Is Billionaire the New Millionaire?

It seems that everywhere I look, it's not enough to be a plain old millionaire anymore.  The Financial Samurai asked earlier this week if becoming a millionaire was now the rule, rather than the exception, Evan of My Journey to Millions has to argue that one million is still a pretty healthy amount of cash, and to get Forbes to acknowledge you as one of the one thousand richest people on the planet, you need a net worth in excess of one billion dollars.  Speaking of Forbes, they get a prominent mention in the new song ‘Billionaire‘, which starts with the singer declaring “I wanna be a billionaire, so f%&$ing bad”.  With all this focus on billions, it seems like millionaires have simply been overlooked as a goal; you seem to need billions before people even aspire to imitate you.

Of course, overlooked in all this is that for most people, even getting to one million dollars is quite a feat.  The World Wealth Report for 2007 puts the number of millionaires in the world at 9.5 million (a number that, given the global downturn in 2008, is probably lower now), meaning that with a world population of roughly 6.8 billion, there's only a 0.139% of choosing someone randomly in the world who has a net worth of seven figures.  In spite of its apparent downgrade in status, becoming a millionaire is still a rather lofty goal.

How to Become a Billionaire

Even though a million dollars is still a pretty sizable amount (which, if properly invested, will allow you to safely withdraw $40,000 at a 4% ‘safe' withdrawal rate, effectively allowing you to make nearly the median US salary indefinitely without having to do any more work), you might still have your mind set on becoming a billionaire.  There's just too many things you'd want to do that a million dollars just isn't enough to suffice.  Fair enough; we all have goals and visions.

Unfortunately, there's no sure way to get to a billion.  If you go through the Forbes list and start to check on how the billionaires made their money, you'll see a variety of methods.  Investment is a popular one (say hello to Warren Buffet) as is starting a company that grows into a powerhouse (Hey, there's Bill Gates).  Inheritance is possibly the easiest one, although if your parents aren't already sitting on a billion dollar plus fortune, that's kind of out.  Even crime can pay; Forbes has caused a bit of controversy in recent years by including on its list people who've made their fortunes through the drug trade or other illicit activities (not that I, or presumably Forbes, would recommend such actions).

But what if you're just a run of the mill, average Joe (or Jane, or a couple we'll call ‘Joe and Jane Fictionale'), not a financial wizard, an incredibly successful entrepreneur, a crime boss, or the offspring of one of the first three; is it still possible to become a billionaire?  Well, I have good news and bad news.  The good news is that yes, it is possible to become a billionaire through simple saving and investing.

The bad news is that it might take much longer than you have available; some back of the envelope calculations show that saving $10,000 a year (about 20% of the median US income, not an impossible amount for many earners) and earning a 12% annual return (a bit high, but not impossible to achieve) yields a total sum of one billion dollars after a mere eighty-three years.  If you start investing when you're twenty, you'll reach this mark by the time you're blowing out the candles on your 103rd birthday cake!

How to Become a Billionaire Millionaire

Alright, so reaching billionaire status might be a little out of reach.  How about we lower your sights a little bit, and focus on becoming a millionaire?  A million dollars still puts you near the top of the global economic pile, it should, if properly invested, throw off enough money for you to lead a satisfying, if not awe-inspiring, life style, and you might actually do it before you qualify for AARP membership.  If you can invest that same ten thousand dollars a year, this time earning a much more modest eight percent yield, you'll end up a millionaire in a mere twenty nine years.  Start at twenty, and you'll be part of that (still pretty elite) cadre by the time you're fifty (sooner, if you can invest more or have some good luck with your investments).  Even if you can only save five thousand dollars each year, you'll still reach one million in thirty seven years, still plenty of time (if you start young enough; yes, you, Mister (or Ms.) ‘I'm just out of college, and I want to enjoy ALL the money I earn) to retire early and beat the rush to a tropical beach to spend your golden (and some of your silver) years.

It might not seem quite as impressive as being a billionaire, but you'll be able reach it a lot sooner, and enjoy your money that much quicker.  (Really, which would you rather have: a million dollar nest egg when you're young enough to enjoy it, or a billion dollars when your biggest indulgence leaving your teeth in when you go to sleep?)  So, the next time you see or hear someone talk about being a billionaire as if simply having million(s) of dollars was old hat, think of just the level of time and energy it would take to reach that point, and be happy to trying to become a plain, old (multi) millionaire.

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