Millionaires Club

mikeBOS · Post by **mikeBOS** » Wed Jun 22, 2011 3:50 pm

I think I will likely, eventually, be a millionaire (perhaps multi) simply because my withdrawal rate (WR) is lower than my return and since I'm so young the money will just pile up on itself as my WR as a percentage of principal gets lower and lower each year so it piles up faster and faster. I think Jacob mentioned once that he expects something similar to happen with him.
Since some of us are retiring around 30 it seems there's an opportunity, if you can get your WR down below 2-3%, to really let compounding interest do its thing so that when we're in our 50's, 60's and up, money will be coming out our ears.
Anyone else see this as a likely scenario for them?
One thing I kind of have an itch to do is get a pilot's license for small airplanes and perhaps helicopters. But at around $35k for the two, plus the costs of actually using them, it's not a very ERE-compatible hobby. So I sort of just resigned myself to not bothering with it. But then, when I reminded myself of this compounding money, I figured, heck, I can do it, I just have to wait until I'm in my 50's or so. That is, if the doomers are wrong

tjt · Post by **tjt** » Wed Jun 22, 2011 4:37 pm

I actually just passed the 7-digit barrier, although I'm still working. My goal is 1.2M. At that point, I do have the same goal as you, to let compounding interest do it's thing and watch the total assets go up, not down.
In electrical engineering there is an expression called "thermal runaway," where an event occurs that heats up a component. The heat creates a positive feedback loop that causes the event to get worse, thus causing the component to get even hotter. And so on, until it goes up in flames... That's my goal with my savings, to reach a point "asset runaway." Given my conservative financial nature, I feel like that's what it will take for me to pull the trigger on ERE.

Post by **jacob** » Wed Jun 22, 2011 6:14 pm

In vernacular astrophysics, we call that "going *BOOM*"

My WR is currently 2.17%. I'll be a millionaire in 2023. Obviously this depends a lot on what the market does between now and then. Viscerally, I don't think I'll "feel" the runaway until my income is big enough to match my old savings rate. It's hard to get a feeling for capital gains because they are so volatile.
It is kind of crazy. All that money and no point in using it.
PS: When I moved over here I looked into the whole piloting thing---we have a local private strip (and two RC strips). Many people in the area are into flying. A small license (daylight, no clouds) will run about $5000. Okay, piece of cake. A small plane is maybe $50-100k. Okay, no problem. Airplane fuel is, however, twice as expensive as regular gas and mileage is spectacularly bad. AAAAAARGH!!! One of the skippers I sail with took up flying in his later years. He stopped shortly after a harrowing landing enlightened him about his mortality. The other skipper used to fly gliders in his younger days. I think if I was to get into flying, I'd probably go with gliders. Philip Greenspun is an EER who took up flying http://philip.greenspun.com/

mikeBOS · Post by **mikeBOS** » Wed Jun 22, 2011 7:07 pm

I've been reading Greenspun for years. If I were to take lessons I'd probably go to his flying club. It's just down the road and, from what he's written, they seem to do good work.
He ER'd the easy way, - built a $20M software company from nothing in two years. He didn't whittle away at expenses like us plebs

. Though, to his credit, he knew enough to hang things up and enjoy life rather than trying to build a $20B company.

Mo · Post by Mo » Wed Jun 22, 2011 8:01 pm

In superconducting magnets we call that a quench.
http://en.wikipedia.org/wiki/Supercondu ... net_quench
I think an awful lot of people will end up being millionaires, due to inflation. I doubt it will carry the weight it once did. For those of us in our 30s, the millionaires of our childhood actually had around 2 million dollars in today's dollars. Also, some use the term millionaire for only those who have $1mil excluding home equity, whereas others include the home equity which includes a lot more people.
Still once one gets onto the "asset runaway" path it's a good thing and very significant achievement.

Freedom_2018 · Post by **Freedom_2018** » Wed Jun 22, 2011 9:04 pm

As long as we don't always assume simple liner extrapolation of asset growth rates (and similarly cost of living etc.)..many of us should do quite OK.
The big thing in my (sometimes paranoid) mind is that the future can be lumpy/discontinuous and extrapolating returns linearly is kind of dangerous (more comfortable using multiple scenario simulation like firecalc).
Also, I would prefer to be more diversified than just one asset class (money)..so being somewhat self sufficient in living quarters, food and learning useful life skills would be equally important.
Oh..and I remember reading Philip Greenspun when I was very enthusiastic about SLR photography.

JohnnyH · Post by **JohnnyH** » Thu Jun 23, 2011 1:53 am

My goal is 0% withdraw until [if?] I have kids... I'll work PT, consult, re-sell, whatever it takes. Hey maybe I'll even get me on some welfare/foodstamps and get back some of that fortune in taxes I put in!

If I can keep my hands off entirely for a decade I'll be sitting very pretty.

Neil Imrie · Post by **Neil Imrie** » Thu Jun 23, 2011 3:57 am

Once upon a time a millionaire was a rare and exceptionally wealthy individual. Nowadays millionaires are not hard to find. I reckon the modern equivalent is at least 10 million.

mikeBOS · Post by **mikeBOS** » Thu Jun 23, 2011 4:26 am

Once upon a time a millionaire was a rare and exceptionally wealthy individual. Nowadays millionaires are not hard to find.
10.1M USD Millionaires in a world of almost 7 Billion.
That's 1 in 690,000 people. I don't know what your idea of rare is, but that's mine.

dpilot83 · Post by **dpilot83** » Thu Jun 23, 2011 5:19 am

Not to hijack the thread, but when you guys get to a certain point are you planning on diversifying your investments more or do you feel you're already pretty well diversified?
I would imagine I'm taking a totally different approach than the majority of you. All my eggs are in the agriculture basket. I farm (currently renting most of it from land owners), and with the money I make, I buy land and farm that land. When I retire I plan to rent that land out for my income.
To keep this post closer to relevancy, I'll say that agriculture has swings in it so it's hard to predict, but I don't think a net worth of a million 3 years from now is outside of the realm of possibility. 3.5 years ago I had a net worth of somewhere around -$25,000.

Neil Imrie · Post by **Neil Imrie** » Thu Jun 23, 2011 5:26 am

Not sure where your got your 10.1 million figure from but I suspect those figures might be out of date. Based on the demise over the US$ over the last few years I think that you'll find the world (especially asia/pacific) has produced many new millionaires.

Admittedly there are many parts of the world where millionaires are thin on the ground but you don't have to look far in the developed world.

I work in a high school in a rural area with a staff of about 50. 5 of these would be 'spenders' who live hand to mouth and probably have a negative net worth. 5 would be 'savers' who own a couple of rental properties, have a few shares and have basically no debt. The others are somewhere in between. The 5 'savers' are all millionaires, just ordinary guys who know how to make their bucks work for them.

dragoncar · Post by **dragoncar** » Thu Jun 23, 2011 6:14 am

Plus, the 10.1 million figure excludes home value. I don't really see why people always exclude home value... someone with a paid-off 5 million dollar home and nothing in the bank is still worth a lot more than someone with a 200k home and 1 million in the bank.

McTrex · Post by **McTrex** » Thu Jun 23, 2011 9:29 am

True, but that money doesn't work for you.

dragoncar · Post by **dragoncar** » Thu Jun 23, 2011 1:50 pm

A 5 million dollar home can pay dividends too -- those kinds of places can often be rented out for events, filming, photo shoots, etc. Not to mention capital appreciation. Real estate is sometimes a good investment and sometimes a bad investment, but that doesn't mean the money isn't working for you (i.e. if you invested in the stock market over the last decade and came out about even, would you say your money was "working for you"?).

mikeBOS · Post by **mikeBOS** » Thu Jun 23, 2011 4:49 pm

Regardless of the ultimate dollar figure, the "runaway savings" effect can be significant for people who reach FI in their 20's.
Which is a little funny. Because we will be taking our long-distance hikes, our sailing trips, and living the life of leisure for 35 years while our peers work themselves to the bone. Yet, in most circumstances, we will still come out of it at the end with more money, and due to this effect, it will on average, likely be far far more money than the typical 65 year old has managed to save.

CestLaVie · Post by **CestLaVie** » Sat Jun 25, 2011 10:19 pm

shanermack · Post by **shanermack** » Sat Jun 25, 2011 11:58 pm

I'm in the anti-millionaire club! I wonder, with U.S. inflation at 3.6% for the month of may, a present, strong upward trend month over month and a gazillion investment articles about impending hyperinflation as well as the near 16% increase in food prices at the consumer level since January, where is the dollar headed? Doesn't look good to me, especially in light of recent political interference and the unadulterated printing of trillions of dollars to paper over national debt. The energy index is up over 21% in the last year also. The list of runaway price increases go on and on.

Oh, and did I mention that the dollar is VERY likely to lose its reserve currency status...and soon!?!?

I'm pretty sure that being a USD millionaire is about to lose much more of it's significance. The numbers speak clearly for themselves and I hope that all the paper millionaires out there are diversifying... Another thing to consider: gold prices are trending downward this month and the intermediate outlook isn't good there either.

webberchoked · Post by **webberchoked** » Sun Jun 26, 2011 11:41 am

im basically in the millionaire club. my life hasnt changed since i passed 300k-ish liquid networth.

Benjamin · Post by **Benjamin** » Thu Jul 07, 2011 9:27 pm

@dragoncar:

I would be inclined to exclude home/property value from my calculations simply because it is not liquid. Securities, for example, are much easier to convert back into liquid cash should the need for that much money in short order arise. Before you can do the same with your home, there are many more considerations.

elai · Post by **elai** » Fri Jul 08, 2011 6:59 am

If your interested in flying, but don't like the fuel prices, you can try an electric ultralight. (2 seater). It wont go as fast, wont go as far, and wont refuel as quickly but for the same distance energy costs around $5 vs $150:
http://www.electraflyer.com/
But unless you live next door to an island and you live on the mainland and your family lives there, airplanes aren't worth it until you get something like a microjet like a Cessna Mustang ($2 million) or something that can fly at 400+ knots. And even then it will just be a bit faster. Flying commercially is almost always faster, cheaper and quicker.