A subindustry in publishing is devoted to books about becoming a millionaire.
There’s Millionaire Teacher, The Millionaire Next Door, The Millionaire Fastlane and The Millionaire Mind, not to be confused with Secrets of the Millionaire Mind or Your Millionaire Mindset. Also, The ChatGPT Millionaire, Baby Steps Millionaires, Seventeen to Millionaire, From Zero to Millionaire and The Millionaire Master Plan. We could go on and on – Amazon’s books page offers more than 50,000 results for a search for “millionaire.”
The word millionaire means wealth, financial independence and prestige, at least in the minds of people writing, editing and publishing personal finance books. But the status of millionaires today has been devalued by high real estate prices. If you own a home in some parts of the country, millionaire status awaits.
A widely accepted definition of millionaire is having a net worth of $1-million or more, which means your assets exceed your debts and other liabilities by seven figures. The 2023 Global Wealth Report from the Swiss bank UBS said the number of millionaires in Canada, measured in U.S. dollars, was just above two million. Wealth inequality is growing, yet the report predicts 63-per-cent growth in the number of millionaires by 2027.
In Vancouver, Toronto and the surrounding areas, the average home price is above $1-million. If you own a home in these cities free of a mortgage and other debts, boom, you’re very possibly a millionaire by the classic definition.
Owning real estate in any city is good for your net worth. A recent Statistics Canada report on household wealth and debt showed the average net worth for all households in the third quarter of last year was $972,113. For homeowners without a mortgage, it was $1.8-million. “Real estate continues to be central to wealth accumulation across the life cycle,” the report says.
Having $1-million in liquid investments seems a higher and more practical level of millionaire status, given how difficult it is to access real estate wealth and put it to work. Beyond selling a property, you can rent it out or borrow against it at rates that today are quite high. The interest rate on a home equity line of credit could be around 7.7 per cent right now, while rates on a reverse mortgage are in the area of 7 per cent to nearly 10 per cent.
Even $1-million in investments has a limited benefit. If you own investments that produce income at a rate of 4 per cent a year, your annual pretax income on a $1-million portfolio would be only $40,000 a year. You could possibly get to $80,000 a year if you withdrew investment gains every year as well as income and didn’t want to touch your principal.
I asked financial professionals on LinkedIn about the meaning of the word millionaire today and heard a lot about the limitations of real estate wealth. “There’s a lot of house-rich ‘millionaire’ retirees struggling to pay their bills right now,” wrote Brandon Yanchus, a certified financial planner.
“Your net worth on paper is useless unless you’ve got liquidity which seems to be the prevailing problem today,” added mortgage broker Deren Hasip.
And then there’s this bit of witticism from Jeffrey Lamont, a financial adviser for lawyers: “In 1996 when Thomas J. Stanley and William D. Danko published The Millionaire Next Door, the term still held a great deal of cachet. Now, especially in Ontario, thanks as you suggest, to housing prices, the millionaire is right next door … and the next door, and the next …”
Inflation helped create millionaires by pushing up real estate prices, but it also reduces the value of $1-million in spending terms. The band Barenaked Ladies first released a song in 1988 called If I Had $1000000 – it ends with the seemingly obvious line, “If I had a million dollars, I’d be rich.”
Maybe back then. Today, it takes $2.3-million to equal the buying power of $1-million in 1988.
Cracking $1-million in net worth means that you’re fortunate and you made some good financial moves, even if one was just buying a house. But to qualify as wealthy today, you need to be a multimillionaire.
If you need some help elevating your game from millionaire to multimillionaire, Amazon’s got you. There’s Multi-Millionaire Mindset, Middle Class to Multi-Millionaire, The 12 Secrets of Self-Made Multi-Millionaires and, of course, The ChatGPT Multi-Millionaire.
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