Who Wants To Be A Millionaire?!

Who Wants To Be A Millionaire?!

Here’s an example of how weird my mind is sometimes.

The television quiz program “Who wants to be a Millionaire” was first aired in 1998. If the program was still running today, we should refer to the 2020 program as “Who wants to be a $1,740,000’aire”.

“What the #^*@ Bob”, you’re saying. You’ve obviously done one too many feasibilities. In my defence, (having previously admitted how weird my mind can be sometimes) what I’m saying is that money loses value over time, and what was $1,000,000 cash in 1998 is $1,740,000 cash now.

That’s what inflation does. And that’s just cash that has no growth component. Think about Sydney houses. The median house price in 1998 was $248,750 and in February 2020 was $1,001,000.

Anyway, back to millionaires. What does it really mean today to be a millionaire? Is it even relevant? It certainly was when I started out as a developer. Ten-foot tall, bulletproof, and just out of nappies. I didn’t know what I didn’t know and a dangerous man – particularly to myself.

Here’s why becoming a millionaire meant something to me then. This was the median house price in 1982:

Sydney $79,425

Brisbane $55,125

Melbourne $52,500

Yes, Melbourne was coming third but more significantly, a $million to me equated to 18 houses. Being a millionaire seemed a million light-years away. But it sure was something to shoot for.

These days owning an average house outright in Sydney makes you a technical millionaire. But you probably don’t feel like one. To me, when judging millionaire status, firstly eliminate the family home. Then look at the net not the value of the balance

Sydney (and Melbourne and…) is full of technical millionaires who simply bought a house long enough ago, didn’t lose their job, and didn’t die. Nothing too smart there. What is smart though, is if they do something with their new-found equity. Something to create more equity and cash flow.

Remember the Australian Property Investor (API) magazine. Each month they’d feature an investor, usually in their late 20’s, who had accumulated four or five properties with a collective value of $2 – $3 million. They say something like “Young gun investor becomes multi-millionaire in under 3 years”. Every hard-working property lover, slugging away in the trenches, was torn apart with rage and jealousy.

Then the funny part. It showed the value of the properties and their debt. Now this was in the days of 95% loans and banks throwing money at you like confetti at a wedding. And here’s our hero, king of the no-doc loans, drowning in 90%+ debt, $300K on the table in a $3million portfolio and handing out the 50 copies of the API he bought to everybody he knows who could read.

One sniffle and a sneeze in the market, a reshuffle of the chairs at work, and the pin-up boy is stacking shelves and driving an Uber 25 hours a day. But he did have his one month of glory in the sun. Not everyone can die saying they achieved that.

How many advertising headlines pushing some form of money-making venture do you see incorporating the term ‘millionaire’? It makes me chuckle. At least get with the times and say multi-millionaire or maybe in 10 years a deca-millionaire.

So what’s the take-away from this rambling.

1. Be aware of how money loses value

2. Be proactive in building equity and cashflow

3. Don’t get featured in property magazines.

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