Why Many Millionaires Don't Feel Rich

By Stephanie Christensen | April 13, 2011 AAA
Why Many Millionaires Don't Feel Rich

The term "millionaire" once inferred that a person was part of society's upper crust, able to enjoy luxuries most only dreamed of, including vacation properties and early retirement. The Gilded Age of the 1980s was all about flaunting excess, as echoed in the movie "Wall Street" and television series like "Dallas" and "Dynasty." Back then one was perceived to be "rich" if he or she had an income around $100,000, according to a USA Today article released on May 22, 1987. By 1989, American millionaires had become quite common: there were about 1.5 million of them. That number has boomed. As of 2009, there are 7.8 million millionaires living in the United States, according to Spectrem Group. (Making this dream come true takes work, but it's well worth the effort. See 10 Steps To Retire A Millionaire.)

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The Millionaire Outlook
However, being a millionaire today doesn't get a person so far as it once did, and the millionaires themselves are painfully aware. Fidelity Investments recently released the findings of its Fidelity® Millionaire Outlook survey, which looks at "investing attitudes and behaviors of more than 1,000 millionaire households," according to the Fidelity media release. This year's study revealed that 42% of millionaires surveyed do not feel wealthy; 46% said the same thing in 2009.

Why are American millionaires lacking such self-confidence toward their own success? It may have something to do with relativity. In wealthy West Coast cities like San Francisco and Palo Alto, home to the mega rich like PayPal co-founder and venture capitalist Peter Thiel, and Facebook CEO Mark Zuckerberg, being a millionaire isn't enough to launch you into a life of luxury - or even make you stand out from the pack. In 2007, Match.com founder Gary Kremen, explained to the New York Times that "you're nobody here at $10 million," referring to the concentration of money in Silicon Valley.

Increased Cost of Living
In addition to the surrounding competition, the cost of living in millionaire-dense areas is enough to chip away at anyone's net worth. The ACCRA Cost of Living Index, published by The Council for Community and Economic Research, lists cities in New York and California among the top 10 most expensive places a person can reside. Manhattan is the most expensive, indexing at 207.9.

Another reason millionaires might not feel so rich is that from a day to day standpoint, they're not actually living much differently than the rest of us. Being coined a millionaire once led to the conclusion that one did a lot more play than work, a stigma that no longer applies to millionaires in 2011. According to Spectrem Group, the average United States millionaire is 62 years old. Just 1% of millionaires are under the age of 35, and 38% of millionaires are 65 and older. West Coast millionaires skew slightly older.

Further, a large number of individuals in the MountainStates and Texas never plan to retire, and millionaires in the Northeast and West Coast make up the largest percentage who don't have plans to retire for at least 10 more years.

Living on Less

According to "The Millionaire Next Door: The Surprising Secrets of American's Wealthy" by Thomas J. Stanley and William D. Danko, frugal living may also contribute to the insecure self-perception millionaires have regarding their wealth. Their research found that the average millionaire lives on less than 7% of his or her wealth, wears inexpensive suits and drives American-made cars that are not the current year's model. Throw the lagging housing market and volatile stock market into the mix, and it looks like millionaires may not be any better off than the rest of us when it comes to the ability to rest on our financial laurels.

Given all these factors, what will take millionaires to feel rich again? Those surveyed by Fidelity pinpointed $7.5 million as the investable asset level that would make them feel back on top. (Becoming a millionaire is not as hard as you might think - it just takes time. Check out 6 Simple Steps To $1 Million.)

And why pay attention to the millionaire "woe is me" findings? They could truly be the key to your own financial future. While millionaires' confidence level in the economy is negative, their outlook for a recovery is at the highest level since 2006, the year Fidelity began keeping tabs on them. Of those surveyed, 43% said they plan to return to stock market investing within the next 12 months. In a Fidelity-released media statement Michael R. Durbin, president of Fidelity Institutional Wealth Services®, explained that "millionaires' outlook could be seen as a leading indicator of the direction of the economy, especially since the last time we conducted this survey in early 2009, they forecasted improvement in all aspects of the U.S. economy at the beginning of 2010."

The Bottom Line
Whether you envy millionaires or shake your head in awe at their lack of financially secure feelings, you can stand to benefit from following their lead, whether you choose to get back into the market, scale back your spending, or continue to live just as you do. One day, you just might be a millionaire, too.

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