Regis Philbin hit the TV jackpot when he debuted as host of the award-winning game show, "Who Wants to be a Millionaire?" in 1999. The show, an overnight sensation for ABC, tapped into a common American dream – becoming wildly rich. According to the IRS' Personal Wealth Statistics study (last undertaken in 2004), an estimated 2.7 million Americans hold gross assets of $1.5 million or more. If you have ever bought a lottery ticket or made an investment based on a "hot tip" just hoping you could be counted in that IRS number, consider that there may be some downfalls to becoming a millionaire.
Meet Mr. Taxman
As a millionaire, you're going to be on the hook for doing a greater amount of (financial) good for your country. And it's not just Uncle Sam that will be asking for his (bigger) portion of your paycheck – an increasing number of states will have their eye on your bottom line. Last year, Maryland became the first state to impose a new tax bracket (6.25%) specifically for state income tax filers who earn more than $1 million; eight other states – Connecticut, Delaware, Hawaii, New Jersey, New York, North Carolina, Oregon and Wisconsin – followed Maryland's example and hiked their tax rates on the wealthy.
Taking On A Second Job
Possessions take time to maintain. Whether you're talking about clothes, cars or chateaus - the more you have of anything, the more time it will take. Money is no different. Once you have millions, you won't be able to just pay a few bills and balance your checkbook at the end of the month. It will take a significant amount of your time to budget, pay taxes, invest, give, plan spending, meet with professionals, etc.
Meet The Joneses
Vaulting into another economic stratum comes at a literal price. Once you have the means to buy a bigger house, purchase a nicer car and join that nearby golf club, you're most likely going to meet a whole new group of people – wealthier people. And becoming their friends can open up a whole new world. That world, while enjoyable, often raises your expectations about your standard of living overnight. All of a sudden, a night out means a waterfront table for tapas, not McDonald's and a movie. Whether you intend to begin the "keeping up with the Joneses" game or not, once you make those more expensive choices and move in those more expensive circles, you're more likely to find yourself paying a lot more attention to what others are doing and join right in.
"But You Shouldn't Have!"
No more bargain-shopping for birthday presents. Friends, family members, co-workers and employees begin to expect bigger, nicer and, well, more expensive gifts. You'd better budget for that. See #2.
They Come Out Of The Woodwork
Just ask lottery winners like Twila Shultz, who won the Super 76 Jackpot in 2001. After winning $8.4 million, her family had to deal with all kinds of people approaching them for money. She told the Pittsburgh Tribune that "one even showed up at the door wanting to borrow $100,000... she even (brought) pictures of her husband's feet. She wanted the money for (surgery on) his feet." Having money will attract people who need or want money. You'll have to have a plan for how to deal with them – decide who you want to give money to and who you want to turn away.
Riding The Roller Coaster
As your portfolio value increases so, most likely, will your anxiety over market fluctuations that could quickly erode your net worth. Never before did you lose sleep over a sagging dollar or what the Shanghai stock exchange did overnight. Welcome to a millionaire's world – where stocks and sleep don't necessarily mix well.
Who Can You Trust?
It's not just long-lost friends and family members who are bound to come knocking – it's professionals, as well. You will likely receive a steady flow of email, snail mail and voicemail offers from lawyers, investment advisers and tax attorneys all eager for your money – ahem, I mean "business." If you don't have a strong background in personal finances, investing or taxes you could probably benefit from assembling a team of credible, experienced professionals who can give you some much-needed advice. The question, again, becomes who should you trust?
As a millionaire, you are now a target for an unwelcome group of people: criminals. A bigger house in a nicer community could attract burglars. A more expensive car could attract the attention of car thieves. A fatter investment portfolio invites potential perpetrators of fraud and other crimes against people with a high net worth. Suddenly, Saturdays are spent checking out home and car alarm systems and your investment advisor's professional background to make sure your wealth and possessions are safe.
The Bottom Line
If you've been squirreling away savings in the hopes that one day you can move out of your middle-class enclave and into that gated community one zip code over, remember that the grass isn't always greener - it may just be more expensive. And it will probably take more time to mow.
Personal FinanceMillionaires: tax-evading golfers that inherited their fortunes, right? You'll be surprised to find how average millionaires actually are.
Financial AdvisorThe most successful people have more in common than just money. Find out what you can learn.
Financial AdvisorMillionaire households in the U.S. reached a record high in 2015, a recent study by Spectrem Group has found.
InvestingDiscover how to start 2016 strong by learning how to imitate the investing strategies that distinguish millionaire investors from most average investors.
Managing WealthEverywhere we look, millionaires are trying to push their methods of financial accumulation on us. But are they effective?
Managing WealthAccording to a recent report from New World Wealth, a number of countries around the world are losing millionaires.
Financial AdvisorMost millionaires don't identify as rich and worry about maintaining their wealth. Here's why.
Financial AdvisorWhen it comes to the number of millionaires as a percentage of overall population, Europe calls itself home to a large portion of the luxury-seeking class.
Managing WealthThere are many ways to hit the million-dollar mark, but the faster you try to get there, the harder it becomes.
InvestingHere's a look at some of the positives and negatives of national lotteries.