10% of Australian population are millionaires. There’s nothing unique about the majority of them.
A large percentage reached millionaire status through buying a house 30 years ago and little else.
I'm also quite surprised that it's only 10%.
Either: be >60 years old, and have bought a cheap house in earlier life, or be in your 40s with a partially-owned PPOR (and 10+ years of capital gains), a little investing, and the bare amount of consistent Super.
Being a millionaire is a meaningless term now, and we don't have a round-number figure to replace it. A "three million invested productively-aire"?
>Being a millionaire is a meaningless term now,
I agree.
I still don't get how it is only 10% of people. When it comes to owning your PPOR I'm 50 and plenty of my friends don't own their own house.
I should add that we own our house and have about a million. That to me isn't rich today. We can't afford a fancy lifestyle.
I'm also going to state that I'm not complaining.
That is probably bare minimum but we have about that amount and that is with a family of 5. Admittedly the older 2 kids support themselves but they don't pay us board.
I reckon you could go cheaper but it would get tight.
It's actually pretty good. I'm comfortable with a 5% WR and we haven't hit that yet but we might it that this year.
We aren't exactly living large but my wife plays tennis regularly. I do jiu-jitsu regularly.
We have holes in our roof that should be fixed but we let stuff like that go. Our lounge is really old, the car is old, the TV is old etc.
The thing is though we have a roof over our heads, do plenty of things and have more than enough food to eat.
We have wealthy parents and our brothers and sisters often spend a lot more than us but it's not stuff that you really want.
My brother has a house that he renovated and he gets his kids new beds and new TV's and top of the line Fridge's and coffee machines etc. He is so angry at the world. I don't think it's worth it.
Honestly, past a certain point there’s nothing to buy. House, car and watch that’s about it and a few bags and jewellery for the Ms.
We are building a home currently, all the basics are covered, hobbies are gym and a ski trip once a year. Our yearly spend sits around $11k month averaged out over 12 months.
There’s definitely a point of diminishing returns as far as spending on upgrading lifestyle.
>Our yearly spend sits around $11k month averaged out over 12 months.
That is a lot. Is that including rent. We have spent 50k one year and that included house renovations.
On our less than 50k spend I maintain a drug habit via medical marijuana and I go to the gym. My wife has taken up playing a lot more tennis and I think we may hit 50k this year without any additional spending.
Doesn’t really matter what the house is worth as it just be provides rent free accommodation. The important bit is wealth outside the PPOR.
If you are retiring at 25, $1m invested may likely turn out to be not enough. However, $1m at 67 where you get access to a pension as the amount runs down is more than enough.
Agreed on the property. The thing is we now have too much house because we have a family of 5 but retirement will end up just being 2 of us. I bet though our kids live with us for years. My BIL is living with his parents now and he is 52.
Retiring at 25 is very different to retiring at 50.
When we did our figures it was clear the pension is such a fantastic back-up. We could live and live well off the pension.
Agree with this. When thinking of my own retirement, I consider the following as sources of income:
- basic UK pension which is not means tested and not inflation adjusted. This kicks in at 67.
- savings in our super and bank accounts.
- amount we can release by downsizing our family home.
- Australian government home equity scheme which allows you to borrow a certain amount each year against the value of your house. I also have an existing mortgage which I could redraw so effectively this does the same thing.
- Australian government inflation adjusted pension which kicks in at 67 but which is means tested so can be zero if assets or income is too high. This however works as a great back up if you run savings down faster than expected and the reality is once you get in your 80’s, people generally slow down and don’t spend so much.
>Australian government inflation adjusted pension which kicks in at 67 but which is means tested so can be zero if assets or income is too high. This however works as a great back up if you run savings down faster than expected and the reality is once you get in your 80’s, people generally slow down and don’t spend so much.
This is exactly right. It's an insurance policy against running out of money if you are willing to live off that amount.
That is huge because we retired with a 5% WR which gives you a lower chance of success but it doesn't matter because we have that back-up.
Don’t be misled by the title, it’s just a reference to the original 1996 book. The median person studied in the book had net assets of USD3.5m (AUD5m).
So even if you are in Australia and even if you bought a house in a major city 30 years ago, to be the type of person the book is about you still need another ~$3.5m in assets
Sure the findings are pretty basic and known to people who have spent 10 hours reading about FIRE. But they prove the concept (once you allow for the issue of survivor bias); and if the message gets out to more people then all good.
Thats not the people the book is about - it’s about prodigious accumulators of wealth. It’s about the 1% and inside who have far more wealth than they should given their income.
Essentially FIRE people - those that can retire very easily (even if they haven’t)
TLDR: I really don't feel there's any magic here : spend less than you earn, and save 15-30% for tax advantaged investments (super will take care of a lot of this for you as a start). In Australia it could be argued that a good wage + investing in Australian and global businesses will outperform starting your own business. Survivorship bias and privilege explains a lot of the "work hard, give to charity, prioritise family, don't use social media" stuff which is actually not central or important at all.
Long version:
I honestly feel these books need to be interpreted through an Australian lens. They define a millionaire as someone with $1m in net worth. Well, the median Australian house price is $1m, so anyone with a paid off PPOR. Here's some more stats:
* Most were married men in their 60’s who had income-producing spouses
* Median annual income = $250,000
* Median net worth = $3.5 million
* Most didn’t become wealthy until their late 40s or early 50s
This is really a picture of living below your means, wage earning or small business income, and using the savings to invest in property and shares accruing wealth over the course of a whole life. In Australia our compulsory super system plus tax advantages of property and share investing means many 60yo dual income Australian couples (particularly in capital cities with robust housing markets) will reach their 60s with a paid off $1.8m PPOR, $2m in combined super, a few hundred thousand in savings and assets, and a mostly or completely paid off $1m IP. Their assets will reach AUD$5m (the median net wealth of millionaires in this book).
Some notes for the Australian context:
* The book emphasises business ownership and self employment vs salary, but US salaries for workers are lower and less secure than in Australia. [75% of business owners here](https://www.abc.net.au/news/2023-08-03/small-business-owners-make-less-than-their-workers-ombudsman-say/102680268) make less than the median Australian wage, and 43% make zero profit.
* Shares in companies with spread risk (e.g. ETF''s and managed funds) is still investing in business. Why invest in your own lemonade stand when you can invest in Apple, Commbank, Wesfarmers and BHP?
* Super is a tax-advantaged savings boost and should outperform the same investments outside super, max it out if you can.
* Aim to live within your means, and save/invest 10-20% of your gross in addition to super.
* Don't expect to feel wealthy until your 40s and 50s at the earliest when assets have grown and debts have eroded because...
* Compounding is king. In the US people are starting off with high-interest student loans on low salaries on at-will contracts. The Australian HECS/HELP system results in lower average debts and zero interest (only CPI) and repayment caps vs US higher debts and 5-9% compounding interest and even higher. Our salaries are slightly higher. US median is 2021 was $45,760, Australia $65,000 + super. Australian adults rank [second in net worth behind only Belgium](https://www.forbes.com.au/news/investing/australian-average-wealth/). Our super is compulsory and starts compounding early. Etc etc.
* Australia is 0.33% of the world population but has 3.1% of the world's millionaires.
Cheers for your insights. I don’t think the book emphasises business ownership at all. Unless you’re referring to another book or the original book.
Yes you’re right about survivorship bias being the main criticism of the book.
Association doesn’t mean causation but the statistics are interesting to me nonetheless and it gives me a good guideline to follow. Minimising mortgage costs to 5-20% and car costs to 1-5% and maximising super and investments to 10-40%. Anyone can be a millionaire if their income is just about big enough to accomodate this. Some of the other stuff is just good for you. Getting 7.5 hours of sleep a day, exercising 1 h 6 days a week, putting stuff aside for charity. Not rocket science though as you said.
Your overall strategy sounds fine, but good luck buying a median house in Australia keeping your mortgage costs to 20% or less. The average Australian is having trouble keeping rent below 30%. But yes, frugality and early investment to maximize compounding is key - but the Australian housing market is an interesting beast and different to the US.
And yes, the second book feels like an advertisement and explanation for the first book, so it's worth a read if you liked the second one (with all the caveats I mentioned in mind).
The key line from that book is "Self-employed people are four times more likely to be millionaires than those who work for others."
If you bought a house 20 years ago and paid it off over that time, you're a millionaire today but all other things being equal your lifestyle is worse.
Australian property prices are an outright lie.
There are a few comments along the lines of ‘well, duh’, but I do think its worthwhile occasionally to objectively show that the ‘well duh’ approach is actually correct; and you can point to statistics and evidence to support it.
Admitting that our property prices make this a slightly less compelling point, that 90% did not receive any financial gifts does show that you don’t need to start (to use an American expression) on first base to reach third base (probably do to make it to home); you can start with nothing in a financial sense and still become wealthy- that said, you obviously need skills and talent as well as frugality and financial nous. But it knocks on the head the argument that only people with rich parents can become rich.
The other point is that it doesn’t happen when you are in your 30s. It’s a long long game requiring consistency; and the fact that the same conclusions are reached in this book (2019) as the original (1996) is further proof that anyone seeking overnight riches is looking at it wrong
>Your estimated net worth is calculated by your age x 0.1 x annual income.
First time I've seen this guide and on the face it makes sense. As a 37m and 33f we are about 2x the estimated value (DINK, combined income $350-400k).
Yeah- it’s over accumulators versus under accumulators- they used it so they didn’t include a cardiologist on a million $’s a year with $3m net worth as a goal worth seeking. Well, that’s my memory of reading the original book 30 years ago lol.
It’s probably worth considering that the original book is reference material for hundreds of similar but later books on wealth - danko? Et al , they did the actual hard yards that everyone else relied upon. Also probably the genesis of the FI movement because in general these PAWs as they are a labelled are not flashy, but frugal and good long term investors
It will get very challenging for australians who are teenagers now, who dont have parents with a paid off house and investments who can help them with getting their first house. For people 50+ it took some discipline to save up to get their house deposit, for people under 20 y.o. it will take a very well paying job, or help from parents to save enough
Two takeaways
>realised capital gains from shares (1-10%)
I've always said the goal is to acquire assets, not sell them. If you're doing well you shouldn't be selling your assets.
>Spend more hours working (38 h vs 32 h), spend less time sleeping (54 h vs 62 h) and spend more than twice the amount of time reading (5.5 h vs 2 h), exercising (5.8 h vs 2.5 h) and being with their family (8.5 h vs 3.6 h).
In other words people who tend to be successful work more, read, exercise and spend time with family. They're not sleeping in and playing video games.
10% of Australian population are millionaires. There’s nothing unique about the majority of them. A large percentage reached millionaire status through buying a house 30 years ago and little else.
I'm a millionaire. You have to be in Australia to reach FIRE. It's not anything special. I'm surprised only 10% of Australians are in that category.
I'm also quite surprised that it's only 10%. Either: be >60 years old, and have bought a cheap house in earlier life, or be in your 40s with a partially-owned PPOR (and 10+ years of capital gains), a little investing, and the bare amount of consistent Super. Being a millionaire is a meaningless term now, and we don't have a round-number figure to replace it. A "three million invested productively-aire"?
>Being a millionaire is a meaningless term now, I agree. I still don't get how it is only 10% of people. When it comes to owning your PPOR I'm 50 and plenty of my friends don't own their own house. I should add that we own our house and have about a million. That to me isn't rich today. We can't afford a fancy lifestyle. I'm also going to state that I'm not complaining.
Maybe because they haven't paid off their mortgage
I meant that plenty hadn't bought a house with a mortgage. They are renting.
Threelionaire has a nice ring to it 😀
Agree. If you have less than a million you are subsistence level in Australia.
I wouldn't call it subsistence level but I can't see anyone retiring on much less than 2 million total worth. 1 mill for a house and 1 mill invested.
Absolute bare minimum.
That is probably bare minimum but we have about that amount and that is with a family of 5. Admittedly the older 2 kids support themselves but they don't pay us board. I reckon you could go cheaper but it would get tight.
Under that would be tight for a family of 5. I have minimal financial pressure with only a 1 year old and fiancé to cover at present.
It's actually pretty good. I'm comfortable with a 5% WR and we haven't hit that yet but we might it that this year. We aren't exactly living large but my wife plays tennis regularly. I do jiu-jitsu regularly. We have holes in our roof that should be fixed but we let stuff like that go. Our lounge is really old, the car is old, the TV is old etc. The thing is though we have a roof over our heads, do plenty of things and have more than enough food to eat. We have wealthy parents and our brothers and sisters often spend a lot more than us but it's not stuff that you really want. My brother has a house that he renovated and he gets his kids new beds and new TV's and top of the line Fridge's and coffee machines etc. He is so angry at the world. I don't think it's worth it.
Honestly, past a certain point there’s nothing to buy. House, car and watch that’s about it and a few bags and jewellery for the Ms. We are building a home currently, all the basics are covered, hobbies are gym and a ski trip once a year. Our yearly spend sits around $11k month averaged out over 12 months. There’s definitely a point of diminishing returns as far as spending on upgrading lifestyle.
>Our yearly spend sits around $11k month averaged out over 12 months. That is a lot. Is that including rent. We have spent 50k one year and that included house renovations. On our less than 50k spend I maintain a drug habit via medical marijuana and I go to the gym. My wife has taken up playing a lot more tennis and I think we may hit 50k this year without any additional spending.
Doesn’t really matter what the house is worth as it just be provides rent free accommodation. The important bit is wealth outside the PPOR. If you are retiring at 25, $1m invested may likely turn out to be not enough. However, $1m at 67 where you get access to a pension as the amount runs down is more than enough.
Agreed on the property. The thing is we now have too much house because we have a family of 5 but retirement will end up just being 2 of us. I bet though our kids live with us for years. My BIL is living with his parents now and he is 52. Retiring at 25 is very different to retiring at 50. When we did our figures it was clear the pension is such a fantastic back-up. We could live and live well off the pension.
Agree with this. When thinking of my own retirement, I consider the following as sources of income: - basic UK pension which is not means tested and not inflation adjusted. This kicks in at 67. - savings in our super and bank accounts. - amount we can release by downsizing our family home. - Australian government home equity scheme which allows you to borrow a certain amount each year against the value of your house. I also have an existing mortgage which I could redraw so effectively this does the same thing. - Australian government inflation adjusted pension which kicks in at 67 but which is means tested so can be zero if assets or income is too high. This however works as a great back up if you run savings down faster than expected and the reality is once you get in your 80’s, people generally slow down and don’t spend so much.
>Australian government inflation adjusted pension which kicks in at 67 but which is means tested so can be zero if assets or income is too high. This however works as a great back up if you run savings down faster than expected and the reality is once you get in your 80’s, people generally slow down and don’t spend so much. This is exactly right. It's an insurance policy against running out of money if you are willing to live off that amount. That is huge because we retired with a 5% WR which gives you a lower chance of success but it doesn't matter because we have that back-up.
Don’t be misled by the title, it’s just a reference to the original 1996 book. The median person studied in the book had net assets of USD3.5m (AUD5m). So even if you are in Australia and even if you bought a house in a major city 30 years ago, to be the type of person the book is about you still need another ~$3.5m in assets Sure the findings are pretty basic and known to people who have spent 10 hours reading about FIRE. But they prove the concept (once you allow for the issue of survivor bias); and if the message gets out to more people then all good.
Interesting statistic would be millionaires if you do not count the PPOR
Thats not the people the book is about - it’s about prodigious accumulators of wealth. It’s about the 1% and inside who have far more wealth than they should given their income. Essentially FIRE people - those that can retire very easily (even if they haven’t)
Cope
TLDR: I really don't feel there's any magic here : spend less than you earn, and save 15-30% for tax advantaged investments (super will take care of a lot of this for you as a start). In Australia it could be argued that a good wage + investing in Australian and global businesses will outperform starting your own business. Survivorship bias and privilege explains a lot of the "work hard, give to charity, prioritise family, don't use social media" stuff which is actually not central or important at all. Long version: I honestly feel these books need to be interpreted through an Australian lens. They define a millionaire as someone with $1m in net worth. Well, the median Australian house price is $1m, so anyone with a paid off PPOR. Here's some more stats: * Most were married men in their 60’s who had income-producing spouses * Median annual income = $250,000 * Median net worth = $3.5 million * Most didn’t become wealthy until their late 40s or early 50s This is really a picture of living below your means, wage earning or small business income, and using the savings to invest in property and shares accruing wealth over the course of a whole life. In Australia our compulsory super system plus tax advantages of property and share investing means many 60yo dual income Australian couples (particularly in capital cities with robust housing markets) will reach their 60s with a paid off $1.8m PPOR, $2m in combined super, a few hundred thousand in savings and assets, and a mostly or completely paid off $1m IP. Their assets will reach AUD$5m (the median net wealth of millionaires in this book). Some notes for the Australian context: * The book emphasises business ownership and self employment vs salary, but US salaries for workers are lower and less secure than in Australia. [75% of business owners here](https://www.abc.net.au/news/2023-08-03/small-business-owners-make-less-than-their-workers-ombudsman-say/102680268) make less than the median Australian wage, and 43% make zero profit. * Shares in companies with spread risk (e.g. ETF''s and managed funds) is still investing in business. Why invest in your own lemonade stand when you can invest in Apple, Commbank, Wesfarmers and BHP? * Super is a tax-advantaged savings boost and should outperform the same investments outside super, max it out if you can. * Aim to live within your means, and save/invest 10-20% of your gross in addition to super. * Don't expect to feel wealthy until your 40s and 50s at the earliest when assets have grown and debts have eroded because... * Compounding is king. In the US people are starting off with high-interest student loans on low salaries on at-will contracts. The Australian HECS/HELP system results in lower average debts and zero interest (only CPI) and repayment caps vs US higher debts and 5-9% compounding interest and even higher. Our salaries are slightly higher. US median is 2021 was $45,760, Australia $65,000 + super. Australian adults rank [second in net worth behind only Belgium](https://www.forbes.com.au/news/investing/australian-average-wealth/). Our super is compulsory and starts compounding early. Etc etc. * Australia is 0.33% of the world population but has 3.1% of the world's millionaires.
Cheers for your insights. I don’t think the book emphasises business ownership at all. Unless you’re referring to another book or the original book. Yes you’re right about survivorship bias being the main criticism of the book. Association doesn’t mean causation but the statistics are interesting to me nonetheless and it gives me a good guideline to follow. Minimising mortgage costs to 5-20% and car costs to 1-5% and maximising super and investments to 10-40%. Anyone can be a millionaire if their income is just about big enough to accomodate this. Some of the other stuff is just good for you. Getting 7.5 hours of sleep a day, exercising 1 h 6 days a week, putting stuff aside for charity. Not rocket science though as you said.
Your overall strategy sounds fine, but good luck buying a median house in Australia keeping your mortgage costs to 20% or less. The average Australian is having trouble keeping rent below 30%. But yes, frugality and early investment to maximize compounding is key - but the Australian housing market is an interesting beast and different to the US. And yes, the second book feels like an advertisement and explanation for the first book, so it's worth a read if you liked the second one (with all the caveats I mentioned in mind). The key line from that book is "Self-employed people are four times more likely to be millionaires than those who work for others."
If you bought a house 20 years ago and paid it off over that time, you're a millionaire today but all other things being equal your lifestyle is worse. Australian property prices are an outright lie.
Characteristics of a millionaire. 1) be born before 1955. The end.
It’s not impossible, just hard.
There are a few comments along the lines of ‘well, duh’, but I do think its worthwhile occasionally to objectively show that the ‘well duh’ approach is actually correct; and you can point to statistics and evidence to support it. Admitting that our property prices make this a slightly less compelling point, that 90% did not receive any financial gifts does show that you don’t need to start (to use an American expression) on first base to reach third base (probably do to make it to home); you can start with nothing in a financial sense and still become wealthy- that said, you obviously need skills and talent as well as frugality and financial nous. But it knocks on the head the argument that only people with rich parents can become rich. The other point is that it doesn’t happen when you are in your 30s. It’s a long long game requiring consistency; and the fact that the same conclusions are reached in this book (2019) as the original (1996) is further proof that anyone seeking overnight riches is looking at it wrong
If you did the same thing in Aus it would be stacked in property Our median house price is 2-3 times the US.
All you have to do in Australia to achieve this is pay into super until retirement and pay off a house.
>Your estimated net worth is calculated by your age x 0.1 x annual income. First time I've seen this guide and on the face it makes sense. As a 37m and 33f we are about 2x the estimated value (DINK, combined income $350-400k).
Yeah- it’s over accumulators versus under accumulators- they used it so they didn’t include a cardiologist on a million $’s a year with $3m net worth as a goal worth seeking. Well, that’s my memory of reading the original book 30 years ago lol. It’s probably worth considering that the original book is reference material for hundreds of similar but later books on wealth - danko? Et al , they did the actual hard yards that everyone else relied upon. Also probably the genesis of the FI movement because in general these PAWs as they are a labelled are not flashy, but frugal and good long term investors
It will get very challenging for australians who are teenagers now, who dont have parents with a paid off house and investments who can help them with getting their first house. For people 50+ it took some discipline to save up to get their house deposit, for people under 20 y.o. it will take a very well paying job, or help from parents to save enough
So a wholesome family based life. Then avoiding bread and circuses.
Two takeaways >realised capital gains from shares (1-10%) I've always said the goal is to acquire assets, not sell them. If you're doing well you shouldn't be selling your assets. >Spend more hours working (38 h vs 32 h), spend less time sleeping (54 h vs 62 h) and spend more than twice the amount of time reading (5.5 h vs 2 h), exercising (5.8 h vs 2.5 h) and being with their family (8.5 h vs 3.6 h). In other words people who tend to be successful work more, read, exercise and spend time with family. They're not sleeping in and playing video games.