I recently came across an eye-opening article that stated 2 in 3 American millionaires do not feel financially secure. If you had told 12 year old Marcus in 1992 that someone with over a million dollars in the bank could feel uneasy about their financial future, I would not have believed you. Back then, I thought becoming a millionaire was the ultimate financial goal—the magic number that promised a life of luxury, security, and freedom from ever needing to work again. So, what changed? Why is it that so many millionaires today still feel financially vulnerable?
The Rising Cost of Everything
One of the major reasons is inflation and the rising cost of living. A million dollars simply doesn’t stretch as far as it once did. In the 90s, a million dollars could buy you a very nice house, a luxury car, and still leave you plenty of room to retire comfortably. Today, that same million barely buys a small house in some major cities. You need roughly $2,400,000 today to match the purchase power of $1,000,000 in the early 90’s. While we may be experiencing disinflation (slowing of the inflation rate), inflation is still happening and will continue to do so. Depending on where you choose to spend your money this can work for or against you.
Lifestyle Creep
Another issue is what’s known as “lifestyle creep.” As people earn more, they tend to spend more, often without realizing it. With every raise, bonus, or investment gain, they might upgrade their home, buy a nicer car, or take more extravagant vacations. Over time, these incremental upgrades can chip away at their wealth, leaving them feeling just as financially insecure as before they hit millionaire status. The problem is that as their lifestyle expands, so does the amount of money they need to maintain it, and suddenly, a million dollars doesn’t feel like enough. I guess Notorious B.I.G. was right when he said “Mo Money, Mo Problems.”
The Fear of Uncertainty
We live in a world of economic uncertainty. Stock market volatility, changes in tax laws, and concerns about the future of Social Security all contribute to a sense of unease, even for those who seem to have plenty. Many people including millionaires worry about outliving their wealth, especially when they consider the unknowns. You don’t have to live in this sense of uncertainty, but it will take some effort now on your part to rethink your money and life goals.
Time to Reassess: How much do you need to fund your life by design?
While financial security is much more than just reaching a specific number in your bank account, it is import to figure out what that Freedom Number is. Your Freedom number is the Net Worth that you need to generate enough passive income to fund your life by design. It’s about understanding your future needs, wants and desire, then choosing to be a good steward of your money today.
Here are three steps to help you better manage your money and gain a sense of true financial security:
- Budget Wisely
Start by creating a budget that accounts for your current income, expenses, and future goals. It’s essential to know where your money is going, and more importantly, to ensure you’re living within your means. This will help you avoid lifestyle creep and give you more control over your finances. Save for emergencies and future needs, and don’t forget to build in some fun money to enjoy life now. - Invest for the Future
Building wealth isn’t just about saving; it’s about growing your money through smart investments. If you’re not already investing for your future, now is the time to start. Whether it’s in stocks, bonds, real estate, or retirement accounts, making your money work for you is crucial to feeling secure in the long run. - Spend with Purpose
Every purchase should align with your values and long-term goals. Before making big financial decisions, ask yourself whether this spending will bring true value to your life. Does it align with your vision for your future? This mindset will help you resist impulsive buys and focus on what really matters to you. You might need to start thinking twice before clicking that Buy Now button on Amazon.
Final Thoughts
I want to be clear that I believe money and happiness to be two very different things. I also know that whatever you want your life to look like both now and in the future will take some amount of money to fund it. What caught my eye on this article is that our world has changed significantly in the past 5 years and the financial landmark you may have created a few years ago for yourself may need to be re-thought. Regardless if your future is cruising around the Bahamas on a yacht or sitting on the sidelines of your grandkids soccer game, it is the responsibility of today’s version of you to prepare for the wants, needs and desires of the future you.
It might be time to recommit to being a better steward of your money, starting with these three simple steps above.
Go Live Life On Your Terms.
Marcus