In 2022, the average (median) net worth of American families exceeded $1 million for the first time.
getty
The Federal Reserve releases its Consumer Finance Survey every three years. This is one of the most detailed datasets ever collected on household assets. The previous report surveyed 4,602 households from 2019 to 2022. The Fed’s survey counted real estate, stocks, bonds, bank and retirement accounts, virtual currencies, and more. We then calculated our net worth by subtracting debts such as mortgages, car loans, credit card debt, and student loans.
These in-depth investigations have revealed many facts, but one that stands out is that the average net worth of an American family will exceed $1 million for the first time in 2022, up from $749,000 in 2019. That’s an increase of 42% since. Did the billionaires’ vast wealth have an undue influence on the data set, or did inflation accelerate the numbers? Both concerns have some merit, but simply put, neither negates the fact that America is full of billionaires.
Research shows that more than 12% of American families, approximately 16 million, will enjoy a net worth of more than…(+) million dollars in 2022.
getty
According to the book’s research, just over 12%, or about 16 million American families, enjoyed a net worth of more than $1 million in 2022. This is up from 9.8 million families in 2019. Additionally, nearly 8 million families will earn more than $2 million in 2022. In 2022, this is a staggering increase from 4.7 million people in 2019.
It’s not hard to imagine why these new billionaires, or mini-billionaires as the Wall Street Journal calls them, have emerged. Over the past three years, two major categories have grown. First, the Case-Shiller Home Price Index, which measures total home values across the country, rose nearly 40%. Second, the S&P 500 index rose almost 20% from the end of 2019 to 2022. This means that house prices and most other inflation-fighting assets were rising.
Two major categories have increased. First, the Case-Shiller Home Price Index rose nearly 40%. Second,… (+) The S&P 500 rose almost 20% from the end of 2019 to 2022. This means that house prices and most other inflation-fighting assets were rising.
getty
Here are some other characteristics worth mentioning about mini-millionaires.
Their income typically ranged from $150,000 to $250,000 per year. From 2019 to 2022, they saw greater wealth growth than the top 10% of families. From 2019 to 2022, median inflation-adjusted wealth increased by 69%. While assets have increased, debt payments have decreased due to low interest rates. (In 2007, debt consumed 19% of income; in 2022, it was 12.9%.) More than 90% reported owning stocks, either directly or through retirement accounts. 87% of them owned their homes. In 2022, 21% of families will be millionaires between the ages of 55 and 64. That percentage more than doubled to 45% for college graduates.
Mini-millionaires experienced greater wealth growth from 2019 to 2022 than the top 10% of families.
getty
millionaire next door
So what are the habits of emerging millionaires? Remember the 1996 best-selling book The Millionaire Next Door by Thomas Stanley and Bill Danko? It changed the paradigm and perception of wealthy Americans, revealing that many don’t live a flashy life or look like the millionaire cliché. More importantly, we identified traits that are common among wealthy people. This analysis will focus on:
They live below their means. They focus their time and energy on wealth-building activities. They seek independence and economic freedom more than status. They raise independent children. they are working hard.
live below one’s income
A significant percentage of the billionaires surveyed in “The Millionaire Next Door” were self-employed or held some type of revenue-sharing or sales job with little upside. But not everyone was like that. The list also included teachers, accountants, engineers and managers. They reached their goals living well below their means. Now, this is all relative. Their research shows that the higher the income, the less frugal families need to be. The key is to keep your expenses modest compared to your income.
“The Billionaire Next Door” revealed that many wealthy families don’t live flashy lives or look like the cliche millionaires.
getty
Focus on wealth building activities
The millionaire next door wants to listen to investment experts about the market and CPAs about tax strategy. They take the time to understand what investments have the potential to outperform inflation. Instead of asking, “Where is my money safest?” they might ask, “Where will my money work and benefit me?” No. A thoughtful investment plan, combined with patience and time, increases the likelihood of wealth accumulation.
seek independence and freedom, not status
Seeking status through purchases is not uncommon, but there is a range. Some people buy homes in certain areas to feel a certain status, but that’s not necessarily counterproductive. However, to varying degrees, many people will probably be able to live in a less expensive home and still enjoy an enjoyable homeownership experience. That doesn’t mean you need to feel guilty about moving to an unsafe area or buying a new home. It’s just that status shouldn’t be the driving force.
What about the car? In The Millionaire Next Door, Stanley and Danko revealed that 81% of millionaires buy cars, and only about 20% lease them. Leasing may not always be wise, but it is often much less cost-effective. The psychology of the owner may also be a factor.
In terms of added costs, the millionaire next door probably won’t spend the extra money on an Uber across town or pay $15 for food delivery that they could easily pick up.
According to the “What the Happiest Retirees Know” survey, the happiest retirees who grew up…(+) gave their children an average of less than $500 per month; Unhappy retirees were found to be paying more than $700 per month.
getty
Raise independent children
Supporting adult children can put a huge strain on your retirement income and savings. Research in my book, What the Happiest Retirees Know, shows that the happiest retirees give their grown children an average of less than $500 a month, while unhappy retirees give less than $500 a month to their grown children. It turns out I’m paying over $700 a month. Retirees supporting their children on $2,000 a month were four times more likely to be dissatisfied.
The more money that goes to your adult children, the less money you have for a happy and healthy retirement. One way the millionaire next door achieves this goal is by emphasizing education. That includes a college education, but it may also mean teaching your children the value of saving, investing, and entrepreneurship. Giving children too much financial support can stunt their growth and cause problems down the road.
work hard
These people didn’t become millionaires by winning the lottery or becoming social media super influencers overnight. Usually there was no unexpected inheritance from long-lost relatives. This rarely happens, but fortunately, it doesn’t have to be. If you work hard, many other pieces will fall into place.
These people didn’t become millionaires by winning the lottery or becoming social media super (+) influencers overnight. If you work hard, many other pieces will fall into place.
getty
conclusion
While there is no magic pill for financial success, there are usually recipes that will point you in the right direction. It’s a lifelong journey that involves working hard, making healthy choices, and having the patience and discipline to make your money work for you over time. But that doesn’t mean you should never splurge. It just means you need to spend more modestly compared to your income.
The emerging and growing population of mini-millionaires in the United States can serve as an inspiration to anyone looking to reach or stay at that economic level. Most people cannot rely on generational wealth or winning slot machines. Be encouraged to learn that there is a path to becoming a millionaire next door, and maybe even retiring sooner than you previously thought.
Be encouraged and learn that there is a way to become a millionaire next door. And perhaps you may even be able to retire sooner than you previously thought.
getty
This information is provided as a resource for informational purposes only and should not be considered investment advice or recommendations. Investments involve risks such as possible loss of principal. There is no guarantee that any investment return, yield or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Dividends for stocks that pay dividends are not guaranteed and may be increased, decreased, or abolished without notice. Bonds are subject to interest rate, credit, inflation and reinvestment risks and possible loss of principal. When interest rates rise, the value of bonds falls. When considering investment vehicles, past performance is not indicative of future results. This information is presented without taking into account any particular investor’s investment objectives, risk tolerance or financial situation and may not be suitable for all investors. There are many aspects and criteria that must be researched and considered before investing. Investment decisions should not be made solely based on the information contained in this article. This information is not intended to be, and should not be, the primary basis for any investment decision you make. Always consult your legal, tax, or investment advisor before making any investment/tax/real estate/financial planning considerations or decisions. The information contained in the article is an opinion only and cannot tell you whether your strategy will be successful or not. The views and opinions expressed are for educational purposes only as of the date of creation/writing and are subject to change at any time without notice based on various factors such as market and other conditions.
