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Unit 4

Big Money

Chapter 1

What Does a Million Dollars Buy?

Page 67

What Does a Million Dollars Buy?

When asked the question “What would you do with a million dollars?” most people tend to give similar answers: “Quit my job,” “Buy my dream house,” or “Go traveling”.

People often think that having a million would make all their dreams come true. In reality, a million dollars may not really be that much money. Twenty years ago, it might have been possible to fulfill these dreams.

However, things are not so easy today.

In most industrialized countries, prices for everything from food to transport to university fees have steadily increased over the years.

Housing prices in particular have risen greatly. The main reason is that the population has increased − becoming very dense in certain areas − but there are fewer homes available for sale or rent.

For example, in the U.S., the average price of a new home in 1990 was $149,800. The average price in 2010 was $272,900. With increases like that, you can see why owning property is considered a good long-term investment.

Housing in city centers also cost more than ever before. People use to move from the city center to the outer city neighborhoods or suburbs to escape overcrowding and noise.

Today, many are moving back because they want to be closer to their workplace. Since space is limited in these areas, supply has not caught up with rising demand, and prices have gone up as a result.

For example, it is nearly impossible to find a place in London’s expensive Mayfair district, or Manhattan in New York City, for a million dollars. Even countries that traditionally have a lower cost of living, like India or Brazil, have seen property prices rise dramatically.

A 2,000 square foot (186 square meter) apartment in Mumbai’s southern neighborhoods can cost more than $3 million the same as a two-bedroom flat in central London.

Inflation is another important reason for the rise in the cost of living. Over the last 150 years, as prices have gone up, the value of money has gone down, so we now need more money to buy things.

In 1913, for example, $50,000 had about as much buying power as $1 million does today.

Of course, people now earn more money than they did 150 years ago, but they also spend more on necessities such as food, medicine, and housing.

Due to this increased cost of living and a tendency for younger generations to spend more, people are actually saving less than ever before.

In order to live well after you retire, you should begin saving as early as possible. Experts suggest that after you stop working, you will need 70 to 70 percent of your salary to live on every month.

In other words, if you make $3,000 per month while working, you will need between $2,100 and $2,250 per month to live on during retirement.

This calculation assumes that you have no mortgage on a house to continue paying or other major expenses like your children’s university education.

However, more retired people now rent their housing because they can’t afford to buy a home, so they will pay more in housing costs over time. People also have to spend more on health care because they live longer; many people in developed countries now live into their 80s or 90s.

Due to increased demand for housing, higher inflation, and a longer life expectancy, a million dollars may not be enough to live on. Of course, where you live and how long you live will influence how far a million dollars can go.

To be able to retire early, travel the world, and build your dream home, you may have to be a millionaire many times over!