Comments on: What Kind of Millionaire Do You Want To Be?

By: eFIPO.com » eFIPO’s Blogs Of The Week #11-End of Year

eFIPO.com » eFIPO’s Blogs Of The Week #11-End of Year — Sun, 31 Dec 2006 21:23:33 +0000

[...] My favorite post this week – What Kind of Millionaire Do You Want To Be? [...]

By: » Weekly Blog Roundup, Holiday Edition on Consumerism Commentary: A Personal Finance Blog

Sun, 24 Dec 2006 15:35:56 +0000

[...] What Kind of Millionaire Do You Want to Be? Blueprint for Financial Prosperity has a frugal tip: rent economy cars and avoid airports. FiveCentNickel enumerates the various versions on Monopoly. [...]

By: Keith Cash

Keith Cash — Sat, 23 Dec 2006 08:51:07 +0000

I agree with Sam. Both are ok.
It will be nice to have millions in the bank when we hit 55. Then travel around the world in a boat. ( a dream )

Cheers

By: sam

sam — Fri, 22 Dec 2006 20:33:49 +0000

Either kind would be fine with me

By: Anonymous

Anonymous — Fri, 22 Dec 2006 03:31:46 +0000

Speaking of inflation, one of the big news items a couple of days ago was the fact that the PPI (Producer Price Index) jumped 2% last month. That’s not an annualized 2%. It was 2% in one month. Although I don’t expect it to continue at that rate for long, compounded over a year, that’s a 26.8% inflation rate.

I’ve been expecting this for a while. The Fed has stopped publishing some of the measures of the money supply. I don’t think it is a deliberate conspiracy to hide the fact that the government is printing money. That would show up in the M1. However, not reporting the M3 will make it harder to track the effects of Fed policy.

The inflation rate is going up, and it is going to stay higher for a while. The talking heads are babbling about the PPI being artificially high because of fuel prices, or the end of rebates on 2006 car models, or whatever. I find that very interesting. Fuel prices should be a factor in the PPI, but I’m having trouble figuring out exactly how rebates to consumers play a role in it.

By: Russell Bailyn

Russell Bailyn — Fri, 22 Dec 2006 03:11:33 +0000

great post jlp. I find that explaining the need to save to people in their 20’s is like pulling teeth. If you can’t visualize your own retirement (or care enough to do so) you won’t be fully committed to saving. A good starting point would be a rise in the number of young people contributing to their retirement plans at work. But when you’re 25, what do you really think about? Having your own place, having a boyfriend/girlfriend, going out to eat, etc. I think 30 is when reality kicks in.

By: Mike

Mike — Fri, 22 Dec 2006 00:06:02 +0000

Good article. It makes my teeth hurt when I read articles talking about the miracle of compounding when it comes to saving for retirement, but no mention of the horrors of compounding when it comes to inflation.

Usually they say something on the order of “if you save $X / month from the age of 20 to 30 and then stop, you’ll have as much money at age 60 as if you wait to the age of 30 to start and then save $X / month until the age of 60″. Absolutely true (although they usually assume a high rate of return on your savings.) The reality is that your savings rate should not stay level, but increase along with inflation and your income.

By: JLP

JLP — Fri, 22 Dec 2006 00:04:09 +0000

BD,

Yes, they are monthly figures.

Also, thanks for the catch on the first graphic. I fixed it. That’s the problem with coping graphics (sometimes I don’t catch everything).

By: JLP

JLP — Fri, 22 Dec 2006 00:02:18 +0000

Enough Wealth,

That was the whole point to my post.

The term “millionaire” defines someone with a networth of one million dollars. True, a millionaire back in 1900 was significantly “wealthier” than a millionaire is today due to inflation. However, both are still millionaires.

My point (maybe I didn’t make it clear) was that lots of people have the goal of becoming a millionaire. However, if their goal takes decades to come to fruition, their million will be worth significantly less than it would be worth today.

By: Enough Wealth

Enough Wealth — Thu, 21 Dec 2006 23:49:14 +0000

Yeh, well as a 45-yr old I think your idea of a “true” millionaire being $1,000,000 in 2006 dollars is a hoot.

People were talking about “millionaires” when I was a kid, and if your inflation adjust $1m of 1970 dollars into 2006 dollars you’ll get a shock.

I’d say that to update how much is needed to be a “true” millionaire you’d have to look at when the term “millionaire” first came into common use – perhaps around 1900 (eg. Rockerfeller et al). If so, todays “true” millionaire probably needs to accumulate $100m in 2006 dollars to “qualify”. (I haven’t bothered looking up the inflation figures for last century, so it could be $50m or $1b).

It’s more important to work out a meaningful goal, than to try to “define” what a true “millionaire” is. For example, work out what income you think you need to live off, work out a realistic ROR on an investment lump sump that would provide that amount indefinitely, and make that your “target”. Then you just need to inflate that target by the CPI each year to keep your goal in sight.