The Million Dollar Checking Account Myth
The Amplified Impact Podcast
April 23rd, 2023
Did you know that being a net worth millionaire isn’t as straightforward as it seems?
I received a comment on one of my YouTube videos about how young YouTube millionaires lie to you…which got me thinking about the different ways that information can be manipulated to influence us.
In this episode, I use real-life examples to teach critical thinking skills and how to separate the good information from the bad.
From net worth millionaires to income and liquid millionaires, there are several ways to calculate this status and you’ll learn how these three types of millionaires can easily manipulate the system and mislead you into thinking they’re worth more than they are.
So tune in and let’s dive into the world of millionaire misconceptions.
TWEETABLE QUOTE:
“Strategies that you deploy when you have money is a little bit different than what you do when you’re building it.” – Anthony Vicino
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Episode Transcript:
Guys the other day I had a comment on one of my YouTube videos that the YouTube video was all about how young YouTube millionaires lie to you. And it wasn’t really a video about calling anybody out. In particular, though, I do use some real life examples of, of people who say things and then, um, How those can be misconstrued or used to tell a particular narrative.
Um, and so, but really the goal of that video was to teach people critical thinking around the information that they receive and the different ways that, uh, information can be manipulated to impress or influence or impact you and really, I think anybody can be a good teacher. You can learn a lesson from anybody, assuming that you go into it with the right mindset and that you have the ability to dissect the information that you’re, you’re receiving to separate the good parts that serve you from the parts that don’t.
And I think criticals thinking judgment, those are just two skills that I, uh, schools haven’t done us a solid and haven’t done us a good job in, in teaching this. So that was really the goal of that video. One of the comments, um, had to do with a section of the video where I talk about what’s it mean to be a millionaire, and how that one term can, can easily be manipulated.
Um, and I’ll share, I’ll share the different ways that it can be manipulated here in just a second. But the, the guy’s comment was something like, you’re not really wealthy, uh, unless you have a million dollars in your checking account. And I found it really interesting because. People that don’t have money have this warped perception of what people with money do with that money.
And I think a lot of this ties to not understanding the rules of money or the strategies of making money. And so when, and I know I was in the similar position when I was like $80,000 in debt and working minimum wage, like my perception of what it took to make money was like, I gotta get a higher paying job and then just start saving and putting it into the checking account.
Cause I, that’s, where else would you put it? Like checking account, saving this account. Right? Like surely that’s where everybody puts their money and that’s what they do in reality. Not what wealthy people do with their money. They’re not just sitting around typically with a million dollars sitting in their checking account, um, because they realize that there are higher and better uses.
There’s safer places to put your money. There are places that will will deliver better yield on their money and still be just equally as liquid. So we’ll talk a little bit about all this, but, uh, the, the start of this was just, um, breaking down the differences of millionaires because this is one way that people can really mislead you.
So there are three different types of millionaire. There’s a net worth millionaire, there’s an income millionaire, and there’s a liquid, a liquid millionaire. The net worth millionaire is somebody. Complete all their assets minus all their liabilities. So like if you have a mortgage, you have a house, then the value of that house minus whatever you still owe on it, the mortgage, that is equity.
And that gets to count towards your net worth, assuming it gets positive. Uh, if it’s negative, then it’s gonna hurt your, your net, your net, net worth. The same way, if you own a car and say it’s worth, uh, $20,000 and you only owe $5,000 on it, then it’s worth 15,000. Right? So all these things added up. Give us our net worth.
And if your net worth is over a million dollars and you’re a millionaire, and this is, this is probably the most common way that people qualify to become a millionaire because you have these assets like stocks and bonds and real estate and business ownership and all these things that kind of start to inflate that number.
The problem with being a net worth millionaire is that we don’t really understand how you are calculating it, cuz there is no standard here. Like banks are all a little bit different in terms of what they count, what they don’t. Some people will count a car, some people won’t. Right? And so, It becomes very difficult to audit somebody when they say I’m a net worth millionaire, unless they’re like so far above it that you’re like, yeah, you’re like 10 million net worth.
Like you’re above a million. You’re, you’re, you’re probably good. Even if you’re fudging your numbers by a little bit, you’re still well over and, and that’s the big problem is that. You can easily fudge this number around. Two things in particular that I’ve seen as real estate and business ownership, because with real estate, like you only ever know what the price of a building is when you sell it or you buy it at that moment of transaction.
Everything else is theoretical. I can say I think this building could sell for 3 million. But I don’t really know until I go to sell it. And I might be wrong. It might be only worth two and a half or might be worth four. And so we kind of, we have to do our best to kind of peg a number. In a lot of cases, as you know, time goes by, if you’re being really conservative, you just stick with the value at you paid for it at the time of purchase.
Um, there’s issues with that, that methodology as well. But if you’re gonna be really conservative, that’s a good way to. But that’s one way that’s easy to, to manipulate numbers and say like, oh, my net worth is X, Y, and Z because my building is worth this. But you don’t necessarily know that until you sell it.
And so you could be making up an incredibly inflated number. And I see this a lot with business ownership because small businesses are very hard to value. So if you’re, you know, you could have a, a kid who starts his own social media marketing agency and he is like, oh, I do $10,000 a month. You know, a little over a hundred thousand dollars a year in top line revenue, and I think I could sell this at a 10 x multiple.
Well, He then says his, his business is worth a million dollars. But the reality is like, could, would somebody actually pay a million dollars for his a hundred thousand dollars of revenue? No, probably not. Like, unlikely. So he’s just kind of inflated the number artificially, and there’s not much that you can really do if, unless you know how he’s calculating it to call him out on it.
And that’s the problem with a lot of the, the young YouTube millionaires or just millionaires in general in the social media spaces that they don’t talk. Of like how it’s actually being calculated. So that’s the net worth millionaire. The second one is the, the income millionaire, and this one’s a little bit more straightforward.
But it can still be a little bit more construed. So an income millionaire is somebody who’s making a million dollars of income, personal income in a year. Now there’s still some, some nuance here, like is that pre-tax or is that post-tax? Because if it’s pre-tax, then you’re maybe only walking away with 500,000, maybe even less, right?
Of actual income if it’s post-tax, you know, that’s, that’s pretty good. Like that’s a lot, that’s a lot of income. So good for you. The thing that that picture doesn’t paint for us is, okay, are you, you’re making a hundred thousand in income. How much are you paying out in expenses? Right? Like, how much did it cost you to earn that?
If it’s costing you 1.5 million to earn the million, then that’s not a good trade, like you’re actually in debt. So that’s not super helpful. And the, the, the thing that I want to kind of drive home with all these different points is that there’s so much nuance in context. There is no black and white.
Here’s the answer. So you just need to be able to apply critical thinking and ask yourself, okay, in what scenarios would this information be valid and helpful? And in which scenarios is it not? Right? Like that’s the key. So I. The last of the millionaire types, and this gets back to the, the comment this young gentleman left on the YouTube channel is the liquid millionaire.
This is somebody who has a million dollars liquid and available. Now, when you hear that, a lot of people think it means you have cash in the corner or you have like in a checking account, savings account somewhere that you could easily just pull it out. That’s typically not what it is. Typically when somebody is a liquid millionaire, it’s in some kind of easily converted.
Investment vehicle, like a money market or a treasury bond, something that’s earning yield in a very stable, safe environment, but that’s still fairly liquid. It’s very rare to see somebody keeping just a million dollars in a checking account or in a savings account. Now, I’m not saying it doesn’t happen depending on how rich you are.
You might actually have that just sitting around because, uh, what most, most wealthy people are doing is just keeping enough money around and liquid in those types of, um, checking accounts to pay for their life, their lifestyle, their, their cost of living on a monthly or maybe three to six month basis.
So if your cost of living is, is pretty high, then sure you might have a million dollars sitting in your checking account. But that would, I would venture to guess that that person is, North of 50 50 million, um, net worth, pretty comfortably at that point, if not even higher, honestly. So, uh, a million dollars in a checking account is just a lot of money to have sitting around.
And the reason that most wealthy people don’t do that is because, one, you’re, you’re vulnerable to the banks, and we’ve seen in 2009 that banks do fail. And then two, you’re, you’re so vulnerable to inflation and all these external factors that are just eroding your money. That most people are just putting their, their cash into something that’s gonna earn them a solid yield, like a treasury B bill that’s like 4%.
So, and backed by the US government. So very, very stable. But it’s just always interesting to me when I see comments like that of like how people who do not have money perceive what people who do have money do with that money. Right? And so I’m not saying that this is what you need to start doing with yours.
Um, the. And strategies that you deploy when you have money is a little bit different than what you do when you, when you’re building it. Um, but I just wanted to share that with you guys specifically the distinction of those different types of millionaires, because I find that’s an easy area to mislead people.
And, um, so I just wanna, uh, arm you with a tool that’ll maybe help you think a little bit more critically about those claims when you hear people make ’em. So hopefully that brought you some value if it did. Um, put that as a gold star on the board. Good job, Anthony. And that’s all I got for you guys. Uh, I’ll see you back here tomorrow.
Until then, stay hyperfocused my friend.
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