by What do you think of when you hear the word millionaire? Do you see a guy driving a Lamborghini through Rodeo Drive? Do you picture a spoiled brat belittling her butlers? There are so many millionaire myths out there. This article will once and for all clear up all of the millionaire myths.
Contents
Myth #1: Millionaires Are Rare
There are 18.6 million Americans who are millionaires (in U.S. dollars).
The adult population in the United States is 245 million.
Assuming the number of juvenile millionaires is negligible, then approximately 7.6% of adults are millionaires.
That means that roughly 1 in 13 US adults are millionaires! If spouses are considered in the millionaire count, then no less than 1 in 26 US adults are millionaires. Either way, that doesn’t sound very rare to me.
Myth #2: Millionaires inherited their wealth
In a survey of 10,000 people, 74% of Millennials and 52% of baby boomers believe millionaires inherited their money. Source: Chris Hogan 360
However, In the book The Millionaire Next Door, Thomas J Stanley surveyed over 1000 people who each answered 249 questions. The author found that 80% of America’s millionaires are first-generation rich, meaning they did not directly inherit their wealth.
Surprising right? That means only 1 in 5 millionaires inherited their wealth. 4 out of 5 made their money through a combination of salaries, diligent investing, and entrepreneurship.
Myth #3: Millionaires are young tech entrepreneurs
The news loves to cover stories about young tech millionaires/billionaires.
Mark Zuckerberg, CEO and cofounder of Facebook, became a billionaire at age 23 after the company’s IPO.
Even Spiegal, Snapchat cofounder and CEO, became a billionaire at age 25, with the increasing value of his Snapchat shares.
Elon Musk became a millionaire at age 27 when he sold his software company. Source: The Ladders
However, these are exceptions to the rule. The average millionaire is not young at all. According to Statista, most millionaires are 60 years of age and older. “Young” is a relative young, but we can all agree that 60, by most metrics, is not young!
Crazy fact to think about: Billionaire Warren Buffett made 99.7% of his money after the age of 52! Source: Medium
Myth #4: Caucasians Are More Likely to be Millionaires
This one could be debatable, but based on very specific data, this one appears to not be true.
People think that caucasians are more likely to be rich because they are the majority in the United States, they held presidential office each and every year (including Barack Obama was one half caucasian), and hold a disproportionately large percentage of Congress seats compared with the overall U.S. population.
However, examining a subset of the population: middle-aged, college-educated Americans, it appears that Asians have the highest odds of becoming millionaires according to 2016 Bloomberg data.
Keep in mind that it does not examine the entire American population. For example, Facebook Founder and billionaire Mark Zuckerberg would not be included in this survey because he is neither middle aged nor college educated (he dropped out of college).
Furthermore the study examines the odds of being a millionaire (meaning just ONE million), but what are the odds of the TRULY affluent, such as MULTI-millionaires or BILLIONAIRES?
I decided to probe a little deeper and conduct my own research. This is what I found:
According to a 2013 Ipsos Affluent survey, 76% of American millionaires were Caucasian, while 8% of American millionaires were Asian.
Furthermore, according to Pew Research examining the year 2013, 62.4% of the American population was Caucasian vs. 5% Asian.
That means that Caucasians had a millionaire to population ratio of 76/62.4 = 1.22
And Asians had a millionaire to population ratio of 8%/5% = 1.6
Therefore it does appear that the odds of being an millionaire are higher for Asian Americans than Caucasians. Of course there can be a significant amount of various factors for why this is true, which I won’t get into here.
Myth #5: Members of Congress Are Financially Similar to The Average American
More than half of those in Congress are millionaires, according to personal financial disclosures. The median net worth of members of Congress who filed disclosures last year is just over $1 million according to Open Secrets.
It would be safe to assume that their financial disclosures include household net worth since they may be filing jointly with their spouses.
For comparison, the median net worth of the median American Household is about $176,000 according to Business Insider.
Therefore, the median member of Congress’ household has a median net worth over 5X that of the median American household.
Do keep in mind that age and education differences could play a factor in the disparity.
Myth #6: China has more Millionaires than the United States
This is far from the truth. The U.S has 40% of the world’s population of millionaires, whereas China only has 10% according to Credit Suisse. That means the U.S. has about 4 times the amount of millionaires than China. And this is even though China has a population about 4 times as much as the U.S. So adjusting for population, there are 16 millionaires in the U.S. for every 1 millionaire in China.
Myth #7: China Will Soon Have More Millionaires than the U.S.
China is increasing the number of its millionaires at a rate faster than the United States. China is projected to increase the number of its millionaires 55% from 2019 to 2024, whereas the U.S will increase its number by only 23% over the same period. However, in 2024, the U.S. is still projected to have nearly 3x the number of millionaires than in China.
China is not expected to have more millionaires than the U.S., at least not in the next decade.
Myth #8: Millionaires Spend Like There’s No Tomorrow
Pass me the grey poupon!
You might think that millionaires are routinely ordering caviar and popping bottles of champagne. Well you’d probably be wrong.
According to a survey of 10,000 millionaires, the average millionaire spends $267 monthly on eating out. On average, Americans spend more than that, at over $280 per month according to Dave Ramsey.
According to the book The Millionaire Next Door, half of millionaire respondents had not spent more than $399 on a suit, $140 on shoes, or $100 on a watch. These numbers are in 1996 dollars.
Adjusting for inflation, in 2020 dollars the same sentence would translate like this:
Half of millionaire respondents had not spent more than $661.90 on a suit, $232.24 on shoes, or $165.89 on a watch. Source for calculating inflation: US Inflation Calculator
That’s pretty surprising! I’m not a millionaire (yet) but I’ve spent more than that on shoes… Oops!
It goes to show you that many millionaires don’t actually spend ostentatiously, contrary to popular belief. They sure know how to save money!
Putting it All Together
How many of these millionaire myths did you believe before I busted them?
Maybe your belief in these myths were a self-limiting prophecy, preventing you from reaching your financial goals.
Maybe your belief in these myths made you cynical about certain demographics or countries.
Whatever the case may be, I hope learning the truth has helped inform you and change the way you think about millionaires.
Because it turns out that:
- Millionaires are not that rare. That should tell you that it is exceedingly achievable, rather than just a pipe dream.
- 80% of millionaires did not inherit their wealth. That means you don’t need to sit around and wait for someone to bestow money on you. You can go get it yourself!
- It is never too early, or late, to get on your path of becoming a millionaire. Most millionaires are 60 years of age and older.
- The best chance to become a millionaire in America is not solely reserved for the majority racial group.
- Households of Congress members have a median net worth over 5X that of the median American household.
- The U.S. has far more millionaires than China.
- China will not surpass the U.S. in the number of millionaires in the near future.
- Millionaires spend less money on eating out than the average American.
Let me know you thoughts in the comments below!
Which of these busted myths surprised you the most?
