a way to go to get to a million but the stats they state are with in reach to where I am at.

Of course thing would be better if the economy were doing better and both me an my wife were not looking at pay reductions and reduced hours and no raises higher medical insurance premiums and etc.

I'm too early in life to really compare as I'm only in my mid twenties and some of these ratios are out of whack for me. I just bought my house a year ago but it is very modest compared to what the bank said I could afford.

Aw. Not a millionaire :( So sad. But I think I'm on my way someday in the future...but not for a long time!

An alternate explanation for the lack of debt reported by these individuals may simply be due to how the information is presented. Often times, investment real estate is held in an LLC. Accordingly, the debt may not be reported on the face of a personal financial statement. I work in banking and often see investment real estate reported as a 'net equity' figure on the assets side of one's personal financial statement.

FMF - While we're on the topics of net worth and real estate, I was just looking at a post of yours from 2006 that outlined the average, top 25% and top 10% net worth figures for various age groups. I'm not sure where you got the information, but I would be interested to see those figures updated with 2012 information. I'm interested to the effect of the recession and real estate market crash on those figures. Not saying you have to do a post on it, but I'd appreciate if you posted a link to where you found the information. :)

Paul --

I'm not sure what info you are referring to -- I would need a specific link to give any guidance.

I usually link to my source at the top of a post (like I did with this one), but without an exact URL I can't be much help.

Well, I bet I'm better looking.....

"Liquid Net worth" approx $2.5M~, age 52, home is about 6-8% of Net Worth, debt 0%, annual income tax is miniscule, less than 1/4% of NW. (yes, 1/4%! ..I'm retired @ 47 income is military pension, Va disability and investment income. I have positioned my portfolio wisely with tax losses to carry forward, and no state income tax in WA state either!). Annual income (not taxable but, the higher amount, annual realized) is about 2+% ($50K+~) is too good!

But, you featured all this in my "story" you published here a while back :)

Apex and Paul -

Good points that yes, higher-NW individuals than simple "millionaires" may be more likely to have higher debt loads, and yes if you look at personal debt vs. debt held through various legal entities, you'll clearly get a different number.

Technically our debt is about 50% higher than our actual net worth. I never really thought of it that way, nor do I think it's constructive to do so as our net worth is well positive and 95% of the debt is for profitable income-producing assets.


I am very close to the stats you have provided...

1. Age is just under 40.

2. Home is about 7-10% of net worth.

3. Have been debt free for 15+ years.

4. Annual income tax is about 3% of net worth.

5. Annual realized income is about 7% of net worth (makes me feel worse about the amount of taxes being paid).



Here is a link to the post I was referencing...


Paul --

The info in that piece is from this post I linked to in the post:

It lists the source data as "Federal Reserve Board's 2004 Survey of Consumer Finances."

I haven't looked for updated data from this report (don't know if it even exists) but now you know as much as I do. :)

I think the key detail we're missing is the average net worth of the millionaires in question. The numbers are in % but we don't know % of what. 2% debt of net worth is equal to what? Its not 2% of $1M, but a # higher than that. Average net worth of millionaires could be $5M or $10M or more.

Apex, I would not say most millionaires aren't business owners. The Millionaire Next Door stats say that 2/3 are self employed. 3/4 of those consider themselves 'entrepreneurs' and the other 1/4 are professionals (doctor, lawyer, etc). Thats a lot of business owners.


I have never read the book but I thought the idea was that they were just ordinary people doing ordinary jobs. If what you say is true that changes my opinion of that book quite a bit. It basically says if you are employed by someone else you are not very likely to make it. Wow, seriously, if what you say is true that begs the question of how applicable the advice is if business owners are mostly the ones who make it????


I found this comment from Stanley about Millionaires in a NY Times article (I think its just from chapter one of the book the way it looks):

"Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires."

That means if you work for yourself you are more than 8 times more likely to become a millionaire than if you work for someone else.

To me, that tells most of the story right there. If you take two groups of 1000 people, one group that is self employed and one group that works for an employer, the self employed group will have more than 8 times more millionaires in it. For all the other things that millionaires do, the most important thing they do appears to be work for themselves in a fashion that allows them to earn more money.

In the same NY Times article he states that the median realized taxable income is 131,000. That puts them in the top 5-10% of wage earners. And notice the careful phrasing. "Realized" and "taxable." Many business owners have ways of not realizing their income by deferring it, or putting it into long term assets that they can quickly depreciate to lower their realized taxable income even though their actual income is higher than that.

It appears most millionaires are doing it the old fashioned way. By running a business that makes a lot of money.


It now appears to be the case that I misunderstood this book. Millionaires are not common people with common jobs. They are mostly people who make a lot of money many of whom happen to live like common folks rather than drive big flashy cars. And that is important too because you can make it and blow it. But it seems the stats show you have little chance to get there if you don't start with a big income. I was mistaken on my understanding that many of them were just working median wage jobs and becoming millionaires through frugality. It appears that would only be a very rare few.

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