The New Millionaire

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”.