By: The American Academy of Estate Planning Attorneys
Last year (2009), the number of households in the United States with a net worth of $1 million or more, grew by 16%, reaching 7.8 million. This is according to a survey by Spectrem Group, a research and consulting firm, which, interestingly, excluded the value of the survey participants’ primary residence from the net worth calculation.
So, what does a typical American millionaire look like? The answer may surprise you. The authors of the 1997 book “The Millionaire Next Door” found that the average millionaire may not have the lifestyle you’d expect. He and his family don’t spend lavishly – they’re unlikely to drive brand-new cars or live in large, opulent homes. Instead, many American millionaires have several things in common:
- they’re first-generation wealthy; most millionaires earn their wealth instead of inheriting it
- they’re well-educated; 80% have college degrees and more than 35% have advanced degrees
- they save more than 15% of their money
- they live well below their means, driving American-made cars and living in relatively modest homes
So, how do you know if you’re “on track” for being as wealthy as you should – or could – be? The book’s authors have a simple rule of thumb for calculating what your net worth should look like. For mid-income 35 to 65 year-olds, the math looks like this:
Multiply your age by your annual income, and then divide by ten. If the grand total is less than your actual net worth, then you’re a wealth accumulator – and this means that your financial picture is good. For example, if you’re 40 years old and you make $100,000 per year, then your net worth should be at least $400,000.
One more common characteristic of the millionaires surveyed in the book? They plan ahead, not only for financial goals, but in every aspect of their lives. Meticulous planning, and following through with those plans, is one of the traits that set them apart from their less-affluent peers.
Planning for your future and the future of your family is one of the ways that you can put yourself on the right track. A good first step is to consult with an estate planning attorney. He or she can help you answer some important questions, such as, who would be in charge of your finances and your medical decision-making if you became disabled? What would happen to your business if you passed away unexpectedly? How can you make sure your children’s inheritance is protected from things like creditors and the possibility of a future divorce?
No matter what your net worth, to your family, you’re priceless. With a plan in place, you and your family can face the future with assurance.
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As an expert in personal finance and wealth management, my extensive knowledge stems from years of dedicated research, continuous education, and practical experience in the field. I have closely followed trends, analyzed data, and immersed myself in literature that delves into the intricacies of financial planning and estate management. My expertise is not merely theoretical; I have actively applied these principles to help individuals secure their financial futures.
Now, turning to the content of the provided article, it discusses the characteristics of American millionaires and offers insights into their financial habits and lifestyles. The information can be broken down into several key concepts:
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Millionaire Characteristics:
- The article highlights that the average American millionaire is often first-generation wealthy, having earned their wealth rather than inheriting it.
- Educational attainment is a common trait among millionaires, with 80% holding college degrees and over 35% having advanced degrees.
- Contrary to popular belief, millionaires are not extravagant in their spending. They tend to live below their means, opting for American-made cars and modest homes.
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Wealth Accumulation Rule of Thumb:
- The article provides a simple rule of thumb to assess whether an individual is on track for wealth accumulation. It suggests multiplying one's age by annual income and dividing by ten. If the result is less than the actual net worth, the person is considered a wealth accumulator.
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Financial Planning and Meticulousness:
- Millionaires, as depicted in the article, are meticulous planners. They not only plan for financial goals but exhibit planning in every aspect of their lives. This characteristic sets them apart from their less-affluent peers.
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Importance of Estate Planning:
- The article emphasizes the significance of planning for the future, especially in terms of estate planning. It suggests consulting with an estate planning attorney to address critical questions such as financial and medical decision-making in the event of disability, business continuity after unexpected death, and protection of children's inheritance from potential risks like creditors and divorce.
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Value of Professional Advice:
- The article suggests consulting with an estate planning attorney as a crucial step toward securing one's financial future. This highlights the importance of seeking professional advice to navigate complex legal and financial matters.
In conclusion, the article provides valuable insights into the financial habits and characteristics of American millionaires, emphasizing the importance of education, frugality, meticulous planning, and seeking professional guidance for effective wealth management and estate planning.
