Who Are The Rich People In America And How Did They Really Become Wealthy
By Michael Rakow
Have you heard the latest news on American household income and assets? According to a recent report by Lee Eisenberg, 80% of Americans make less than $99,000 per year. A recent survey in the New York times said that most Americans don't consider a person to be "rich" until they make over $100,000 per year, so what's keeping that other 80% of the population from becoming rich?
Well, in many cases being rich in terms of what you are bringing into the house isn't the same as being rich in what you actually own. We are talking about net worth here, and that's what too many Americans have precious little of. We have become a society built on debt, which isn't always a bad thing... until your liabilities start eating up all your assets. The top 20% of Americans have at least $263,100 in net worth, which isn't bad, but it's hardly enough to be called rich! Now consider the fact that the top 10% of Americans have a net worth of $833,600 or greater, and the net worth of the top 1% (about 3 million people) is as much as the bottom 100 million Americans!
Mr Eisenberg's article uses statistics from a Federal Reserve Board survey, and I don't doubt that the massive disparity has gotten even more extreme since this was written. The real question is what can the people who aren't in either of those "top 20 lists" (for income or net worth) do about it? I'm fortunate enough to have been outside the top 20 looking in, and now in the top 20, working to get other people in.
Once you get into either of the two "top 20 lists" that I have mentioned, better deals become available to you, and you are able to invest at rates of return that were previously not possible for you because the people with the money didn't "trust" you enough to let you into those deals. So aside from just being more comfortable in your lifestyle and time-management, you receive better rates on credit cards, home loans, investments, and virtually everything else.
The catch is that you could be in the top 20 for income and in the bottom 20 for net worth, and then you can scratch everything I just talked about because your "empire" is build on a house of cards that one little wind could blow over. I have personally seen it happen to numerous people who got sick, got divorced, or whatever, and suddenly their credit was shot, their assets were liquidated to pay off debt, and foreclosure was started on their house. At that point you can forget about getting any of those great investment opportunities that the banks offer for about the next 7 years or so. It's harsh but true.
There are other ways to climb back into both top 20 groups though, if you have the right mindset and you are willing to do the work to get back there. The number one key to opening that door (regardless of whether you have been there before or not) is really carefully assessing what you are spending your money on. Are you spending it on things that will just cost you money, or things that will make you money. Sure, a new sports car would be nice to have, but wouldn't a nice used Prius make more sense, so that you can re-allocate all that money that you would have spent on the sports car and on feeding it gas? It may not be glamorous, but I'll bet the interior space is about the same, and you can tell your friends that you just wanted to "go green." Then head back into your house with a little chuckle, sit down at that computer, and invest that money into building something that generates sustainable wealth and net worth.
The sports car example is cliche and rather obvious, I hope, but I use it to illustrate the point that the top 20 lifestyle isn't about swimming pools, sports cars, mansions on huge multi-acre estates, and all that jazz until you've absolutely 110% ensured that you have the residual income for you and your family to be secure forever - usually when you are in that top 5% or so. So if you like to "pamper yourself" with hundreds of shoes, expensive sporting events, daily lattes, poker games with the guys, and other miscellaneous unnecessary crap that just eats up your income and time little by little, get over it! You need to get real, and build an assets that can sustain you with value appreciation and residual income.
PS: More to come in the near future. I decided to start writing about topics like this because I got tired of seeing people fail to acquire sustainable wealth, for many little reasons that could be easily avoided once you identify the problem and engineer the appropriate fix. There is just too much BS out there, and I want to do my small part to correct that. I thought that blogging and writing online articles would be the fastest and most effective way to start getting this information out to people for free, so I hope you enjoy!
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