Insights from Fed’s Consumer Finance Survey

The Federal Reserve releases its Survey of Consumer Finances every three years. One of the most detailed datasets collected on domestic wealth, the last report looked at 4,602 households between 2019 and 2022, calculating wealth based on real estate, stocks, bonds, bank and retirement accounts, cryptocurrencies, and more. It then subtracted liabilities—mortgages, auto loans, credit card debt, and student loans—to determine net worth.

Though such a thorough examination led to many revelations, one stood out more than the rest. In 2022, the average (mean) net worth of American families topped $1 million for the first time, up 42% from $749,000 in 2019. One might argue that the mega-wealth of billionaires overly influenced the dataset or that inflation juiced the numbers. Both concerns have some merit, but neither cancels out the undeniable fact that the United States is flush with millionaires.

According to the survey, about 16 million American families, slightly more than 12%, had a net worth of $1 million in 2022. This statistic revealed a roughly 61% increase from the 9.8 million families tallied in 2019. Furthermore, almost eight million families landed above $2 million in 2022, a staggering increase from the 4.7 million in 2019.

The Survey of Consumer Finances defines those within this net worth range as mini-millionaires.

What Do Mini-Millionaires Have In Common?

According to the Survey of Consumer Finances, mini-millionaires share several key traits:

1. Their income was generally $150,000 to $250,000 annually—the 80th to 90th income percentile.
2. They saw more consequential wealth gains (as a percentage) from 2019 to 2022 than the top 10% of families, a.k.a. the ultra-wealthy.
3. From 2019 to 2022, their median wealth jumped 69%, adjusted for inflation. Not so coincidentally, the S&P 500’s total return was about 64.1% during this same period.
4. While asset values increased, lower interest rates decreased their debt payments. Debt consumed 19% of their income in 2007 vs. 12.9% in 2022.
5. More than 90% reported owning stocks directly or through retirement accounts.
6. 87% of them owned their homes.
7. By ages 55 to 64, 21% of families were millionaires in 2022. That percentage more than doubled to 45% among college graduates.

Lessons from The Millionaire Next Door

The best-selling 1996 book The Millionaire Next Door by Thomas Stanley and Bill Danko reshaped the country’s perception of wealthy Americans. It revealed that many millionaires don’t live flashy lives but instead benefit from disciplined financial habits. Here are some compelling values that distinguish them from other cohorts:

1. They live below their means. Millionaires spend less than they earn and prioritize saving and investing over luxury purchases.
2. They focus time and energy on wealth-building activities, taking a long-term approach to investing and financial growth rather than seeking quick wins.
3. They seek independence and financial freedom rather than status and aren’t driven by the need to impress others with expensive homes or cars.
4. They raise independent children, believing that teaching financial responsibility to the next generation is crucial in preserving wealth.
5. They work hard. While education is valuable, The Millionaire Next Door emphasizes that relentless effort and regimented focus are even more critical factors in building and maintaining wealth.

Bottom Line

There’s no single path to becoming a millionaire. Still, the Survey of Consumer Finances and The Millionaire Next Door both offer valuable insights into what has worked in the past: consistent investing, homeownership, disciplined spending, and strategic debt management. These habits, combined with time and patience, continue to pave the way for economic success in America.

A new Survey of Consumer Finances will be released later this year. One can’t help but wonder what data it will provide for future mini-millionaires as the Army of American Productivity marches on toward innovation, and many of the retirees who saved and invested with prudent diligence look forward to financially secure and happy retirements.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Investing involves risk, including the possible loss of principal. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.