Everyone dreams of being a millionaire, but numbers show that more Americans than ever are achieving that dream. When asked about their success, they often have answers that surprise the less wealthy.
Millionaires often feel that they are middle class at best, and they often cite having more financial worries than before they made their fortune. A recent poll asked a few hundred millionaires what they valued over $1 million. They had a number of answers, but these three were the most common and the most interesting.
Paying Off Mortgage
Buying a house is still one of the major expenses in the average American life. Despite the crash, the housing market has mostly rebounded, and the median price of a new home is up to $296,400. Maybe more telling is that the average value of a house is $360,600. Both numbers suggest that Americans are investing hundreds of thousands of dollars into their home, and housing is returning to a positive investment strategy.
Even if buying a house can make you money in the long term, it’s a major financial burden. The average interest rates run between three and five percent. This means the average American pays a total of $222,332 in interest alone over a 30 year mortgage, and it leads to monthly payments of $1,619 per month.
Reducing such a hefty bill to zero is a combination of gratifying and liberating. Regardless of what you choose to do with that extra money, it’s very nice to have.
Whether you do it for investment reasons or not, owning a home has inherent value. The freedom of ownership is satisfying and a typical source of pride for many Americans. The satisfaction of finishing the purchase and being free of any and all ties is something that cannot be represented in numbers, and it is the biggest reason this is on the list.
Paying Cash for a Car
You don’t have to be a millionaire to do this, but it sure helps. Paying cash for a car saves tons of money. The average cost of cars has been steadily rising for the past two decades, and loan policies have compensated for low rates by encouraging longer repayment periods.
In numerical terms, the average cost of a car is up to $33,560 at an interest of 4.35 percent. The average loan term is up to seven years, but five-year plans are still easy enough to finance. In that case, Americans are spending $623 a month on car payments and paying an extra $4,000 for their cars in interest. Paying cash up front relieves that hefty monthly payment, and it saves an average of $4,000 per vehicle, which is no minor savings.
Like with a mortgage, there is an unquantifiable value in paying cash for a car. Besides the sense of accomplishment and satisfaction at saving money, it cuts the shopping process in half.
Paying cash means no loan negotiations, approval process or any of the other frustrating bargaining techniques that make car shopping such a notoriously unpleasant experience. Buying a car without a loan is an amazing way to get closer to being a millionaire by saving money while making a stressful process easier.
Paying for Kids’ College
It’s no secret that college is getting ludicrously expensive. While tuitions range wildly depending on the type of college and residency, the overall average is $109,513 for a 5-year degree. If the school allows it, it comes out to $1,096.32 a month during the degree program, and most Americans can’t afford that on top of car payments and a mortgage.
So, the common answer is to look into student loans with deferred payments. In that case, borrowers can look forward to a 3.76 percent interest rate that will yield $22,045.04 in interest if the payments are completed in a five-year plan. Sparing your kids this burden right out of college is one of the most rewarding feelings a parent can have.
The rewards extend beyond helping the kids financially. A college education is more valuable than can be summed in financial terms, but even those numbers are compelling.
On average, a degree holder will earn $17,500 more per year than their less-educated counterparts. That’s enough to recoup the cost of education in only seven-and-a-half years, and it will result in an average lifetime earnings of over $500,000 more than without the degree. A college education is still the most reliably lucrative investment an American can make.
Regards,
Ethan Warrick
Editor
Wealth Authority
