Nearly any average person in the USA can be a millionaire - all they have to do is chose to be one.
What do I mean by this? Take the average family living in an average home in America. It is worth about $268,000. If you go back 35 years, that is an annual appreciation of about 5.5% per year. Now suppose our Average family lives there for 35 years. They pay off their 30-year fixed-rate mortgage over time and the house appreciates in value. Their home will be worth $1,745,705.10 by the time they retire.
BINGO! We have our millionaires!
Of course, by then, maybe a million bucks won't be worth much. And of course, maybe Real Estate won't be worth much either. So let's assume their house only doubles in value to $536,000. If they put aside $5000 (about 10% of their income, if they are average) into an account earning 5% rate of return, by retirement they have $501,761.69 in their account. Add this to the value of their home and BINGO, we have our millionaires!
You can play with the numbers, using the compound interest calculator as well as other tools on the web and work up different scenarios, including your particular circumstances. But for the most part, middle-income Americans can all easily be millionaires by retirement if they pay down their debts (and pay off their mortgage) and put aside some money into savings.
Sounds simple, right? Well, why do so few choose to do it?
The siren song of commerce, amplified by the TeeVee, is one answer. People today think it is "normal" to carry $5000 in credit card debt, to borrow money for every purchase, to fill their homes with crappy junk made in China or mounds of electrical gadgets. And worst of all, they go out and buy (or lease) one brand new car after another in a futile attempt to find happiness by trying to outspend their neighbors or peer group.
They refinance their home a half-dozen times, taking out more and more unearned equity to pay off the credit card bills of today. Many young couples in their 30's today have a mountain of credit card debt, two car loans (or leases), A primary and secondary (or line of credit) mortgage on their home, and little or nothing in savings. Their net worth is very low, possibly even zero - or negative. And this does not alarm them, because they can "afford the payments" - or so they think!
They forgo the opportunity to be a millionaire, so they can have shiny trinkets today.
And they will be dirt poor when it comes time to retire, I'm afraid.
Are we supposed to feel sorry for them? I think not. And yet, these are the same people who will argue that the system is "unfair" and "stacked against them" and that they are "living paycheck to paycheck" and never seem to get ahead.
YOU HAVE CHOICES. Make them wisely.
If you are buying a Jet Ski and not fully funding your 401(k) plan, have your head examined.