What Does a Millionaire Actually Look Like?

In reality, there is no one look for a millionaire. Logically, we understand this. However, the word does conjure an image doesn’t it? Taking a deeper look into this idea of a millionaire can be an eye opening exercise, that can ultimately inform how we manage and use our own money moving forward. Let us Investigate…

Okay, let’s be quick about this. Put the image of a millionaire in your head and hold it. What pops in right away?

Typically, I have a financial system that I run for my students throughout the year, and we do this exercise at some point in the first month or so.

If you are like me or my students, a certain image popped into your head at the mention of the word “millionaire”.

For us, typically it’s something lavish, perhaps involving yachts, clear blue water, and people sunbathing on the deck with their fancy sunglasses.

But then, shortly after, I override that image and come up with a completely different one.

My new image, I believe, is much closer to reality. Let’s take a look and figure out how it came to be. Then we’ll see what take-aways, if any, we can collect from the exercise…

The Stereotypical Image of a Millionaire

When I do the aforementioned exercise of envisioning a millionaire with my class, two things become abundantly clear. First off, the reality of our image is that the person that lives such a lavish lifestyle is WAY richer than a millionaire.

Being a millionaire these days, isn’t nearly as impressive. This is partly because the value of the dollar has gone down due to inflation. Having a million today just doesn’t have the same worth.

According to this inflation calculator I quickly found, $1,000,000 is the equivalent about $10,000,000 in 1989 when I was a young impressionable 10-year-old. Wow! That’s a 10X devaluation of the dollar in 23 years!

Another reason a million dollars isn’t quite as impressive is the fact that we are living in the age of information. Nowadays, we frequently hear about billionaires (1 billion is one thousand millions!) and the massive business transactions they make. This further demystifies the concept of a millionaire.

Still, despite all of this, the term millionaire still has weight to it. Which is why I’m using it in this post.

Getting back to our example, there is a good chance that a person living a lavish lifestyle spends like a millionaire, but isn’t actually a millionaire.

We see this a lot. People are constantly trying to “keep up with the Joneses”. Other people in their lives have all the latest and greatest, be it technology, cars, fashion, housing, etc. They want a piece of it too.

And while they can technically afford all of these things, it comes at a price. Most likely, by spending exorbitantly, they are foregoing their future savings. They are probably also adding many years to the time they need to go to work.

Personally, I would much rather have the precious commodities of “time” and “choice”. With the financial decisions I make today, I can get to a point where I have the choice to step away from work and use my time in a way I deem best.

And truthfully, I do NOT think I am sacrificing any happiness in the process. That’s the part that makes this fit so well for me. In fact, the knowledge that I am securing my future gives me peace of mind, reduces stress, and probably makes me happier.

If you are interested, I wrote a post on the danger of YOLO (You Only Live Once) purchases and why we do them. It digs a little deeper into what we are talking about here and gives practical ideas on how to alter this way of thinking.

Here is that post entitled “YOLO Purchases that Don’t Hurt Your Savings“.

A Real-Life Example from my Childhood

I’ll never forget a conversation I had with my parents after driving away from a house of one of their friends. I was probably 10 or 11 and I was definitely beginning to notice symbols of status around me. Noticing the luxury automobiles that others were driving was a favorite past time of mine.

At any rate, this house that we had just finished visiting checked all the boxes for me. First off, it was massive. Secondly, it was incredibly elaborate and everything was new. Third, it had a game room filled with all sorts of arcade games and pinball machines. Finally, and perhaps most importantly, it had two luxury automobiles, a Jaguar and a Mercedes, in the driveway.

I was impressed!

“Wow!” I probably proclaimed to my parents as we were driving away. “They are so rich! They must be millionaires!”

I remember my mother looking back from the passenger seat at me and calmly stating something along the lines of “Actually, no. They are not rich. They are currently having a lot of trouble right now with money… They may have to move soon.”

This just about broke my brain. These people had everything and here my mother was telling me that they were in financial straits? It didn’t compute and it probably showed by the look of confusion I was wearing.

Each chiming in, both my parents continued. They explained that one of the two had recently lost their job. More importantly, they explained that the family was living well above their means and spent every nickel they got.

That meant, when life threw them a curveball, as it is wont to do, they didn’t have the resources in place to absorb that impact. Now, they were left scrambling to get out of their credit card debt, pay their bills, and hang on, by a thread, to whatever belongings they could.

This had a huge impact on me and I wonder if my parents even remember it…

And just to be clear, my parents did not typically talk about the finances of others. Like a good teacher, they saw that teachable moment before them and chose to break that one code for the benefit of their child.

I’m sure they missed some moments along the way as we all do, but that one they absolutely nailed.

And getting back to the point, these folks were spending like millionaires, but it came with a very heavy cost.

Most commonly, this is called lifestyle creep, and I have a post entitled “Don’t Let Lifestyle Creep Eat Away at Your Savings” that may provide good value in this topic.

Now we’ve discussed this image of a millionaire that pops into our heads. We’ve also compared it to someone who simply spends like a millionaire. Moving on, let’s investigate what I believe a millionaire actually looks like!

What Does a Millionaire Actually Look Like?

0nce I override my initial image, a completely different one takes its place.

The new image is that person wearing a care-worn jacket they first purchased in the 70’s, driving around in an old Corolla that has well over 200,000 miles and is happily making their coffee from grounds that come in a bucket.

Why do I come up with this image you ask?

It’s because that’s what I believe is closer to the truth for most millionaires. In order to accumulate wealth, most people have to be careful with their money. They string together thoughtful financial decisions, one after the other.

Over time, these seemingly trivial decisions can add up to huge amounts.

Then, by the time they actually do have this accumulated wealth, their habits are so deeply engrained, that they opt not to partake in the lavish lifestyles we sometimes envision.

For an insight on how to establish positive habits in your own life, read this review I did on the book Atomic Habits.

This is why they still wear their coat from the 70’s. “It still works fine. Why change it?” they reason.

This is why, they drive the old Corolla with 200,000+ miles on it. “It still gets from A to B, with no trouble. Why mess with success?”

In the meantime, the average person has gone through 10 jackets, and is on their 4th car in the same amount of time.

The differences in spending can accumulate quickly.

If you’re interested in saving like these hypothetical millionaires, I’ve put together a post called Now or Later? – 5 Money Saving Tricks that Really Work.

People are naturally skeptical that these concepts can result in becoming a millionaire, but the math doesn’t lie. If you spend thoughtfully, invest wisely, and give it time to do it’s work, you can be a millionaire many times over.

I’ll say this many times in these posts, and I’ll say it here as well. I am NOT a financial expert in any way shape or form. I’m just a teacher from a family of simple investors and have a newly reinvigorated appreciation for the profound impact these ideas can have on our financial outlooks.

On this site, I tell you my plan for my own money, but you should only do what you think is right for your money.

Now that that disclaimer is out of the way, let’s take a quick peak at the math of it all.

The Math of Becoming a Millionaire

You know how the conditions for creating diamonds is something like, heat, extreme pressure and lots of time?

I think the millionaire formula is similar. Saving, investing and time are the three key ingredients as I see them.

In other words, if you save well, invest wisely, and give it time to do its magic, you can become a millionaire in less time than you might suspect.

Personally, I have no designs or aspirations to become a millionaire. I just want to reach Financial Independence. When I get to a certain total of savings (TBD, but probably somewhere in the $500,000 range) I plan to live off the interest it provides from investing AND whatever meager pension I receive. I can also dip into the savings I’ve accumulated if need be.

I wrote a post entitled Retire Early on a Teacher’s Salary – An Outline, that details, more specifically, how I plan to have the option to retire in 5 – 9 years.

But “millionaire” has more cache! So let’s take a look at what it would take to become a millionaire. Below I am going to create a table showing how much you would need to save/invest each year in order to become a millionaire in a fixed amount of time. I’ll start at 5 years (which should be completely unrealistic) and keep adding increments of 5 years until it looks entirely realistic.

To do this, I’ll assume the 8% market return that the market has returned since it’s conception. Then, I’ll just plug the numbers into this compound interest calculator that I like from Nerdwallet. That way I can show you much was actually was actually invested (principal) vs. how much was earned via interest.

Spoiler alert: The impact of the interest will be more pronounced over time.

Here’s the table. It calculates how much money needs to be invested per year in order to become a millionaire in a fixed amount of time ( in increments of 5 years).

Take a look and then we’ll process it together. What jumps out at you?

Years to become millionaire	Total invested per year	Total principal	Total Interest
5	$157,850	$789,350	$210,924
10	$63,950	$639,600	$361,145
15	$34,100	$511,600	$488,676
20	$20,250	$405,100	$596,181
25	$12,100	$302,600	$699,294
30	$7,750	$232,600	$773,419
35	$5,050	$176,850	$832,685
40	$3,300	$132,100	$872,723

Processing the Millionaire Table

At first blush, the first two rows feel completely unrealistic on a teacher’s salary.

This makes sense, because you are trying to achieve this high figure in a short amount of time. That means you have to add a lot each year, and it doesn’t give the ever-magical compounding interest time to take effect.

Around Row 3, however, things start to get interesting really quickly…

Now, all of the sudden, 15 years from now, you are telling me I can be a millionaire if I put away $34,000 per year?

Sure, that’s still a tall order, but it’s not altogether impossible. I’ve read examples of people saving 70 – 80% of their income. 70% of my own income, where I stand now, gets me above that number if I play everything right. Especially if I max out my pretax accounts (403b, 457, and HSAs are examples of this).

Mind you, I do not want to live that lifestyle. That is too much of a strain. If you’ve read my post called “Improve Your Savings Rate Drastically“, you know that I’m aiming for a much more comfortable savings rate of 40%. While we’re on it, give that post a look if you are interested in seeing the massive, life-changing difference between even a 40% savings rate vs. a typical savings rate that is conventionally recommended.

One more benefit uncovered in that post is the idea that if you are increasing your savings rate, you are spending less. And if you are spending less, you need less to get by. And if you need less to get by, you can retire earlier! See how that works for you many ways?

Getting back to the table, there is good news for me. I don’t even feel the need to become a millionaire. My Financial Independence number is about half of a million (the way I see it now). My plan is to live off of the interest of my investments, plus my pension and the actual savings if need be.

So, given that fact, I only need to save half of that amount (about $17,000) over 15 years I’m quite content. Now, we’re really talking!

And as we continue down that table we see the yearly total invested go down. This is for the obvious reason that it’s spread out over more years so you would have to invest less per year.

But the potentially less obvious reason is that the amount of interest we are accumulating is going up. That is because, through the magic of compounding interest, our investment, given time to work, is building on itself.

The longer you give it to work, the more interest you accumulate (always assuming the market continues to go up).

By the time you get to 40 years, you have only actually put in approximately $132,100. The rest is interest!

And if you are looking at the table feeling daunted by the amount of time, remember that the conventional wisdom for teaching is that you stay in for 30 years to collect your full pension.

After burning out last year, I took that off the table for myself. I’m 12 years in at the time of writing this and I estimate that 5-9 more years to retire (vs 18 more years to get to 30) is well within reach. That is far less daunting to me!

If you are interested in learning about this “magical” concept of compounding interest and how to put it to work for you, I wrote a post entitled “Teacher’s Pet – Compounding Interest” for your consideration…

Now, let’s put a bow on this one and bring it all together.

In Summary

To review, we’ve seen that, due to inflation, being a millionaire these days doesn’t have the same gravitas because the value of the dollar has gone down considerably.

We’ve also explored the difference between actual millionaires and people that spend like millionaires. In the case of the latter, and the friends of my family, spending like a millionaire can not only put you in a tight spot in the present, but it can also add many years to your mandatory work sentence.

Next, we looked at what my new image of a millionaire is. This is a person that has built the habit of spending sparingly and saving consistently. Over time, especially if buoyed by investing, these small daily wins can add up to huge totals in the long run.

Lastly, we looked at the math of becoming a millionaire, and it appeared far less daunting than most folks might imagine.

In the end, we all make decisions that are best for us. My general premise is that I hope to learn to forego some of the creature comforts now, invest wisely, and take care of my future self down the road.

Having the option to access time and have agency (to use an educational buzz word) in the process, are of great value to me and well worth any short-term “sacrifices” I make today.

I know I’ve given you a lot of links today (no pressure!) but I would be remiss if I didn’t add one on investing. This post, “Investing Basics Made Very Simple“, gives insight in how I plan to invest in an easily accessible manner. Give it a look if you are intrigued by this concept and are looking for an inroad.

As always, thank you all for reading. Do any of you have a vision of a millionaire that you want to put in the comments below? Any other thoughts? All ideas are welcome (within reason!). Also, please feel free to reach out and contact me any time!