Personal Updates

Week 8: What Does Millionaire Actually Mean?

I realize because the entire focus of this blog is becoming a millionaire by 25, I should clarify what millionaire actually means to me. Over the past few decades, the word has migrated from its original definition.

Millionaire originally meant somebody who had a net worth of over million dollars. That means if you add up all your assets and liabilities, you would have over a million dollars.

Say you own a primary house that is worth $500,000, a secondary (investment) property worth $300,000, and a car that is worth $100,000. You also are long in multiple mutual funds and own bonds. If you add these, they are worth $500,000. Let’s also say that you had $20,000 of cash in your bank account, and the resale value of all of your items is another $20,000.

However, you have a mortgage out on your second house, and you still have to pay off $250,000. Let’s also say that you have $50,000 in student loan debt. These are liabilities, would you subtract from your assets to get your net worth.

So, your net worth would be $1,140,000, and by traditional standards, you’d be a millionaire.

(It’s worth noting that some economists say not to include your house when calculating your net worth. I disagree with this, as do many, and when calculating net worths on this blog I will be including homes. However, I will be subtracting mortgages, as they are liabilities.)

Some argue that these assets should not be included if you were trying to figure out if you are a millionaire because they are illiquid (It’s a difficult to sell them and get cash. Homes and cars are considered liquid assets, while stocks mutual funds and bonds are considered illiquid.) Their argument is that to be a millionaire, you need $1000000 in liquid assets, like stocks or cash.

Even more radical, is an argument that some politicians are using (for the “millionaire tax”), and to be considered a millionaire you need to be making a million dollars a year. This side state that your network doesn’t matter anymore, because of inflation.

On this blog, when referring to a millionaire, I mean the first definition. To become a millionaire by 25, you have to have a net worth of $1000000. That means, that your assets minus your liabilities need to equal 1 million dollars.

It’s difficult enough to become a millionaire, and when you add on these various limitations, it becomes so much more difficult.

Here’s a short brief on how I plan to achieve this goal.

I plan to grow this blog, my Instagram and my YouTube enough to have a vibrant community of like-minded people. Then, I can offer valuable products that aid you on your journey to millionaire by 25.

As soon as I have enough capital, I plan to begin investing in real estate and land. While I’ll probably need to take out mortgages, which will cancel out the home’s value at first,

I hope to buy in areas where appreciation is strong, and I can do small products to boost the home’s equity. Equity is included in net worth.

I’m also going to continue investing in the stock market, mainly through mutual funds. This will provide a nice passive growth of capital.

I’m confident that if I put in the work, invest wisely, and stay focused on the goal, I can easily achieve millionaire by 25.

Happy Investing,

James

 

PS:

Let me know what you think about the blog, the Instagram, and the YouTube in the comments below. I always like to hear from you all.

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