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The millionaires at $1m to $10m absolutely DO have to be "frugal" if we use define "frugal" to be about "smart spending" as opposed to fishing pennies out of public fountains.

The word "million" is deceptive because it is an amount beyond what 99% have. It makes it seem like some mind boggling amount of money but mathematically, it really isn't that much. A person classified as "millionaire" could be tagged that because of total net assets and not the liquid cash in a bank account. E.g. a $500k house + $500k IRA/401k + $25k car is a "millionaire".

But let's say you have a multi-millionaire (e.g. 2 million dollars). That might be $1 million in cash in the bank. That's still not much money because:

- it's not enough to park $1 million of principal into risk-free US T-Bills and live off the current interest rates of < 1%. That's only $10k income per year which is less than minimum wage.

- if your child gets an expensive health problem like leukemia or spouse gets cancer, your medical bills could blow past the lifetime cap of the health insurance policy and therefore, you have to drain your savings to pay for expensive treatments.

- non-Ivy League schools can cost $50k per year. If you have 2 children and you want to give them the gift of college education without being burdened with student debt, that's at least $400k. And to stay at $400k, it would require the parents to be "cheapskates" and not fund any extracurricular trips like ski vacations and Spring Break parties down in Mexico.

The millionaires that have less than $10 million definitely have to be "frugal" and watch their money. Consider than NBA star Allen Iverson earned $200 million and blew it all away.

At $100+ million, one can start getting frivolous and maybe buy a Ferrari. However, $2 million is not enough cushion to live off interest income and be 100% worry-free from unexpected life events. One would still have to work somewhere to keep adding to the nest egg.

I think it really depends on the kind of life you want whether one million is enough to live off. There is this guy, "Mr Money Mustache", that preaches a "frugal" lifestyle as a means of retiring very early with less than a million in the bank. On his blog he talks extensively about this.

In particular, he provides some evidence that it's safe to spend 3-4% of your assets every year, indefinitely, if you invest in index funds. That means that it's enough to safe about 30 times your annual expenses. For me, that would be around 650000 Euros. A million certainly would cover this, and have something left over for extreme crisis.

As long as your income is greater than your expenses (which include healthcare and retirement saving) you can absolutely buy a sports car if it makes you happy and it is not your life-goal to retire early.

I think it is nice if you can provide your children some security, but I do not think that your savings have to be at the highest level when you die.

I come from a country where college education is free and healthcare is not capped. I do have to worry about dental care beyond the basics, though.

Agreed on everything but this line

> it would require the parents to be "cheapskates" and not fund any extracurricular trips like ski vacations and Spring Break parties down in Mexico

One would assume a 'frugal' household knows better than that and would want to pass their value system on to the next generation too. Want to get wasted in Mexico? Find a way to make it happen yourself.

It's laughable to suggest splurging on a 300k Ferrari is irresponsible at $10M < assets < $100M.
You can comfortably purchase a Ferrari with far less than $100 million. In fact, there are circumstances under which you could comfortably purchase a Ferrari with well under $1 million.

What most folks don't recognize is that you can get significant leverage on savings, a solid income and a good credit score. In the case of a used exotic car, if you purchase the right make, model and year and negotiate a good deal, you can often drive the car for not much more than the total cost of, say, leasing a Mercedes. In some cases, you can even drive the car for a while for next to nothing.

They key is that you buy used, identify a good deal, put down as little cash up front as is possible (i.e. 10%) and extend the loan term out as far as you can (specialty lenders will do 72 to 120 month loans on exotic cars). If you hit the depreciation curve at the right time, you really can't lose.

You'd be surprised how many people who could pay cash for a $250,000 Ferrari still have a car note. There's really no good reason to pay cash outright in many cases.

just minor nitpick - "lifetime cap of the health insurance" - i though with obama care this was eliminated, no?
At $10m you can comfortably buy a Ferrari without losing sleep over it (except in anguish that it might be stolen, or damaged).

But: between being frugal and buying an overly expensive toy car, there's a lot of space. At $10m, you can spend $20k every month and it'll last you forever if you invest the rest in index funds at 3% or so. So a frugal lifestyle is uncalled for at that point, unless it's your personal way to obtain happiness.

Good post. One nit tho:

> - if your child gets an expensive health problem like leukemia or spouse gets cancer, your medical bills could blow past the lifetime cap of the health insurance policy

The lifetime cap was one of the things eliminated by Obamacare afaik.

I think there's a big difference between being frugal and cheap, and it somewhat has to do with personal style and creativity. Somebody with no taste and a need to show off might require a $300k super car because they feel like that's what millionaires do. But you can get an amazingly awesome vintage sports car for $60k or less. The same could be said for houses, vacations or anything else, you don't have to spend the maximum amount possible to get something fantastic. But you also don't have to live like a cheapskate in order to preserve your wealth.
Cannot read the article, however, we should be careful about the definition of "millionaires".

If we define "millionaires" as the individual with 1M of worth asset you are definitely right.

If we define "millionaires" as High-Net-Worth individual (HNWi), the people who have at least 1M in investable finance without counting the primary residence it start to get more interesting.

However, if we define "millionaires" as individual with a net profit of 1M in the last fiscal year, they DO NOT have to be frugal :)

From everything I've heard, the cutoff is around $25MM to really not have to ever worry about money
Do people with millions of dollars in networth even think about T-bills?

Genuinely curious.

You have some good points here but keep in mind that some of the things you mention (health care, education, etc..) are very US-centric and far less of an issue in other places such as Europe.
FYI Obamacare eliminated lifetime caps on health insurance payouts.
When I read this article few minutes ago I found the following phrases and quotes defining the characters of these people and justifying their acts-

...“It’s (money) an important tool. They don’t neglect it, but they also don’t worship it.”...

...“Part of this pressure to keep going is less about greed and more about insecurity that might be self-imposed,” ...

...“It’s about paying attention to what makes you happy and not just doing what our society tells us to do,” ...

... he and his wife simply didn’t care that much about material possessions...

... “We like to travel, and we’ll spend the money for that because it’s worth it having a real experience together.” ...

And when I went through the comments here, I found none so far discussing on any of the points above.

Every one of those quotes is portraying selfishness. Why should anyone discuss those points? They don't have long-term value to anyone else.
The article is decent, though the headline is a little silly. In the sort of cases described in the article, it's the frugality of these millionaires that was a major contributor to how they got to be millionaires in the first place.

Rather than letting falling to the all-too-common temptation to let luxury spending grow wildly with income, it's possible to set clear goals of financial independence, build habits that keep you on that path, and arrest the tendency to keep going on the hedonic treadmill.

I've found value in resources like Mr Money Mustache's blog for quantifying what actions are helpful to work toward financial independence: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...

Is this a surprise?

People who have lots of money, are good with spending money? and knowing the value of things?

I don't think they're cheapskates, they just know what ACUTALLY brings value to their life's. They probably wouldn't mind spending, if they get more or equal value from the thing they are purchasing.

Fancy Cars in general are terrible value, for the enjoyment they bring you. Unless say its your hobby.

Fancy Cars in general are terrible value, for the enjoyment they bring you. Unless say its your hobby.

Buying a brand new fancy car is a terrible investment for the enjoyment, but that doesn't need stop you from having one. The article makes the point that there are plenty of ways to have "nice" things without breaking the bank, even if you don't have $$Texas.

"And while they own three homes — condominiums in Naples and Boca Raton, Fla., and a house in Lebanon, Pa., where they grew up, none of them are huge. One splurge is an annual trip to Italy."

Frugal? Is this a joke?

I think "frugal" in this context means "spending within their abilities".

In contrast, many lottery winners are bankrupt within 5 years. Why? They're "rich"! They can spend money like it's water! And they do... Then they run out.

As other commenters point out, a million dollars is money, but you still have to be careful. You probably still have to work.

You can go out for dinner three times a week at a reasonable restaurant and not worry about it. You can buy a decent car without it impacting your budget too much.

They're not penny-pinching. They're not part of the 47% of americans who'd have trouble raising $400 for an emergency expense.

But care-free? Nope.

One trip a year to Italy is probably $5K for two people. In comparison, that's like $50 for someone with $10K to their name. It's money, you likely have to plan for it, but it's do-able.

Those three properties together cost less than a starter house in Silicon Valley.
The Millionaire bar is lowered each year at the rate of inflation. So to see how I'm really doing vs. my generation, I factor in inflation since my birth date, and that is the number I need to achieve 'Millionaire' status.

It's somewhat arbitrary, but for me, that's about $6,000,000 in 2015 dollars....

Yeah when they made the film How to Marry a Millionaire in 1953 with Marilyn Monroe, a million really meant something.
Sometimes I wonder if people do things like darn their own socks just to show off how frugal they are. I have a hard time believing that a multi millionaire values his time low enough to darn socks to save sock money.
Maybe he enjoys doing it? Perhaps it's something from childhood or early adulthood with fond memories, or just simply a task he enjoys the process of?

I'm sure most people here can understand the idea that sometimes fixing your own stuff can be fun, even if it's cheaper to replace it.

Frugality is easiest to practice as a habit. E.g. rather than regard entertainment as an expense, frugal folks make simple errands and tasks into their entertainment.

Also frugality is not about showing off, except among frugal friends comparing notes.

Another factor its that not advertising one's wealth is an inexpensive form of household security.

Another NYTimes article by a millenial amazed by the completely ordinary lives led by their parents' friends.
I'm a "frugal millionaire" with liquid, investible assets of approx 1.2m USD (does not include my home, car, etc.) I saved and invested my way to this after about about 15 years of working. My highest yearly income was approximately 160K while my lowest was around 50K. I drive a 10 year old car (which I bought new, in cash) and my mortgage is fully paid off.

I still go to work everyday (unfortunately.) I'd rather work part time, 2-3 days a week as a contractor/consultant, then work on my own projects the rest of the time.

I often wonder how many others out there are like me... "working millionaires."

I'm curious - how did you amass your 1.2m USD? I have a similar background and have done well but have not reached your level. Was it thru regular investing? Or did you have some "high payout" one-time events like making a lot of money on house appreciation, sale of a company, etc.

In any case, nice work!

The Millionaire Next Door is a good read related to this although it is getting a bid dated.
That book had a large effect on my views of money, not being ostentatious, etc. Some people need to be flashy with their money, but probably not a good idea. I have a friend who usually drives a fairly new model Porsche while I think I have more wealth than he does and I have a 1998 Toyota Corolla. That said, it would be a more boring world if we were all the same!
I highly recommend How Much is Enough? by Robert & Edward Skidelsky.
Note also that in several states, the average full-career government employee receives a pension worth over $1 million. It's just that we don't commonly use the term "millionaire" when the payment is in the form of an annuity.

http://www.wsj.com/articles/SB100014240527023043607045794151...

Its important to have a spouse who has a similar desire for sensible frugality. The level of income is less important than simply living below your means for your whole life. With prudent financial planning, compound interest and the passage of time achieves the level of wealth described in the article. Indeed car purchases are a good indicator.

An omission of the article is that often frugal persons are generous to their loved ones and causes they care about.

Compound interest? Where? The interest rates are such that inflation would destroy whatever gain you have. Nearly all savings accounts are paying an annual yield of less than 1%! That means WITH compounding, you're looking at a 1% or lower gain. Inflation is typically between 1-4%, with 2% being the benchmark in terms of financial planning, though admittedly in April, we had slightly negative inflation, but that trend won't continue.

Investing is the only way to build wealth. It's impossible to save your way to financial freedom. If you make an average of $100K per year from age 30-60, that's $3 million in income. Assuming about 35% in state, local and federal taxes, that leaves you with $65K per year. Now, you're saving 10% of that per year, that's $6,500 saved per year. With a 1% rate, at the end of 30 years, you have about $229K. Assuming you live to be 80, that's $229K that needs to earn enough to pay your bills. Even if you saved 20%, you'd still not even have $500K at the end of 30 years.

With the same 20% savings rate and some reasonably smart investing (12% returns,) then you'd end up with over $3.5 million over the same period. If that investing is in real estate, you could potentially earn that gain tax free (or tax reduced) because building depreciation percentages can generally exceed the "profit" from real estate cashflow. On top of that, a 1031 exchange means you can keep selling and trading up to larger and larger real estate without paying a capital gains tax, which means you build even more net worth that can then be leveraged to buy more properties. Most millionaires get there because of property, very, very rarely because they save their way to it. A typical middle-class wage doesn't lend itself well to saving your way to millions. The math just doesn't work, the tax code also doesn't support it.

Frugality isn't the key to success. The $30 you save by washing your own car is peanuts compared to the value of that time doing something more productive (like sourcing real estate or researching investments.) Frugality can actually cost you more money because of the time-value of money. But admittedly many of us have inherited our parents/grandparents' Depression Era, middle-class ethos. It's a classic example of Rich Dad Poor Dad.

I have a friend who is a school teacher. He is the most frugal person I know. He paid for his first home by the time he was 29 and than sold that and bought a awesome home that was paid off in 7 years.

Most generous person I know. He would give the shirt off his back if need be. Drives his wife nuts :)

the people in this article have multiple or large houses, take expensive vacations, buy luxury goods... they don't sound overly frugal to me. wtf? am i taking crazy pills?

my parents (in their 60s) have 2 lifetimes worth of savings and investments yet still do their own laundry, have a vegetable garden, mend their clothes.... but they drive nice cars, take expensive vacations, and buy tons of gadgets. they have a massive OLED TV that they watch stereotypical old-person shows on, yet still re-use their ziploc bags. this is not an either/or proposition. people are complex creatures, especially when it comes to money.

in other words they're just normal people, not overly or underly frugal. this entire article is confused. older people with $millions today have a huge diversity of backgrounds, philosophies, and lifestyles. it's impossible to capture some kind of over-arching rule. spending habits are usually a mix of contemporary attitudes and early life values.

if nobody spent any of their money our economy wouldn't work. the important thing is to be careful with your savings and investments - the goal isn't to be a complete cheapskate and die with every penny you ever earned. i can't think of a worse way to live.

Its clear to me that the article's family are still living well below their means. Multiple homes make sense for those who are frugal enough to restrict vacations mostly to the second home, which if well-located can appreciate in value faster than inflation. Frugal families often have such assets that appreciate, rather than expenses or possessions that depreciate.
You can spend your money on high marginal value things like lifting people out of poverty, or on paying someone to create pollution and junk.
The farther you are in life in your job, personal life, friends, the easier it is to live enjoyably with spending less money through work trips to fabulous cities, automobile perqs, subsidized meals, work home-buying perqs, etc.

I'm not sure how much these people are struggling with their low spending.

As a person who travels regularly for work I can say you have quite a romantic view of business travel.

The reality is that I usually see (in this order) an airport, a taxi, a conference room, a hotel dining room and/or bar, a hotel room, a taxi, an airport.

The idea that there is much downtime on a business trip is a fantasy of those who don't travel for work.

Please note that although we respect frugality over lavishness. Frugality among rich people is one of the primary reasons behind wealth inequality. Sitting on top of an perverse amount of wealth and not doing anything with it is bad for the economy.

Wealth needs to be redeployed back into the economy and it must be done in following a method that doesn't grow the wealth in an unnatural compounding way.

Unless they've sacked their money away under their mattress, it has been deployed back into the economy. It is either invested or in a bank where the majority of it has grown the pie of total dollars through loans (this is often not well understood). If I have ten dollars that I place in a bank, they will only hold the required reserve. Assuming this is 30%, then seven will get distributed in loans. The effective size of the money is now 17 dollars.