When considering our financial futures, we tend to focus on the idea of becoming millionaires.
A million dollars is an enormous amount of money and a nice round sum that stands for wealth. It’s a threshold at which you might be imagining that your financial problems will be taken care of, and you’ll transition into a new stage of comfort and security.
But if you check the stats only 3% of Americans are millionaires.
So wasting your precious life moments in the worry of achieving a number doesn’t make sense.
Even if having a million dollars is a good thing though, aiming to have that much might not be. That doesn’t mean you shouldn’t seek to build wealth. You should think of building wealth that would help you enjoy a comfortable life without getting trapped in the number game.
Let’s discuss 4 legitimate reasons why the specific pursuit of a $1 million bank account might be a poor financial strategy.
4 Reasons You Shouldn’t Aim to Be a Millionaire
#1. You May Avoid Diversification of Funds
If you’re chasing a million-dollar goal, you might be over-aggressive about fund investment. You may neglect the benefits of diversification in the obsession of growing money fast.
You could invest all of your money in high-risk options like stocks or cryptocurrencies in order to become a millionaire faster.
Remember, March 2020 stock market crash (when the Dow Jones fall-off nearly 3,000 points on March 16, 2020) eroded 30% of investor’s money within 2 weeks.
When you’re looking to build wealth and set up your financial future, you should ideally be putting the money you do have into different types of funds and accounts.
Diversified investments and savings are good things, and can help you to not only build wealth but also protects your money from market fluctuations.
#2. You May Make Illogical Compromises
If you’re focused on reaching a specific sum, you may also begin to make illogical compromises in service of that goal.
The Gala Spins entertainment platform actually illustrated this point nicely with tongue-in-cheek surveys of what respondents in the UK would give up in exchange for — in that case — one million pounds.
The different surveys answers were as below –
- 72% said they’d stop wearing makeup
- 69% said they’d give up watching a favorite sport
- 68% said they’d surrender a favorite food
- 62% said they’d stop traveling abroad.
Now, this was a playful exercise, but you can clearly see that people will sacrifice meaningful experiences and passions for life just to reach a number. It shows how much the “one million” label can capture our attention, and it begs the question of what other illogical compromises one might make in pursuit of the goal.
- Would you forego vacations with your family?
- Spend years in a job you don’t enjoy?
Aiming for a million dollars might just push you to compromise on the small things that give you happiness and are much more meaningful than just chasing a number.
On the other hand, if you focus on creating multiple income streams, growing your assets over time, that would lead you to live a financially independent life without worrying about the numbers.
#3. Stressful Life
This is a little bit of an extension of the previous point, in that the idea is that pursuing a $1 million bank account can be an unhappy process. But MarketWatch framed the idea in an interesting way with regard to stress: “The goal is not to be a millionaire, but to lead a stress-free financial life.”
Do you know why you want a million dollars in your bank account?
Because you amount signifies a stress-free life.
The difference, however, is that if you focus on removing financial stress from your life as the primary goal, you’ll stand a better chance of doing so in the present.
Along with that, you should look for ways to boost your current income and safeguard your financial wellbeing, rather than make sacrifices to reach a future goal.
#4. Value of Money Decreases Over Time
There’s an article on Business Insider titled “A Million Dollars Ain’t What It Used To Be,” citing numbers suggesting more Americans are beginning to think of higher sums when imagining what they consider to be “rich.” And this article was written back in 2011! Since then, the million-dollar number has begun to seem even smaller.
As the inflation rate increases year by year, the million-dollar number has begun to seem even smaller. You can see the power of the US dollar decreasing over time as shown below.
The snapshot below depicts that a 100 USD bill in 1900 has the power of buying anything worth $3 in 2020.
But that doesn’t mean that one million USD is not a lot of money, nor that reaching the goal would be disappointing.
The point is that the value of money decreases over time, and this alone makes focusing for years on a single sum a strange exercise. It is better to earn a comfortable income so that you can boost your current financial standing to live a comfortable and secure life.
There is certainly nothing wrong with wanting a million dollars or keeping it as a goal in the back of your mind.
But consciously aiming for this goal, and structuring your financial activity accordingly, typically makes for a less productive and less happy lifestyle than you might assume.
You can focus on becoming financially independent rather than chasing a fixed number of 1 million dollars.
Financially independent means you don’t have to work for your livelihood, your multiple income streams take care of your finances and you do what you love to do.
Being financially independent is a more meaningful way of living life that gives you a purpose of doing something valuable to you, your family, and society.