Who wants to be a millionaire? Most of us, probably. Well, it looks like a huge number of people have managed to achieve this dream over the last year. Let’s take a look at why there has been such a surge in people’s wealth and how they’ve managed to become millionaires.
What qualifies someone as a millionaire?
This may sound self-explanatory, but it’s worth unwrapping. We all understand that a million is just a number. But when it comes to someone’s wealth, hitting millionaire status isn’t necessarily just having a million pounds in the bank.
When calculating someone’s net worth, we have to take into account all of their assets, which may include things such as their:
- Equity in businesses
- Investments like stocks and shares
- Big-ticket items like cars
- Cash in their accounts
After adding all of this up, the next step is to take away the person’s liabilities from this figure. Liabilities are amounts the person owes, like debts and mortgages. Because if someone’s house is worth a million pounds but 50% of that is a mortgage, their net worth wouldn’t qualify them as a millionaire.
How many new millionaires are there?
According to research from the Credit Suisse Global Wealth Report, a whopping 5.2 million people became millionaires over the last year. It’s worth pointing out their figures are in US dollars rather than sterling.
The total number of millionaires in the world did stand at 50.9 million, but now it’s up to 56.1 million. This is the first time that more than 1% of adults across the world have a net worth of over a million dollars.
The report also shows that total global wealth actually grew by 7.4%. It seems crazy to think that this has happened during a global pandemic.
Why are there so many new millionaires?
The last year has been hard for a lot of us, but some have managed to prosper. This doesn’t mean that they’ve done anything bad or nefarious. It just means that the unpredictable way everything has unfolded has led to some unexpected benefits.
There were a few key reasons why so many people saw their wealth increase significantly over the last year:
- Rising house prices have meant that some people’s net worth has increased simply because their property has gone up in value.
- Stock markets recovered very well from the initial crash and some have gone on to reach new record highs.
- Low interest rates have made it cheap to borrow money and have reduced the cost of many people’s mortgage payments.
- With few opportunities to spend money or go on holidays, household savings have hit high levels.
Can anyone become a millionaire?
Yes! Reading this, you might think a goal like becoming a millionaire is out of reach. Well, it isn’t. By building good habits and learning to manage your finances, creating multi-generational wealth is not out of the question.
When it comes to building wealth, the most important factor is often time. Over time, smart investments in property and real estate have the potential to rise in value. For investors, buying shares and holding them over long periods can allow their wealth to grow using the power of compound interest.
Tomorrow will always be unpredictable, but small steps today will act as a solid foundation for your future. Unexpected things may lie ahead and investments may lose value, but taking action is how you’ll give yourself the best shot at joining these millionaires.