Who wants to be a millionaire? If you ask most people, they will tell you “I do!” But if you ask them what a millionaire really is, you’ll get many different answers. Even though “millionaire” has a specific definition, you’ll find that most tend to describe it more vaguely. Some of the descriptions I’ve heard of millionaires are like these:
“It’s when you have a lot of money”
“Being a millionaire is when you have more money than you can spend”
“It’s a level of financial freedom where you can do anything you want without thinking about money”
“When you have enough money that you don’t have to work anymore”
After hearing nebulous definitions like the ones above, I decided it would be a good idea to dive deeper into defining what a millionaire really is.
The Simple Definition of a Millionaire
Noun, an individual who possesses assets worth a million dollars or more.
That’s a pretty simplistic definition by any standard. It doesn’t take into account certain factors that may complicate the real definition of what a millionaire really is.
Millionaire Status is Based on Net Worth
For instance, just because you have a million dollars in assets doesn’t technically mean you’re a millionaire. If you also have a million dollars in debt, that just means you’re broke!
Or, if you have a million dollars in assets but $500,000 in debt, you may not be broke, but your net worth still doesn’t earn you the title of millionaire. So if you want to truly meet the definition of millionaire, your assets minus your debt (net worth) should equal one million dollars or more.
What Does a Millionaire Look Like?
When you think of a millionaire, what picture comes to mind? If you ask most people, you’ll likely get an answer that looks something like this:
But in reality, people with a net worth of $1,000,000 or more are likely to be more under the radar.
Chris Hogan’s book, Everyday Millionaires, blows these misconceptions out of the water. His team researched over 10,000 millionaires, uncovering details of exactly how they made their money and how they spend it.
Surprisingly, the average millionaire looks nothing like most of us imagine. Here’s a quick list of some of the attributes of how real millionaires live and build wealth:
- They are not flashy
- 2/3 of all millionaires never made six figures in any working year
- Live on less than they make
- 73% have never carried a credit card balance
- They built wealth slowly– no get rich quick schemes
- 79% never received any inheritance
- Most are generally frugal people
- They pay cash for used cars– Toyotas, Hondas, Fords, Chevys, etc.
- 6 out of 10 graduated from public schools
- Live in a paid for house in an average neighborhood
- They steadily invested in their 401k over decades
On the outside, the average millionaire looks much like everyone else. The main difference between them and their broke peers is that they were intentional with their money over a long period of time.
How long will it take you to accumulate a million dollars? Here’s a handy popup savings calculator to help you find out:Savings Calculator
The 4 Levels of Millionaires
Of course, there are many types of millionaires. The retired couple with $1.2 million in their 401k is totally different than the entrepreneur who grew a $100,000,000 business. Below, I’ll show you the 4 different levels of millionaires and how they stack up against one another.
The 4 levels of millionaires are:
- Centimillionaire (Hectomillionaire)
Approximately 8% of Americans are millionaires. A millionaire possesses many of the attributes stated above. Simply stated, a millionaire has a net worth of over a million dollars. For the most part, they invested money in retirement accounts over decades, stayed out of debt, and lived a modest lifestyle. They are average people with average jobs who exercised lifelong financial discipline to achieve millionaire status.
The average millionaire can usually live comfortably during retirement on their savings and investments. They can even enjoy some finer things they didn’t spend much money on before, such as better vacations, home upgrades, higher end vehicles, and supporting more charities.
A multimillionaire is someone who has accumulated a net worth of two million dollars or more. They also saved and invested in retirement accounts and lived relatively modestly for decades. Approximately 6.25% of American households have a multimillion dollar net worth.
Multimillionaires differ from millionaires in a few basic ways:
- May have saved more aggressively for a longer period of time
- Higher paying jobs that allowed them to save more over time
- Many have built successful small businesses
- They are well-versed in investing
- May be older, thus having had more time for their money to grow
Multimillionaires have more financial freedom to live life on their own terms. They are able to make larger splurge purchases (such as paying cash for a vacation home) without feeling any financial effects.
Multimillionaires also have more ability to pass along significant generational wealth in the form of paying cash for college educations and leaving inheritances to children and grandchildren.
Charitable giving at a high level is also a hallmark of multimillionaires.
The definition of a decamillionaire is someone with a net worth of at least ten million dollars, but less than $100 million dollars. This level of wealth is even more rare, with only 1.13% of American households in this category.
Decamillionaires are typically extremely successful businesses owners, elite athletes, entertainers, investors, and others who have achieved career success at a very high level. They can live life on a scale that most of us can only dream about.
Decamillionaires can afford anything they want, but don’t always live the extravagant lifestyle you might imagine. Some of the hallmarks of a decamillionaire are that they:
- Have more control over their time
- Work, but it’s typically not a 9-5 job
- May own higher end luxury cars such as Porsche, Jaguar, Maserati, Mercedes, Ferrari, and Lamborghini. However, they are just as likely to own a Toyota or Honda as an everyday driver.
- May own more than one home.
- Are more likely to fly first class/business class
- Might be a millionaire only on paper, without a lot of liquid cash available.
- Tend to be generous to their favorite worthy causes
- Usually pay cash for their kid’s college instead of taking out loans
- Did not inherit most of their money
- Have more money than they can spend
- Don’t have to worry about prices, but still like getting good value for their money.
Decamillionaires are a Varied Group
Of course, the list above is only a small sample of the characteristics of a decamillionaire. The truth is, those with a net worth of $10 million or more are as varied a group of people as anyone.
Each has a different situation and a different perspective about money, how they invest it, how they make it, and how they spend it. You can find a great example of that variety in this Quora thread about how decamillionaires live.
The definition of a centimillionaire (which is a misnomer) is someone with a net worth of at least $100 million dollars. Sometimes called hectomillionaires, these ultra-high net worth folks are not yet billionaires. But with continued wise investments, billionaire status is not far off for them. Centimillionaires are in rarified air, making up an extremely small percentage of US households. I was not able to find any good statistics on centimillionaires in my research.
Although stats are hard to find, we can glean some good information from sites like Reddit about how centimillionaires think and act when it comes to money. Here is some interesting info:
- Many made their money by starting a business that grew exponentially over time.
- A much smaller percentage inherited at least a portion of their wealth.
- They tend to be very private about their wealth (thus the lack of information to be found).
- Centimillionaires can struggle with who to trust, especially with new acquaintances.
- Mostly conservative with their investments. They typically own stocks, mutual funds, real estate, and other boring investments.
- It’s hard to find others who can relate to their situation/lifestyle.
- Many struggle with finding further purpose for their life now that they have achieved an ultra-high net worth.
- Many also struggle with what to do with so much money.
- They tend to be generous, but also tend to become jaded by organizations that solicit donations from them.
- They have a ton of freedom to do what they want with their time.
“Millionaire” Has Many Different Meanings
As you can see, the term “millionaire” can mean a lot of different things. It all depends on the level of wealth involved. The life of a person with a $1-2 million net worth sometimes varies considerably from someone with well over $100 million.
Wealth can bring financial freedom. But it also potentially complicates your life in ways you could never imagine before you built wealth.
Wealth is a Magnifying Glass
No matter the net worth, wealth ultimately acts as a magnifying glass. Extreme wealth simply magnifies who you are and what you’re all about. If you were evil before you became wealthy, you will still be evil. If you were gracious and generous before, you will only become more so as you build more wealth.
So as you continue to increase your wealth and pursue the 4 levels of millionaire status (if that’s your goal), remember to also continually develop those areas of life that make us humans the happiest:
- Genuine connection with others (friends, family, significant other)
- A happy, stable family life
- Freedom to live life on your own terms
- Doing work that you love
- Connecting with God
- Being loved by others
And whatever else that makes your heart sing.