Millionaire Status
After checking my balance sheet for the month of August I realized that the value of all my assets is worth $1,006,200. Great Scott! For the first time in my life I own a million dollars worth of stuff! 🙂
According to the official Oxford Dictionaries website, a millionaire is “a person whose assets are worth one million dollars or more.” The word “assets” is commonly defined as any owned items or properties that have financial value. So according to this official definition I am now technically a millionaire! ? Gosh almighty! Below is my reaction right now.
I started investing about 8 years ago. I mostly just buy a wide range of investments and use diversification to lower my risk. I also intend to hold my investments until I retire. It sounds like a simple strategy, but it works for me. 🙂 Some readers may think I’m a good stock picker. But that’s not true.
In the last 7 years falling interest rates have pushed up asset prices across the board for stocks, bonds, and real estate. The S&P 500 index in the U.S. returned over 150% to investors since 2009. 😀 Good heavens!
My point is anyone could have randomly invested in a basket of different securities starting in 2009 and would likely see similar appreciation in their assets as I have. 😉 So I didn’t get lucky choosing stocks. But I am lucky to have started investing near the bottom of the great recession in 2008.
I’m also a fan of using other people’s money to work for me. For example, my 8x leverage in farmland has earned me the equivalent of 8 years of returns in just one single year! 🙂 The leverage used when buying my primary residence was even more extreme as my down payment was only 6% of the purchase price.
By maintaining a high savings rate, and borrowing cheaply to invest in a prolonged bull market, it didn’t take long before I saw the effects of compounding returns!
The graph below shows my historical balance sheet. The data for 2016 is only an estimation.
Lifestyle Change
There’s no point in having money if we don’t spend it right? 😉 So with my new found wealth I plan to increase my expenses through lifestyle inflation that will create positive experiences. For example, from now on I will say YES to guacamole with my order at Chipotle, even though it will cost extra. I will also choose premium seating at the movie theater for the extra leg room. 🙂
Do you guys remember the classic song “If I had $1,000,000” by the Barenaked Ladies? We don’t need a BMW or a Rolex to be happy. Sometimes it’s the little things in life that can bring the most joy. 😉 Here’s a blurb from the song.
If I had a million dollars
(We wouldn’t have to eat Kraft dinner)But we would eat Kraft dinner
(Of course we would, we’d just eat more)
And buy really expensive ketchups with it
(That’s right, all the fanciest – Dijon ketchups)
The first verse of the song also claims that you can buy a house with a million dollars. Ah-haha! ? That’s funny because according to the real estate board of Vancouver, the benchmark price for a house around here is $1.51 million, lol. But to be fair the song was produced in the late 1980s. Jeepers. Now I feel old.
Of course having a million dollars worth of assets isn’t necessarily the same as having a million dollars in net worth, or being a liquid millionaire. So my next big goal is to build up 1 million dollars in tangible net worth. 🙂 I think it will take me 6 more years to hit that milestone. By that time I will turn 35 years old and become financially independent, hence this blog’s name. 😀
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Random Useless Fact:
Anything can become fascinating if we’re bored enough.
Woohoo! I’m not sure I like defining millionaire as a person with $1 million in *assets* but if the dictionary says it, it must be true 😉 CONGRATS!!!
Thanks Vanessa. 🙂 I don’t really agree with the way millionaire is defined in the Oxford dictionary either. I think the term may be somewhat outdated. Then again, I could be just misinterpreting the semantics because it doesn’t specify whether assets refer to net assets or gross assets.
Congratulations… although I’ve always understood that being a millionaire was tied to your net worth, because arguably one could go to the bank in theory and borrow to become a millionaire, and we know that ain’t just right 😉 Stay focused on the long term goal, and you’ll get there, I have no doubt – Cheers
I completely agree. 🙂 Looking only at assets without any incurred debts doesn’t give an accurate picture of one’s financial situation. I won’t consider myself to be a true millionaire until I have $1 million in tangible net worth.
Some may suggest that brand, goodwill, and intellectual property should all be assets that contribute to overall wealth. Although that’s technically true it can be difficult to determine the value of such intangible things so personally I leave them out of the calculation. But you probably have better insights into this since you’ve got more business experience.
We should start refer you as Liquid the millionaire!!!
Great nickname. I’m sold. 🙂
Congrats on achieving 1 million in assets. I am around $870000 behind you in assets lol
Thanks. You’re also doing much better than most Canadians. Let’s keep up the grind. 🙂
Good Job!!Congratulations!
Thank you Lina. 🙂
A few things: i) Good to see you acknowledge your right place-right time luck. Even billionaire Buffett admits as much. ii) Good to see you acknowledge the difference between assets, net worth, and liquidity. $1 million is worth $0 million if you can’t access it (e.g. $1.5M Vancouver crack shack). iii) “By that time I will turn 35 years old and become financially independent…” Nope. Using the same quoted dictionary, Oxford, ‘finance’ is defined as: “the monetary resources and affairs of a…person”. ‘Independent’ is defined as: ‘free from outside control; not influenced or affected by others; not depending on another for livelihood or subsistence’. ALL of your investments and ALL of your money and ALL of your income will be VERY dependent. Unless, of course, you are referring to the NINTH (9th) definition of ‘independent’ which is: ‘(of income or resources) making it unnecessary to earn one’s living’. It would grant you Employment Independence but certainly never Financial Independence. If you are going to use the dictionary to define yourself, at least get all the definitions correct (probably a good thing for all the PF newbs out there to get straight, too). iv) Perhaps your most formidable trait(?) would be… Read more »
Good points, especially the last one. I’ve heard bull market cycles in the past typically last between 6 to 8 years. Since we’re already more than halfway through 2016 the next major correction should be nigh based on past trends. I’m trying to look for signs of weakness in the markets. So far it appears employment and GDP growth are slowing down in most western countries. I hope to see the next recession or market correction coming and try to protect myself against the downturn. 🙂 But that is only a hope because it’ll probably hit me swiftly and unexpectedly, especially when I have not experienced what a real bear market looks like yet. But whatever happens, I’m pretty excited to see my own emotional reaction when I lose as you say “a sh!t ton of money,” lol.
point iv) is the most important point to learn about yourself… how will you handle loss… not just loss, but a big loss? Our NW took a big hit in 2008… almost 40%… That said it took us 2 years to recover it all back and a little extra. Why, because we understand our relationship with money, and did not panic this time around… We also experienced the 1999/2000 financial issues. Panic is bad. If you invest in quality companies, quality companies make it through tough times we have now learned… I strongly suggest trying to train yourself prior to the next big correction. In the end it’s only money, and most likely if you are making more than an average return, it’s someone else’s who has not learned the lessons you’ve learned 😉 Getting lucky is easy, staying lucky is hard, and that’s where knowledge and experience ensure long-term prosperity- Cheers
Congratulation Liquid !!!! You made it.
It doesn’t take 6 years to bring up your net worth to 1 million, I would say you will hit to the target in less than 3 years because you will experience a big compound effect. Your 1 million assets will keep grow exponentially.
Enjoy and have a big party 😀 .
Thank you for having more confidence in me than myself, haha. 🙂 You could be absolutely right. If asset prices continue to appreciate I could very well have $1.4 million in assets, and have my debt paid down to $400K in 3 years from now. #youneverknow
Will you know start to decrease your debt or will you always have a certain level of debt because you feel it is better to invest with someone else’s money rather than your own.
I have a post coming up this month that will explain this in more detail. But to put it briefly for now I view debt as a tool along a continuous spectrum. There are no limits to this range. It goes from negative infinity to positive infinity. I have to be constantly mindful of where I am along the debt spectrum. Some factors that affect my position include the cost of borrowing, my portfolio size, inflation rate, etc. As long as interest rates are kept artificially low like today then I will always have at least some level of debt if I believe I can make a higher return from my investments than the interest I’m paying on my debt. 🙂 But if we ever reach an economy like in the 1990s when interest rates were much higher, then I might even go into negative territory on the debt spectrum. This means not only will all my debt be paid off (probably by selling assets) but I will also have other people owe me money to take advantage of the high interest rate payments.
“As long as interest rates are kept artificially low…”
What does this mean? What, exactly, is “artificial” about the rate level?
It’s artificial in the way that central banks are manipulating currency instead of allowing the free market to take care of it. 🙂 Author Jeremy Hammond’s explains it better on his blog.
He says “when people talk about “artificially low rates,”… they mean rates determined through the Federal Reserve’s manipulation of the money supply that are lower than they otherwise would be if determined by the market.”
There is no “natural” rate, thus there cannot be an “artificial” rate. The interest rate is what is — for various reasons — accept it.
The central bank has always had control over the level of short-term interest rates. In fact, central banks merely respond to economic conditions and adjust interest rates accordingly. Central banks don’t control the economy, rather the economy dictates what the central bank will do, hence why there are so many models that can accurately predict when the Fed will hike/cut interest rates.
@Jerry
Yes, this is true. 🙂
Congrats-and thanks for taking us along for the ride. It makes fascinating reading!
Thanks for reading Fee. 🙂 Enjoy the long weekend.
Congratulations — looking at that chart, you’re well on your way to hit the “true” millionaire mark before you’re 35!
What a fun post to read! Thanks for sharing!
I can’t wait to get there. 🙂 It seems like every year goes by faster than the last.
Congratulations! Life changes so much once you become a millionaire. The guacamole is just the beginning. We starting using paper napkins (well technically they are paper towels – but don’t tell the kids that.) Now we drink all of our beverages out of our fine crystal wine goblets. Orange juice tastes better in a wine glass. The crystal was a nice wedding gift that has been collecting dust – but we can use them now because guess what! We are millionaires and can buy new ones if they break. But we won’t.
Congrats again and it has been a blast following along.
Hi May. You are one of the first real millionaires I know lol. 🙂 I think folks like us have developed such a strong habit for financial responsibility that even if we let ourselves splurge from time to time our wealth will still climb regardless, especially when we have so much assets already.
Good job! This technically means you made it to your goal of being a millionaire at age 35. *throws confetti*
However, as you live in YVR, the inflation and quality of life there is much higher…. So you have about $1.52 actually. ^__^;
Haha, money isn’t what it used to be anymore, especially in YVR. Maybe some day I’ll move out of the city and settle down some place where my $1.52 can stretch a bit further. 🙂
You are indeed lucky that you started investing around the bottom of the market. So many people, myself included, saw their investments drop by over half, so a good portion of that 150% increase simply went to get back to square one, and the overall rate of return wasn’t so hot comparatively.
[…] this time last month I proclaimed that I had a million dollar in assets. At first I was really happy about my situation because I thought I was unique. 🙂 But as it […]