Tim Ferriss, in his book 4HWW introduced the term The New Rich. These are the people who enjoy the lifestyles that were traditionally linked to the rich people, without having the assets of the rich people. The New Rich enjoy the lifestyles of the rich because they have created passive incomes that allow them to fulfill their obligations and cover the expenses of their desired experiences. In other words, the New Rich have learned to live rich without being rich.
I want to introduce the term The New Millionaire.
Traditionally, The Millionaire is someone who owns a Million Dollars worth of assets. These assets allow them enough leverage to live a certain lifestyle. For example, if you own 10 homes, free and clear, worth $100,000 each, then you have assets that are worth a million dollars. If you rent out these homes to generate cash flow, you may expect to earn, after paying out expenses and taxes, a 10% return, or $100,000 in annual income.
If you were to leverage the real estate, you can own more homes (and more headaches) to net a million dollars in assets and after paying for servicing the debt, taxes and expenses, you can expect to earn about the same returns on your assets.
Let us be generous and say you can earn a 12% return, or $10,000 per month in income using the real estate model, which is probably the most common one amongst the millionaires. I don’t believe the stock market will yield that kind of returns and owning your own business will give you better returns, but it will most likely not be passive income.
So, I would define The New Millionaire as someone who is generating $10,000 per month in passive income. I further define passive income as income that is not proportional to or dependent upon the time you spend on its generation. In other words, there is no such thing as purely passive income Though it is possible, it is very unlikely. After all, even billionaires like Bill Gates, Warren Buffett, and Sir Richard Branson are all involved in their “work”.
Hi Rasheed,
Interesting thoughts! I was just recapping my year figuratively and financially, it was really confusing. So, I made less money than I ever have before in my life or my business– and yet, it was the best year ever. Not just with what I did, but also, I was able to hit all of my financial milestones (saved almost 4K) bought all of the things I wanted to, and pricy ones at that (new camera, new climbing gear, a fancy MacBook Pro), signed up for every course I wanted, either online or off, ate, drank and was merry.
I’d say, if you’re in a location like Thailand, The New Millionaire could bring in about 2K a month (or less!) and quite possibly have the best year Ever!
Happy New Year, BTW, hoping for one just as great as this one!
Hi Brooke,
You are right. I remember when my younger brother was living in Pakistan. He was living like a king, yet he was only making less than $1500 per month, so it is all in leveraging what you have and setting your priorities right.
Glad you are able to live it up and enjoy. I am gonna have to just make it over to Thailand soon.
Rasheed
That’s a good way to look at that milestone. Like Brooke said, I am making less money than I have in the past, but I don’t have the kinds of expenses I used to have, either. I used to make a pretty good deal of money, but I also had a 5-bedroom house, several cars and other toys I never had time to play with because I was always working to make more money to keep it all.
I like this way much better
Yes James, funny how that works.
I was listening to a couple of restaurant managers talk about profits. One was of the belief that he’d rather do $5000 in business and make $1000 in profit than do $10,000 in business to make $1000. His supervisor explained that while it makes sense, it doesn’t pay bills, because you have to have a certain amount of cash flowing through the system to make it work. And I thought, if that’s the case, then you need to change the system.
Trying to keep up the Joneses never brings satisfaction. Knowing what you want and going after it always does.
Rasheed
I like this concept because I had been obsessed with passing the threshold and becoming a “millionaire”. But, now have realized that that’s just more darn responsibility and work. I love the idea of working towards passive income instead. Thanks!
Hi Annette,
Welcome to Present Day Nomads. Glad you like the concept of passive income. The bottom line is living a fulfilled life. You can’t take your possessions with you anyway. On the other hand, the money that you make enables to you live the life of your choice.
If one lives simply enough, they can do a lot of things that millionaires traditionally do on a lot less money. For example, if you like gardening and enjoy cooking, you can raise a lot of your own food and eat well, and spend more of your income on the things you like, while the person who eats out in fancy restaurants frequently may have more money than you and still have less fun (plus would more likely have expensive medical issues due to a poorer diet). Henry Thoreau wrote, “A man is rich in proportion to the number of things he can afford to let alone. That man is richest whose pleasures are cheapest.”