How To Squeak By On $5 Million

Still life of stacks of one hundred US dollars
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Would your financial worries be solved if you just had more money -- say, $1 million?

Maybe. But according to a recent study by the folks at UBS (UBS), even millionaires -- multimillionaires, in fact -- fret over things like making ends meet and having enough to achieve their life goals.

The news from Wealthville is rather surprising. Researchers found that only 31 percent of millionaires consider themselves wealthy. Even among those with $5 million or more, only 64 percent of them are confident that they'll meet their own goals.

For anyone having a hard time making ends meet on their income -- no matter whether you're in the middle class or the upper class (or extreme upper, upper class) -- there are ways that you can improve your financial condition.

Don't Let Your Cash Sit Around and Languish
Whether you have $5,000 or $5 million in the bank, it's important to think sensibly about your cash.

It makes sense to keep some of your assets in cash, especially in the form of an emergency fund. But according to the UBS study, at least 47 percent of those surveyed say that "It's important to me to have cash because that's money I know I am extremely unlikely to lose."

Whoa, back up. That's dangerous thinking that shows these folks haven't considered the effect of inflation.

While the conventional way to think of inflation is as an increase in prices over time, the smarter way to think about it is that inflation is the erosion of your purchasing power over time -- historically, about 3 percent annually.

Here's what that means: If you sock away $1,000 for 20 years during which inflation averages 3 percent, it will end up only able to buy you $554 worth of things (in today's dollars). To have $1,000 worth of buying power in 20 years, you'll need to sock away about $1,800. (Play around with different scenarios with this inflation calculator.)

So while nearly half of those surveyed see cash as a risk reducer (that preserves their wealth), they're actually exposing their money to even more risk (shrinking over time). The lesson for all is this: Don't keep much more than you need to in cash. Instead, seek out long-term wealth-growing assets.

Smart Saving/Spending Strategies for All Walks of Life
Too many people have not saved enough for retirement, and even those with a million dollars socked away may be in for a rude awakening. Fortunately, even if a million dollars (or $10 million, depending on your goals) seems far away, you can get closer to it, or even surpass it, with a little planning. Here are some strategies that can be put into play no matter what income level you're at:
  • Live below your means. If your $4.5 million mortgage on your $5 million home is costing you around $30,000 per month when you bring in just $35,000 per month, you're cutting it way too close. It's the same with a $2,000 monthly obligation, if that has you living paycheck to paycheck.
  • Funnel your raises or bonuses into savings instead of spending them. So if your salary goes from $2 million annually to $2.4 million, put that $400,000 into savings and investments. (And, OK, even if your raise or bonus this year amounts to "just" $4,000, save that, too. Small sums can add up and be quite powerful over time.)
  • Rein in your spending. You don't have to resort to making salads from yard trimmings, but by cutting out three fancy $4 coffees each week, you can save $624 in a year. Cut out a daily $6 pack of cigarettes and you're looking at an extra $2,200 per year! Thinking about buying a $1.5 million yacht? Consider whether an $800,000 one will do. You can do a lot with that $700,000 difference.
  • Boost your total savings. You can do this in several ways. You might, for example, take on a second job, even for just a year. Ten extra hours per week earning just $15 per hour will amount to $7,800. If you're able to collect $450 per hour, as some lawyers and others do, you're looking at an additional $234,000! You might also work at your one job for a few more years than you originally planned. That can deliver several years of significant income, while permitting you to delay tapping your retirement savings, too.
  • Be smart and strategic. If you're not contributing to an IRA, look into doing so. If your employer matches your 401(k) contributions, take maximum advantage of that.
It's hard to believe that anyone with millions in net worth feels financially insecure, but that seems to be the case. The good news is that we can all make ourselves more secure.

Motley Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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Rebecca Leah Dias

"Thinking about buying a $1.5 million yacht? Consider whether an $800,000 one will do."

Life... I'm doing it wrong.

*eats salad made of yard clippings while fantasizing about what a "fancy $4 coffee" tastes like*

December 30 2013 at 4:54 AM Report abuse rate up rate down Reply

I would love to have to suffer living on only 5 million dollars. Better yet I would love to see them have to suffer for just one year and live on what some of us have to live husband and I are both disabled and are not able to work and don't even make 15,000 a year....try living on that you rich stuck ups. Maybe you would appreciate that money a bit more and would be a little more willing to help those that are less fortunate then you!!!!!!!

December 16 2013 at 10:15 PM Report abuse rate up rate down Reply

aaaaahhhhhhhhhh..........poor rich people. if you cant handle it , just let me know.

November 19 2013 at 8:48 PM Report abuse rate up rate down Reply

The guaranteed method of becoming a multi-millionaire is max out your 401k and IRAs over the long term investment peeiod - the Rate of Return is higher when you follow the Divest Terror and Divest Sudan initiatives (includes divesting the subprime UBS, multi-nationals will disregard the laws of the US - UBS legal published a document stating that they do not consider the laws of the US to be binding). As well as eliminating all gambling, alchohol, tobacco and firearms through researching all of the holdings in your funds and accounts and eliminating the high risk investments, while following the advice and sermons of your clergyman or pastor.

This method considers that the investor follows a disciplined risk assessment policy for asset diversification across all markets and strategies.

November 13 2013 at 10:32 PM Report abuse rate up rate down Reply

Squeak by is right; because I\'ve calculated that it would take $10 million for both my wife and I to comfortably live at our present ages today (between 41 & 47); including medical, housing & taxes, cost of living, and basic necessities of life, and including some basic toys & leisurely travel. This also includes managing present retirement investments up through retirement, and death. And that is planning and living conservatively & comfortably with $10 million without feeling like a slave to work or life\'s financial pains or hardships. Come On, Lucky Lottery Numbers!!

November 12 2013 at 3:15 PM Report abuse rate up rate down Reply
Thomas G Fruge

If you have $5 million dollars for retirement.
You have more that most.
There are billions living daily on less a income than that.
Excuse me if I don\'t weep for the poor millionaire who feels he don\'t have enough.

November 12 2013 at 11:04 AM Report abuse +3 rate up rate down Reply

Okay, darn it, I'll go with the $800,000 yacht.

Gosh, I have to admit, I'd never have thought of that.

November 12 2013 at 6:15 AM Report abuse +2 rate up rate down Reply

This is just another dopey article filled with common sense financial claptrap. There is absolutely nothing NEW to learn here. My heart goes out to those "poor" folks who can't manage on $5 million or more, too. C'mon!!!

November 11 2013 at 12:01 PM Report abuse +2 rate up rate down Reply

I found this article misleading. The title suggests information about how people with $5 million live, but not so. The article contains almost no information about millionaire spending, but mostly covers commonplace knowledge about spending, saving and investing.

November 09 2013 at 10:08 PM Report abuse rate up rate down Reply

Somewhere a WalMart worker is reading this, and throwing up in their mouth a little.....yup !

November 08 2013 at 8:52 AM Report abuse rate up rate down Reply
1 reply to rkeeeballs's comment

Somewhere a walmart worker should consider their choices in life.......yup

November 08 2013 at 10:39 AM Report abuse -1 rate up rate down Reply