Forums / Property Investing / General Property / $1,000.000.00 dollars isn’t enough !!

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  • Profile photo of wealth4life.comwealth4life.com
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    Today we are told that if we are worth $1mil (net) not including the value of our home we will not have enough to survive in todays/tomorrows world.

    It used to be that a millionaire was worth one million dollars – some analayis say now a millionaire is a person with over $10mil net assets as a miminium, how does you bank balance look.

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    Profile photo of YorkerYorker
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    Very valid point. Can’t be living for too long off $1 million these days. However I will say that $1 million a year in property is not too bad going.

    Profile photo of AblazAblaz
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    I see your point but if a person had 1 mill in cash and use it to live on i.e spent it day in day out until it ran out that would be suiside.
    But if you invested 1 mill in the stock market thruing off a 10% return that would give a person 100k a year forever.
    i would be very happy to live off that.

    Just my 2 bucks worth[cap]

    Profile photo of elveselves
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    well, I guess I dont worry so much about tomorrow in terms of what value will be and my worth. I could die tomorrow and would I care? no
    so enjoy while you can, do what you can and take care of yourself, but enjoy as much as you can along the way, the old saying money can’t buy happiness really does hold true…

    Elves

    ” a blind man may see what a sighted man may not”

    Profile photo of MiniMogulMiniMogul
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    well said ablaze

    and then, invested in property, you see the million never shrinks, it grows in value over time and so does the income, which if it’s rent, is indexed for inflation. So a million dollar block of flats returning 10 percent could be a 2 million block of flats returning 200k in 8 -10 years…isn’t that the length of time they say that property takes to double?

    joy to the world

    Profile photo of techatecha
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    Ablaz has got it.

    Once youve made your first Million there is no way youll have it sitting in a corner smiling back at you.

    Youll have learnt how to put it to work.

    I read here constantly of generating passive income and this IS how youll be able to survive and ENJOY life.

    You can do/have BOTH you know.

    There are 3 ways I know of for generation of a passive income.

    (1) The obvious Property.
    (2) From a business you own .Even though you dont work in it or work full time it can generate an income.(Banks love this!)Of course this maybe your way of making a living now.
    (3) Trading or more to the point INVESTING long term in the market.

    So even $30K a year from Property
    Another $30K from the other 2 so that totals $90K a year.
    Very achievable if you have a Nett equity of 1 mill.

    The challenge is getting there and doing it as elves says.Hell its gotta be FUN.
    90% wont come close.

    tech

    Humans are the DUMBEST of creatures.
    They do the same thing day in day out and expect a DIFFERENT result.

    Profile photo of NaughtyJonnyNaughtyJonny
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    Originally posted by Ablaz:

    But if you invested 1 mill in the stock market thruing off a 10% return that would give a person 100k a year forever.
    i would be very happy to live off that.

    This is only good with a few additional considerations:

    Firstly, your principle would need to grow by the CPI so that the real value of your return doesn’t decrease over time. $100K earned today won’t get you the same benefits as $100K earned in 2020.

    Simply sticking the $1M in a 10% term deposit and living off the income WILL result in you getting less money year after year – even if the interest rate never changes. Whatever strategy you do will need to meet or exceed inflation and the cost of living by AT LEAST the amount you spend each year.

    Getting 10% + capital appreciation is going to be risky and in an era of around 5% official interest rates it’s far better to look at a lower return + capital appreciation. To do that, you need to lower your expectations (say 50K per year + appreciation) or have more money than $1M.

    IMO, having $1M in the stock market and expecting a 10% return means ACTIVE investing (rather than passive investing) and means increased risk. Risk of losing some or most of it and being forced back in the workforce – often with fewer skills than you had when you left it.

    Next, once you’re in the ‘invest and retire’ mode, it’s better that interest rates remain higher rather than lower. Low interest rates are far better for we investors, but it’s hell to those people who rely on their investment returns. As we’ve seen recently, low interest rates are the mantra of ‘good government’, so you’re always going to need to have more money than less to be able to live comfortably.

    Do you think the government would bring the IR down to, say, 2% if they could? It’s a possibility, and one that would mean your $1M is only earning $20K per year.

    And finally, the last – and possibly most important thing – to consider is: is $100K enough? Once you get used to living at any ‘standard of living’ it’s very hard to go backward.

    Sure $100K per year is a lot of money to most normal people now, and one that would be a dream – but once you get used to it, the natural tendancy is to push your standard of living to that amount. What happens when you get ‘forced’ to only live at $80K/year (say you’ve run up your credit cards by $30K or $40K) and need to cut back for a while? The natural human tendency would be to eat into the principal – and then that reduces your income in later years.

    Not meant to be a downer, just some thoughts to consider when you think $1 Million is ‘rich’.

    Editted to add (based on other comments):

    – if you did have $1M could you really sit back and not risk it by trying to make it grow? Would you really be happy to remove yourself from wealth building and trying to acheive even more? Risk comes with that.

    – and if you did have it in property, the actual house is a depreciating asset. While you might be able to get a good return, you’re looking at a LOT of expense if you want it to be consistant over a longer period of time. Even when you take out normal yearly expenses, you still need to do capital expenditure from time to time.

    I just think if you want $100K per year – regularly and *with minimal risk* – you probably need around $3M to achieve it.

    Profile photo of wealth4life.comwealth4life.com
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    There are TWO areas here for mention 1. when you don’t have a $1mil you have theories 2. When you do have a $1mil you have realities.

    Not including your house or principle place of residence.

    As i have said many times before when you have money offers come to you and your view is changed when you lend it. Read again the Richest Man in Babylon and you will understand.

    I want to make money so i don’t invest unless i am GUARANTEED of at least 15% per annum upwards, and then compound it.

    Profile photo of Still in SchoolStill in School
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    Originally posted by NaughtyJonny:

    Quote:
    Originally posted by Ablaz:

    Getting 10% + capital appreciation is going to be risky and in an era of around 5% official interest rates it’s far better to look at a lower return + capital appreciation. To do that, you need to lower your expectations (say 50K per year + appreciation) or have more money than $1M.

    IMO, having $1M in the stock market and expecting a 10% return means ACTIVE investing (rather than passive investing) and means increased risk. Risk of losing some or most of it and being forced back in the workforce – often with fewer skills than you had when you left it.

    Hi NaughtyJonny,

    you strategies mentioned above, seemed to be a little risk adverse.. a little to conservative.

    with 1 mill, there are plenty of manage funds out there, that return more than 5 or 10% and are secured and guaranted.

    stock market can go up and down due to violatility, but there have been many, many stocks that have been returning 10% plus in the last year. (a 10% return, in a bullish market is very little.)

    though with 1 million dollars today, to me personally that has always sounded very little, i personally think of 1 million dollars as 1 house, a car in some very nice areas of Sydneys.

    Cheers,
    sis

    Wanna Talk About Stocks

    Profile photo of NaughtyJonnyNaughtyJonny
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    Originally posted by Still in School:you strategies mentioned above, seemed to be a little risk adverse.. a little to conservative.

    with 1 mill, there are plenty of manage funds out there, that return more than 5 or 10% and are secured and guaranted.

    Oh sure. Don’t get me wrong – this is the safe PASSIVE option with little risk involved. Kind of like the ‘retirement’ option if you will. Not the strategy I would use now, because I can always make the second fortune if I lose the first. :)

    Even if you do invest in a managed fund though, you still want to get your fund to grow over time so that you continue to live at a standard you expect from today’s $100K per year.

    That being said – with $1M, you should be able to make a lot more than 5%. Money makes money makes money. But you need to be ACTIVE in watching how that money is going. You’re taking on more risk, so you need to be more diligent in monitoring the changes associated with the investment.

    ResidentialWealth mentioned being able to make 15% or more on $1M. That is very possible, but you can’t (or are unlike to be able to) just invest it and then go on holidays overseas for the next six months – expecting to get back and find you’ve made 1/2 of your annual return.

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