Do You Need $1 Million to Be Wealthy? 67% of Americans Say Yes
Many people think it takes $1 million to be wealthy. Attaining that goal may be more doable than you'd think. Read on to learn more.
Image source: Getty Images
These days, a lot of people are struggling with their finances in the wake of lingering inflation. So it's not so shocking to learn that only 14% of Americans consider themselves wealthy, according to recent data from Edelman Financial Engines.
What's a little more surprising, however, is that 2 in 3 Americans believe they need $1 million or more to feel wealthy. That's up from 57% last year.
At first, the idea of attaining a net worth of $1 million might seem laughable. But it may be more doable than you'd think.
How to get to $1 million
Getting your net worth (which is your total assets minus your total debts) to $1 million isn't easy, and it's not the sort of thing you can expect to happen in a year or two. But you may be surprised at how easy it can be to eventually be worth $1 million.
Let's say you make an effort to save $500 a month this year, and at the end of 2024, you invest $6,000 in the stock market. Over the past 50 years, the market's annual return has averaged 10%. If you can earn that same return on your $6,000, your portfolio will be worth around $437,000 in 45 years.
Meanwhile, let's say you buy a home this year for $250,000. In 45 years from now, at which point it'll likely be paid off, it may be worth $600,000. So if you take a $600,000 home that's free and clear of a mortgage and add its value to your $437,000 investment portfolio, you'll have passed $1 million -- eventually.
Focus on what it takes to be financially set now
The above example illustrates that getting to a net worth of $1 million is doable even if you're only a moderate earner. But also, you'll see that it could take a really long time to get to the $1 million mark. So rather than focus on that, think about what it'll take to be financially comfortable in the near term.
This doesn't mean you should neglect your retirement savings. It's still a good idea to consistently fund an IRA or 401(k) plan. Rather, instead of just focusing on an eventual goal -- and one that involves getting to a pretty high number -- think about the amount of money or savings it will take for you to feel good about your finances now.
Maybe having a $10,000 savings account cushion gives you peace of mind and allows you to spend on different things with less worry. Or maybe you need $15,000 in savings to feel as if you can do things like go out to eat at nice restaurants and take vacations without feeling guilty.
Also, think about what it costs to be you for a month based on your essential bills. If that number is $3,000, aim to save a $9,000 emergency fund at a minimum so you're protected in case you lose your job.
It's not totally shocking to learn that most Americans say it takes $1 million to feel wealthy. After all, that's a large number, and it's sort of a classic number that's used a lot to signify wealth. But the reality is that you might get to a great place financially with a lot less money to your name.
Alert: highest cash back card we've seen now has 0% intro APR until 2025
This credit card is not just good - it's so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
