Can one really become the 'Millionaire Next Door'?

[clifp]

To further flesh out this calculation, the annualized rate of return for Vanguard Wellington since its inception in 1929 has been about 8.28% (source Vanguard Wellington? Fund Investor Shares - NYTimes.com ). Over that period, inflation, as measured by the CPI deflator, has been running at 3.07% (source http://www.bls.gov/cpi/cpid1501.pdf), meaning that our hypothetical median household simply buying VWELX could expect a real return of approximately 5.2%, and that they therefore would need to save 14.4% of their income to hit a million at 62. Around here, saving that much of a $52k income would be quite difficult. In fact, the United Way recently conducted a study of ALICE households in Connecticut (Asset Limited, Income Constrained, Employed) and determined that a basic survival budget for a family of 4 here is $64,689 annually. (source http://alice.ctunitedway.org/files/2014/11/14UW-ALICE-Report_CT.pdf)

But the median house house income for Connecticut is 66K, so one or no kids, save about 10% over your income stick it in Wellington and you have a million by retirement.

I think it is hard for the person earning a below average wage to become a millionaire, but a couple even if both are earning average salaries can do it.

 

[Andre1969]

I think we can wrap this up, simply, by saying that there is a wide variety of ways to become the Millionaire Next Door.

After all, the world don't move to the beat of just one drum. What might be right for you, may not be right for some.

I could go on, but to summarize, it takes diff'rent strokes to move the world.

 

[scrabbler1]

I worked full-time for 16 years, topping out at just under $78k, before I switched to part-time for 7 more years with a salary topping out at just under $50k. I attribute my ER 6 years ago at age 45 to 3 things:


(1) No kids (never wanted them);
(2) LBYM (low housing costs, no expensive hobbies, keep low-end, inexpensive cars a long time);
(3) Company stock's value I cashed out at nearly $300k when I ERed;


My total value of investments just missed $1M in late 2007 before the crash but rebounded in less than 3 years, finally exceeding $1M in 2010.

 

[Fred123]

But the median house house income for Connecticut is 66K, so one or no kids, save about 10% over your income stick it in Wellington and you have a million by retirement.

I think it is hard for the person earning a below average wage to become a millionaire, but a couple even if both are earning average salaries can do it.

But I think Gumby's point in referencing the report (please correct me if not true) is that the median income in CT is very close to the survival income. And survival means, at least to me, no room for savings. That income is the *combined* income of all wage earners who live in the household. The median *individual* income is much lower, around $22K for women and $35K for men. Good luck saving a million dollars (or $1.5M in TMND dollars) on that. Really, it's tough for a lot of people in this country, and that isn't really appreciated by some of the posters here.

And now an editorial: just become someone disagrees with you doesn't mean that they are a "troll." It means that they disagree with you. I originally started participating in these forums because of the lively, relatively snark free discussions I found here, but, for whatever reason, the snark factor has increased lately -- directed at both posters who disagree with the main stream, and for individuals who, due to character flaws or lack of income, haven't managed to achieve financial independence. This place is headed towards being yet another Internet echo chamber, which seems pretty sad to me. Oh well.

 

[Ungoliant]

You just seem overly hung up on this idea of proving the unlikelihood of becoming a millionaire while earning a median income, which is something that basically no one disputes. The original claim that ordinary people can become millionaires made no such claim that "ordinary" was defined as someone making a U.S. median salary. You made that assumption and have been vigorously attacking that straw man ever since.

I think in the context it was used, the word "ordinary" simply refers to the fact that these are largely not people who were born into generational wealth, or won the lottery, or live in mansions with butlers attending to their every whim. They're regular people working fairly regular jobs, who if you saw them on the street, you wouldn't notice anything special about them. Of course they made a higher than median salary, and of course they probably dodged their share of bad luck in life, but they also took steps to preserve their wealth that others making those same salaries typically don't, which is why they're the ones who ended up millionaires.

I think one also has to consider the target audience of the book, for whom having higher-wage, white-collar jobs with discretionary income to invest is likely quite ordinary indeed. For some in that target demographic, the message that ordinary people like themselves can reach such a major milestone through prudent financial planning can be quite enlightening. The fact that there are a lot of poor people in the country's ghettos, who will probably never read the book and for whom this doesn't apply, is sort of beside the point. It just comes across like you have a political axe to grind about how the wealthy don't appreciate how good they have it.

 

[MichaelB]

Thanks for a civil and interesting discussion.