If you are an aspiring millionaire, you obviously want to know what will really make you join this very exclusive club of millionaires. So here are many ways to look at it.
Net worth millionaires
This is the most accurate way of looking at who is really a millionaire and this is how financial planners and advisors look at it. Naturally, the banks, other financial institutions, and the government will also use this definition.
Net worth = Assets - Liabilities
Assets are things that you own. For example, cash, stocks, valuables, gold, home/real estate, jewelry, etc.
Liabilities are items like debt and other commitments like child support, alimony, etc.
If you live in a home worth $100,000 (that is assets) and your remaining mortgage is $75,000 (this is your liability), the home will contribute $25,000 to your net worth.
Now, this is a technical definition, but the one definition that I like is often used when you want to become a professional investor (e.g. you want to invest in startups or join a private equity fund), and that means investable assets. This means that you are a millionaire if you have at least one million dollars available for investment. It might be in your IRA, 401(K), brokerage account, bank account, etc., but it is not tied up in your home, car, boat, etc.
Income millionaires
This is rather unusual way to think about it is because very few Americans actually make a million bucks a year. The reason this may become important is that some of these individuals may make that kind of money, but because they overspend, they are actually not net worth millionaires, since they do not even own their home, boat, car, etc. They simply spend it on leases, rents, and partying. It is rare but you do run into folks like that.
So when will you be a millionaire?
As soon as your net worth hits $1,000,000. A word of caution, though. Prices of almost all financial products like stocks, bonds, gold, etc. tend to fluctuate, and even home prices can vary quite a bit, in the early part of your millionaire journey, you will go through periods in which you drop below a million dollar if the stock market drops or property prices decline. So, I like to think that when you touch $1.2 million is when you can really tell yourself that you are safely a millionaire because you have that margin. However, the best thing is not to make any changes they day you reach that magical number. Do not stop investing and keep going forward.