Article - What is Millionaire?
From Wikipedia, the free encyclopedia
- Net worth vs. financial assets
- Number of millionaires in the world
A millionaire is an individual who resides in a household whose net worth or wealth exceeds one million units of any currency. It can also be a Person who wholly owns 1 million units of currency in one bank account or savings account. A multimillionaire has a net worth of more than two million units of currency and a hectomillionaire has a net worth of more than 100 million units of currency, but the technically incorrect centimillionaire (net worth of 10 thousand units, strictly speaking) is more often used to mean the same thing. While statistics regarding financial assets and net worth are presented by household, the term is also often used to describe only the individual who has amassed the assets as millionaire. That is, even though the term statistically refers only to households, common usage is often in reference only to an individual.
Depending on the currency, a certain level of prestige is associated with being a millionaire, which makes that amount of wealth a goal for many. The status of millionaire, however, is no longer as exclusive as it once was. The increasing number of millionaires is partially due to inflation: a million dollars, for example, provides far less purchasing power today than it did in the 19th century. Nevertheless, it still ensures a comfortable lifestyle for those becoming millionaires.
Recently there has been some controversy over how to correctly determine a person's status as a millionaire. One of the two most commonly used measurements is net worth, which counts the total value of all property owned by a household minus the household's debts. According to this definition, a household owning an $800k home, $50k furnishing, two cars worth $60k, a $60k IRA, #$45k in mutual funds, and a $325k vacation home with a $250k mortgage, $40k in car loans, and $25k in credit card debt would be worth $1,025,000 and every individual in this household would thus be a millionaire. However, according to the financial assets measurement, equity in one's principal residence is excluded. So are all other fixed assets, such as the car and furniture.
While millionaires constitute only a small percentage of the population, they hold vast control over economic resources with the most powerful and prominent individuals usually ranking among them. Forbes and Fortune magazines maintain lists of people based on their net worth and are generally considered authorities on the subject. According to Forbes' latest annual list of the richest people published in 2007 there are 946 US-dollar billionaires in the world. The number of millionaires is much higher.
Many lottery, sweepstakes, etc. winners in the United States have been known as "millionaires" when they actually won an annuity payable over 20 or more years totaling a million dollars.
Another commonly used term is multimillionaire. As the term implies, multimillionaire applies to those individuals residing in households with a net worth or wealth of two million or more. Only a small minority of millionaire households are indeed multimillionaire households, yet many of the stereotypical millionaires shown in televisions programs such as "The OC" are actually multimillionaires. The term also has a more prestigious connotation than millionaire.
Roughly 0.9% of high net worth individuals (HNWIs) can also correctly be identified as ultra-high-net-worth individuals (ultra-HNWIs), those who reside in households with a net worth or wealth of 30 million or more. There are approximately 70,000 ultra-HNWIs in the world with 54,000 or 77% residing in the United States and Europe.
The "World Wealth Report" is a report on individuals with a net worth of at least $1 million in all assets except their "primary residence". The report is compiled annually by Capgemini for Merrill Lynch.
The 2006 report for the year 2005 tells that "8.7 million people globally each hold more than US$1 million in financial-asset wealth, an increase of 6.5% over 2004."
The number of millionaires grew faster than the number of people in the world in 2005 (1.2%)
Some growth in international wealth and the number of high net worth individuals can be attributed to the weakness of the US dollar, as stated in the report.
HNWIs (more than $1 million, in 2005)
- Global: 8.7 million
- Europe: 2.8
- North America: 2.9
- Asia-Pacific: 2.4
- Latin America: 0.3
- Middle East: 0.3
- Africa: 0.1
Ultra-HNWIs (Ultra-HNWIs Account for 0.9% of All HNWIs) (more than $30 million, in 2003)
- Global: 70,000
- North America: 29,000
- Europe: 25,000
- Asia-Pacific: 12,000
- Latin America: 2,000
- Middle East: 1,000
- Africa: 1,000
There is a wide disparity in the estimates of the number of millionaires residing currently in the United States. According to TNS Financial Services, as reported by CNN Money (http://money.cnn.com/2006/03/28/news/economy/millionaires/), 8.9 million households in the US alone had a net worth of at least $1 million excluding primary residences in 2005. Millionaire households thus constituted roughly seven percent of all American households. The study also found that half of all millionaire households in the US were headed by retirees. Another finding was a record "33 percent increase over the 6.2 million households that met that criteria in 2003," fueled largely by the country's real estate boom.
A report by Capgemini for Merrill Lynch on the other hand stated that there are approximately 1,900,000 households in North America whose net worth exceeds 1 million US dollars (which include "private equity holdings stated at book value, ...publicly quoted equities, bonds, funds and cash deposits.. offshore investments are theoretically accounted for, but only insofar as countries are able to make accurate estimates.." as well as real estate not used for primary residences) (p. 30)).
These two very different numbers come from very different methodologies. TNS Financial Services uses household surveys and extrapolates the data from their sample across the entire US population. Merrill Lynch/Capgemini use macroeconomic analysis, estimating the total wealth of a country and its distribution among the population, and deriving from these estimates the number of high net worth individuals.
At the end of the third quarter of 2004 the "households and nonprofit organizations" net worth was $46,681.4 billion. If divided by 131 million tax paying households that makes $356,347 for each (46,681.4/0.131).
"L.10 Assets and Liabilities of the Personal Sector" net worth was $21,022.8 billion excluding "corporate farms" liabilities (31175.7-14035.2+1626.5+2255.8). If divided by 131 million tax paying households that makes on average $160,479 for each (21,022.8/0.131).
According to the Swedish government revenue service (Skatteverket) 7,057,800 people declared income during 2003 (on form "inkomstskatt 1"). "Households and non-profit institutions serving households" net worth was 1,961,561 kronor at the end of the third quarter of 2004, which includes "tenant ownership rights" (real estate ownership) of 510,002 kronor.
Excluding assets in "collective insurance" (government pension funds), the net worth is 1,289,812 (1,961,561-671,749), that is 181,664 kronor (US$25,000, 7% of Americans net worth) for each person declaring income (1,289,812/7.1).
Great wealth and its consequences is a popular theme in fiction. The Millionaire was the title of a 1955 TV series about an unseen man of wealth who gave away $1,000,000 to a different person each episode, and a 1931 motion picture about a retired millionaire who buys a gas station to ease his boredom. Millionaire is also a common nickname of the international quiz show Who Wants to Be a Millionaire?, first hosted in the UK by Chris Tarrant, and later in the US by Regis Philbin and Meredith Vieira. Who Wants to Be a Super Millionaire also aired in the US, where contestants could win a total of $10,000,000. Many reality TV shows offer one million dollars as first prize.
Millionaire characters are also heavily used throughout entertainment programs. The heavy use of millionaire characters in televisions shows has led to the creation of stereotypes for persons whose net worth or wealth exceeds the amount of one million. Perhaps the most famous characterizations of millionaires on television shows and in movies are the evil businessman, the starlet, the ruthless lawyer and banker as well as the corrupt politician and their materialistic off-spring. These shows often portray their millionaire characters in a lifestyle of complete excess, that is far out of reach for most net worth based millionaires in the US. It should also be noted that, as with most stereotypes, the millionaire stereotypes created by entertainment broadcasts and productions are not representative of the diverse population that reside in millionaire households.
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