$5 million is the new "millionaire"

Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes

well actually $6.4 million according to this Charles Schwab wealth report on the San Francisco Bay Area. Which matches my sentiment that you need about $5 million to begin feeling like a true "millionaire", which I define as being independently wealthy; having FU money to do what you want, etc. (Guess a million dollars isn't what it used to be!)

It's an interesting study:

https://aboutschwab.com/images/uploads/inline/Charles_Schwab_SF_Bay_Area_Survey_Full_Findings.pdf

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Dawn AnastasiPro Member

Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

10y

In the Midwest you need considerably less money to have a roof over your head. It's all about being happy. If you can be truly happy, it doesn't matter where you live, what kind of car you drive, or how much money you have. It's hard to be happy which is why many people long for "stuff" to fill the void.

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Account Closed
Rental Property Investor · San Francisco, CA · Member since 2014 · 18 posts · 10 votes
10y
It sure isn't! I live modestly here in the city despite owning my own (small) home... I don't have a ton of expendable income. A million here is not much at all. It's still hard to wrap my head around the fact that a million dollars makes you a very wealthy person in other parts of the country.
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Account Closed
Rental Property Investor · San Francisco, CA · Member since 2014 · 18 posts · 10 votes
10y
My thought is to move and invest my $ elsewhere and come back when I've got 5 million... But easier said than done. And there's the likelihood that by the time I've made 5 million the city will require 10 to live really comfortably!
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Account Closed
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
10y
Its because of artificially low interest rates that retired people and savers are being screwed over to support the wall street and housing bubbles. I can still remember CD rates of over 5% prior to the 2008 crash. If you could safely generate 5% then you can generate a risk free $50K per year from $1M. Now you are lucky to get 1% and can only generate $10K from that same $1M. And you need $5M to get the same $50K income. Thats why $5M is the new millionaire!
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
I have to agree with @Amit M. and disagree with @Account Closed here. $50k a year would land me in the ghetto here, and I would think it wouldnt go very far in Berkley California as well where you are.
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Raimondo F.
Investor · San Francisco, CA · Member since 2015 · 23 posts · 25 votes
10y
@Amit M. fresh off the press. Thanks for sharing!
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Radhika M.
Investor · San Jose, CA · Member since 2014 · 167 posts · 146 votes
10y
@Amit M. Interesting study. I do agree with you that we need 5+ million to feel wealthy here.
If you had asked me a few years ago I would have said 3 million is rich but I now feel 5+ .
@Keli Landowski The national average to feel wealthy per the study is 2.5 million not one million. I think in most places 1 million is not what it used to be 5 to 10 years ago.
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Stone Teran
Investor · Cincinnati, OH · Member since 2015 · 374 posts · 120 votes
10y
I've never understood the definition of millionaire. Is it a million in assets, a million in cash or a million in assets less liabilities?
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Ben H.
Investor · Jacksonville , NC · Member since 2015 · 143 posts · 54 votes
10y
Not sure $5mil is FU money. If you have that portfolio generating 4% that's only $200k/yr. If you are still paying a mortgage/housing on that not sure it's quite FU. Don't get me wrong, I'll take $5mil over what I have now. The debate is over how much is FU money.
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David Hays
Investor · Malaga, Andalucía · Member since 2014 · 150 posts · 73 votes
10y
Originally posted by @Stone Teran:

I've never understood the definition of millionaire. Is it a million in assets, a million in cash or a million in assets less liabilities?
Technically speaking, you would be a millionaire once your net worth reached or exceeded $1 million (so then this would mean your assets minus liabilities).
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David Hays
Investor · Malaga, Andalucía · Member since 2014 · 150 posts · 73 votes
10y
Originally posted by @Amit M.:

well actually $6.4 million according to this Charles Schwab wealth report on the San Francisco Bay Area. Which matches my sentiment that you need about $5 million to begin feeling like a true "millionaire", which I define as being independently wealthy; having FU money to do what you want, etc. (Guess a million dollars isn't what it used to be!)
It's an interesting study:
https://aboutschwab.com/images/uploads/inline/Charles_Schwab_SF_Bay_Area_Survey_Full_Findings.pdf
See, I think this definition of "FU money" is 100% dependent on context and lifestyle choices. Obviously what's required to maintain a certain lifestyle in San Francisco isn't the same as in Raleigh, or Madrid, or Tokyo... I can tell you with utter certainty that $1 million USD would easily equal "FU money" to me, but then again, I guess I qualify as one of those "lifestyle investors" I've seen mentioned around here.
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Michael Delpier
Investor · Houston, TX · Member since 2015 · 176 posts · 121 votes
10y
I can remember being 20yo and thinking I was super rich because I had $10K. A million was well outside my belief of what I could obtain in my life. That belief has changed.
Growing up in the SF area, it was possible to save your way into a down payment for a house. I don't really think that is possible anymore. Hard to save 20% of $1.5M for a starter home. It is even hard to save 2.5% when you are paying $3500/mo rent far a small apartment.
For me, FU money is the ability to pay for my lifestyle and still have the ability to grow all from passive income. This would give me the ability to say FU and still live without my current career. Saying FU has a tendency to burn bridges. But I really like my career, so doubt I would say that anyway.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
10y
In the Midwest you need considerably less money to have a roof over your head. It's all about being happy. If you can be truly happy, it doesn't matter where you live, what kind of car you drive, or how much money you have. It's hard to be happy which is why many people long for "stuff" to fill the void.
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Justin B.
Investor · Gaithersburg, MD · Member since 2013 · 660 posts · 441 votes
10y
FU Money is simply when you can say FU to anyone you want and not have to worry about it effecting you negatively financially. I'm sure someone somewhere has written an equation that will help you figure out what your FU number is. :)
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James MasottiPro Member
Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
10y
For me I think my number is something like $1.2-$1.7 million. I'm in Southern New Jersey...definitely not as expensive as SF, SoCal, or NYC...but not the cheapest either. This is based on the idea of owning 15-20 rental properties free and clear. With that I would have something between $7500 and $14,000 of passive income a month. This most definitely would allow me to live the lifestyle that I wanted off of the passive income I was generating. I could absolutely see where 2x this amount at a minimum would be needed to feel the same way in SF, SoCal or NYC
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
5 million your smart enough to learn how to do very conservative HML.. at 12% apr that's 600k a year minus tax' nets you 400k ish... can live most places on 400k a year... even bay area.
but it sure seems like the more you make the more you spend.
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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
10y
@Jay Hinrichs lifestyle inflation is the American motto. Would be appropriate if it were on our currency!
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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
10y
Is this any different than NYC? I think they asked the wrong question(s). With fixer-uppers in the Bay area at nearly $1M, the question to ask is not "At what level of personal net worth would you say a person in the San Francisco Bay Area could be considered financially comfortable?" but "Excluding your residence... At what level of personal net worth would you say a person in the San Francisco Bay Area could be considered financially comfortable?" I'd bet most respondents are not Accredited investors which requires net worth over $1M excluding your primary.
At $5M Net Worth, I would strive to have a taxable income of $0 and work on building net worth rather than taxable income. Not hard with depreciable assets like real estate. My 2 cents.
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Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
10y
Originally posted by @Account Closed:

Its because of artificially low interest rates that retired people and savers are being screwed over to support the wall street and housing bubbles. I can still remember CD rates of over 5% prior to the 2008 crash. If you could safely generate 5% then you can generate a risk free $50K per year from $1M. Now you are lucky to get 1% and can only generate $10K from that same $1M. And you need $5M to get the same $50K income. Thats why $5M is the new millionaire!
Very well put! I haven't seen you Anish posting on BP much recently. After having lived in Hawaii for 5 years, although its been an absolute blast, the overall limited/lazy mindset of MOST of the folks here has me considering the Bay Area to settle down in the future. Then I heard about the (unfavorable to men) sex/dating ratios in San Francisco. For all you Bay area-ites, any thoughts on this?
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Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
10y
Originally posted by @Dawn Anastasi:

In the Midwest you need considerably less money to have a roof over your head. It's all about being happy. If you can be truly happy, it doesn't matter where you live, what kind of car you drive, or how much money you have. It's hard to be happy which is why many people long for "stuff" to fill the void.
Agree 100% Dawn. I havent noted any inherent happiness increase past earning $75k/year, if I'm being totally honest. 90% of my happiness came from internal and external frame control. I think Seneca and other Stoics should be required reading for investors on BP.
For instance, a weekend a month (1-2 days) just wearing the same t-shirt and jeans, eating rice and beans for every meal, and not using a cell phone, while repeating to yourself "is this the life I have so feared?". Doing this ironically brought me more money and happiness. :)
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
But when you snag one she's a real millionaire!
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Cody Barrett
Phoenix, AZ · Member since 2015 · 345 posts · 138 votes
10y
I would be doing just fine with 6 figures here in Racine lol.... Let alone 7...
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Bryan Hancock
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
10y
The generally accepted SWR for passive investing is 4%. As someone mentioned above this is $200k/year. You can live very well on far less than this in many areas of the country. The Bay Area is an outlier and is used to make for a good article headline.
The median household income is just over $50k/year. So for at least half of the population they would be free from trading their time for money with $1.25M in equity, which is not much more than $1M.
A million dollars is still a lot of money. There really isn't anything significant about this figure though. The wealthier I get the less I care about money and the more I realize that my time is my most important asset. At some point making money becomes pretty easy too and the money you have amassed starts to make money without a whole lot of extra labor imputed to given investments.
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Dawn BrenengenBusiness Member
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Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
10y
I could live off the income generated by $1 mil if my house was paid for. I wouldn't WANT to do it, though. I have a feeling I will be spending more money in retirement, not less. So, I'd like to replace my current annual income minus my current annual retirement savings with passive income before I'll feel ready.
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Yung Hung
Rental Property Investor · Raleigh, NC · Member since 2015 · 33 posts · 12 votes
10y
Usually you would go to a cheaper place to retire versus a more expensive one, the world is a vast place, I'm sure you can find a place to retire just as nice as the Bay Area in other countries/regions/places. Don't just follow the "hype" :)
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
10y
Originally posted by @Jay Hinrichs:

....but it sure seems like the more you make the more you spend....
Agreed. The needle always moves.
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