Is one million euros enough to be a millionaire in Spain?

The million euros falls short: how to calculate real wealth

According to a forum user's calculation, three figures are enough to set up the plan: €230,000 already allocated to investments, a €200,000 flat that appreciates on its own, and a 5% annual return. Their conclusion: about €1 million in net worth in about 14 years. The concept is debatable. Because, as pointed out in the thread, that million is the same old number and no longer buys the same amount.

The question isn't how much is left. It's what reaching it means.

How many millionaires are really in Spain

Participants handle some data: in 2014, one in 100 Spaniards had more than one million in assets, and the conversation suggests that today there would be over a million millionaires in the country, a figure that would place someone with it among the richest 3%. The figure is less impressive when one realizes that assets are not liquidity: someone who has their house paid off and a depleted bank account enters the statistics without living like a rich person.

Therein lies the first misunderstanding. The second is what that wealth is made of.

Real estate behind almost all fortunes

A persistently circulating hypothesis holds that in Spain over 90% of that group built their wealth on real estate. Buy on credit, hold on, wait, and pay quickly. The problem is that valuation isn't a price: a flat 'is worth' what the neighbor says until it has to be sold in a hurry. Whoever hoards four flats and a couple of garages in major cities sums it up without drama: selling them at a discount, the million is sure to be reached. But a discount, by definition, is money left on the table.

Debt plays in both directions. The interest on a twenty-year or longer mortgage and the opportunity cost rarely enter the calculation. And that 'snowball effect' everyone talks about only starts to roll when one stops paying installments.

What does it really miccionan to be a millionaire?

Here the consensus breaks down. For some, a millionaire is someone who has a million; period. For others, the term got stuck in the past: with a million pesetas in the 90s, you weren't rich, you were poor. Some raise the bar to five million, and others to ten if immediate liquidity is required. And then there's the definition that doesn't depend on the figure: a millionaire is someone who can go their whole life without earning another euro.

The most uncomfortable version is that of disposable income. The calculation compares the minimum benefit for a couple with no income or children —€1,066 per month plus €300 in rent subsidy, €1,366 in total— with the gross dividends needed to match it: about €20,490 annually, as they are taxed at 20%, and that's demanding a 4% return. Translated: a significant capital is needed to replicate through income what the system guarantees without assets.

Inflation eats away at the number

There's a conversion that's jarring: 100,000,000 pesetas are €600,000. A generation ago, that was a fortune; today, as a forum user puts it, it's relatively little money. The million is still a round and nice number, but round and nice aren't financial categories. Inflation erodes the target figure and, what hardly anyone mentions, also the income with which one plans to reach it.

Why some save and others don't

A businessman in the thread says he pays two foremen accommodation, car, gasoline, and €3,500 net; with their partners working, each household brings in about €5,000 net per month. When asked about their savings, neither had reached €3,000 in the bank. He, who earns several times more, lives with less. The gap, he says, isn't income: it's habit.

The millionaire who felled pines with his son

The image that breaks the stereotype is that of a developer with a company in Holland and hundreds of millions in assets who spends his day on an excavator fixing terraces, with his 16-year-old son cutting pines with a chainsaw. The house he just built cost five million and is selling for €17 million. There's no yacht in the picture. Nor in that of the investor who admits to having behaved like a gambler and losing €200,000 in small biotech companies. Money, when it truly exists, makes less noise than is assumed.

With these numbers, anyone would say the path to a million is clear. And yet, the figure that is jarring isn't the million. It's the €3,000: all that two households earning €5,000 net per month had saved.