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There is a publishing sub-industry devoted to books about becoming a millionaire.
There is A millionaire teacher, The Millionaire Next Door, The Fastlane Millionaire a The Millionaire Mindsetwhich should not be confused with it Secrets of the Millionaire Mindset or Your Millionaire Mindset. Also, The ChatGPT Millionaire, Baby Steps Millionaires, Seventeen to a Millionaire, From Zero to Millionaire a The Millionaire Master Plan. We could go on and on—Amazon’s book 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 who write, edit and publish personal finance books. But the status of today’s millionaires 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 a millionaire is having a net worth of $1 million or more, meaning your assets exceed your debts and other liabilities by seven figures. The 2023 Global Wealth Report by the Swiss bank UBS said the number of millionaires in Canada, measured in US dollars, was just above two million. Wealth inequality is growing, yet the report predicts a 63 percent growth in the number of millionaires by 2027.
In Vancouver, Toronto and surrounding areas, the average home price is above $1 million. If you own a home in these cities without a mortgage and other debts, boom, you may be 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 that 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 remains central to wealth accumulation across the life cycle,” the report says.
Having $1-million in liquid investments seems like a higher and more practical level of millionaire status, given how difficult it is to get hold of real estate wealth and put it to work. Beyond selling a property, you can rent it or borrow against it at rates that are quite high today. The interest rate on a home equity line of credit could currently be around 7.7 percent, while rates on a reverse mortgage range from 7 percent to nearly 10 percent.
Even $1 million in investments has limited benefit. If you own investments that generate income at a rate of 4 percent per year, your annual pre-tax income on a $1 million portfolio would be only $40,000 per year. You could potentially reach $80,000 a year if you withdrew investment earnings every year in addition to income and didn’t want to touch your principal.
I asked financial professionals on LinkedIn what the word millionaire means today and I heard a lot about the limitations of real estate wealth. “There are a lot of retired ‘millionaires’ struggling to pay their bills right now,” wrote Brandon Yanchus, a certified financial planner.
“Your net worth on paper is worthless unless you have liquidity which seems to be the common problem today,” added mortgage broker Deren Hasip.
And then there is this piece of wit from Jeffrey Lamont, a financial adviser to 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 purchasing power of $1 million in 1988.
Cracking $1 million in net worth means you were lucky and made some good financial moves, even if one was just buying a house. But to qualify as rich today, you need to be a millionaire.
If you need some help elevating your game from millionaire to millionaire, Amazon’s got you. There is The Multi-Millionaire Mindset, Middle Class to Multi-Millionaire, 12 Secrets of Self-Made Multi-Millionaires and, of course, Multi-millionaire ChatGPT.
Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.
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