Your House Doesn’t Make You A Millionaire
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1% of the world population qualifies as millionaires.
A millionaire has a liquid positive net worth of 1 million dollars minus their debts and liabilities. So unless you net millions of dollars after selling and paying off your property (if it’s not already paid), you’re not a real millionaire.
Many homeowners want to call themselves millionaires but don’t qualify for this status. Even if they sold their homes, many would not be millionaires because of their debts (e.g., credit cards, student loans, personal loans, car loans, etc.). Debts and liabilities add up quickly and are the ultimate detractors of your net worth.
The American dream is not the way to build wealth; it’s a way to get property, but you still don’t own the property for 15–30 years. You’re renting from the bank until you pay that mortgage off. The only difference is that you have more “”freedom”” (to the extent of your HOA if you have one) to do what you want with the place versus renting a unit and abiding by their property laws.
The American dream equates to owning a lovely home, a nice car, and being able to afford nice things, but at what cost? The lovely home is the foundation of the American dream; it’s how we’re taught to build wealth and enter the world of freedom, but is renting a liability a dream come true?
So many people who “”bought”” their homes now wish they never did because they can’t afford the upkeep and the 15–30 years of mortgage payments. Owning a home is not for people who don’t want to be stuck with a bill for 360 months. And if you want to build wealth, your liability (primary residence) doesn’t need to be how you do it.
If your house were taken away, what would you be left with? Many homeowners would not have much to their name because they are house-poor. People still rarely can afford to cover a $500–$1000 emergency without a credit card or loan, which means they most likely don’t have a 3–12 month emergency fund or much retirement savings.
Most people are reaching retirement age without much in their bank accounts, so their “homes” are savings zappers. Many people’s financial resources go straight into their primary residence, not leaving them with anything left to build up their liquid net worth. House poor is what they call it.
A guy told me his retirement plan was his house, and I paused. I needed clarification. He’s not renting or selling it, so what does he plan to do for income?
Your primary residence should never be your financial fallback plan. If you decide to get a home, remember it’s a liability until it earns you income.
Never bet all your money on one horse. Labeling and planing on your primary residence being your fallback plan is one horse. And if you’re not planning to sell or rent your home like this guy, there is no plan unless you pay it off or use others living with you to pay it off and provide additional income through charging more than the actual house cost.
Ideally you have at least three horses (sources of income) when as you’re edging towards retirement age. And if possible, maybe you don’t stop working at all.
There are many ways for individuals to become millionaires, primarily through business, investing ventures, and living below their means; a much easier way to build wealth and keep your liabilities low.
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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.