COLUMN - I enjoyed a recent piece by American investment writer Ben Carlson asking exactly this question.
The numbers are remarkable. There are now 25.3 million dollar millionaires in the world, up 7.9% last year. America alone added more than 1,200 new millionaires every single day.
Count home equity and roughly one in five American households is a millionaire household.
And yet the inequality continues right up the ladder. The ultra-wealthy, those worth $30 million or more, make up just 1% of millionaires but hold 35% of millionaire wealth. As Carlson puts it, "there's even inequality among rich people!"
So does a million dollars make you rich? Carlson's answer: it depends where you live, how old you are, and what your lifestyle costs. He borrows a definition from Scott Galloway that I love.
Rich means your passive income exceeds your spending. By that measure, a retired couple earning $50,000 a year and spending $40,000 is rich. A Manhattan banker earning $2 million and spending all of it is poor.
Here is the part Carlson doesn't cover. A million dollars in investable assets puts you in the top 1% of the world, but only the 88th percentile of American households. In South Africa, it tells a completely different story.
This country has only around 41,000 dollar millionaires among a population of more than 63 million.
At current exchange rates, $1 million is about R16.4 million. Living costs here are roughly 45% lower than in the United States, and housing is the real difference. The typical American house now sells for around $410,000, about R6.7 million, while the average South African house costs about R1.75 million.
In other words, R5 million buys you a large family home in a secure estate here, or something close to the beach on our coast. Convert that same R5 million to dollars and in America it buys you a modest home in one of the cheaper states.
The same money that makes you merely comfortable in the US funds a genuinely good retirement here.
Yes, we pay for things Americans don't. Private security. Solar panels and inverters. Boreholes when the municipal pumps break. School fees, medical aid, the lot. It is fashionable to call these our "second tax," and they are real costs.
But even after paying them, the sums work out in our favour. The lifestyle that R16 million buys on the Eastern Cape coast would take multiples of that in California or New York.
We spend a lot of time in this country talking about what is broken. Fair enough. But if the goal is a rich life rather than a big number, it helps to notice that we are playing on one of the cheaper courses in the world.
Rich isn't a number. It's the gap between what comes in and what goes out. And that gap is easier to build here than almost anywhere the millionaires are counted.
I am away on leave for the school holidays for the next two weeks, so there won't be a newsletter during this time.
Matthew Matthee has a wealth management business that specialises in retirement planning and investments. He writes about financial markets, investments, and investor psychology. He holds a Masters Degree in Economics from Stellenbosch University and a Post Graduate Diploma in Financial Planning from UFS. He is a partner at PSG Wealth. [email protected]
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