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How the Rich Make Money

Written on April 27, 2009 by George Krueger & Mary-Lynn Foster in Money, Passive Income

The Federal Reserve recently published some new wealth data [PDF]. They looked at levels of net worth and the income associated with each. They defined net worth as total assets (including a primary residence) minus any money owed.

You need a net worth of over $8 million to make the top 1%, $2 million gets you in the top 5% and it takes about $900,000 to place yourself in the top 10%.

So those are your targets if life on your own terms means being in the top 10% or above.

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Making more doesn’t mean having more

This report also looked at share of total wealth. As it turns out, the richest of the rich – the top 1% – didn’t get richer. They still held approximately one-third of the country’s total wealth in 2007, the same as 1995.

However, their share of income was up significantly – from 17% in 1997 to 22% in 2007.

The wealthiest people in our country saw a bigg increase in share of income, but their share of net worth didn’t go up. Does that mean rich people got caught up in the “spend, spend, spend” economy? Possibly.

We often think, “If I could just make a little more money.” This study offers further proof that making more doesn’t necessarily translate into having more – even for the richest among us!

Make do, then make more

The crucial thing – the starting point – is to figure out how to make do with what we already have. Then when we make more, we’ll have more because we manage it all better.

We can enjoy some of it now and invest the rest for our future – for the life we dream of living.

How the rich make money

As might be expected, the average person gets most of their income from salaries and wages. As we move to the top 5%, we see that a larger share of income comes from business ownership and investment real estate.

It really kicks in for the top 1%. Plus they have built up enough assets to get a significant boost from selling those assets for a profit. It’s Economics 101 – buy low and sell high.

But it’s no panacea

We’ve recently seen people losing money in business and real estate. Like most things, it’s no panacea. It’s risky. But if you aren’t trying to get rich quick, you can greatly improve your odds.

The best advice

We also found it revealing that this study showed that the bottom 50% lost money holding assets and from the ownership of businesses and real estate.

The rich made a lot. The bottom half lost money. What do the rich know?

Before you jump into investing in a business or real estate, educate yourself. Get advice from someone who’s actually succeeded at it. If they’ll mentor you, that’s great. If they charge you for it, it will be worth every penny.

You’ll get where you want to be faster by learning from people who have done it rather than trying to learn it on your own.

So if life on your own terms means building wealth, get started creating multiple streams of income today – even if it’s just part-time!

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Please join us next time when we ask, “Are you talking to the right person?”

Thanks for reading our post today. Until next time, here’s to your bigg success!

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The Entrepreneurial Roller Coaster Ride

Written on July 1, 2008 by George Krueger & Mary-Lynn Foster in Business, Entrepreneurship, Fear, Uncategorized

When you own your own business, you have your highs and you have your lows. And it seems like you rarely have any in-betweens.

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George said …
I never talked about this for years. I thought it was just me. Then I got up the nerve and mentioned it to my sister, who also owns businesses.

She said she knew exactly what I was talking about! So that encouraged me to ask other business owners about it. So far, every single person I’ve ever talked to about this knows exactly what it means. You can see it on their face as soon as you bring it up.

But it’s something I think a lot of entrepreneurs don’t talk about.

Mary-Lynn added …
With Bigg Success, I’m experiencing business ownership for the first time. And I feel like I’m on a roller coaster. There are days where I feel exhilaration from the ride and there are days when I feel sheer terror and want to get off the ride.

Entrepreneurial terror

If you’ve never experienced it, count yourself lucky, but most people in business have.

You can feel terrified at times even with a job. You may fear you’re going to lose yours when you see other people’s jobs getting cut. But it’s still different for business owners.

George …
I remember one of the guest speakers for my class who talked about the number of mouths he had to feed now. A lot of the most successful business owners I know take personal responsibility for their people. They don’t look at just putting bread on their table; they worry about their employees as well.

That can keep you up at night!

Inc. published an article (way back in February 1987) called Entrepreneurial Terror. A portion of it has been republished on Wachovia’s Small Business site.

It was written by Wilson Harrell, a serial entrepreneur and author of For Entrepreneurs Only. He said:

“… the ability to handle terror, and to live with it, is the single most important
– and, yes, necessary – ingredient of entrepreneurial success.”

This company doesn’t love misery

He says that you shouldn’t share your lows with your friends and loved ones, because you’ll just pass the worry on to them. Unless they’re your partner in business.

He adds that you should always share your highs, though.

How highs turn to lows

The way you spend your time and money when you’re on a high often has a lot to do with how low you go. Let’s look at two examples:

Too busy for marketing
When you’re so busy, you may even be running at capacity, and you know your business couldn’t crank out any more volume no matter how much you wanted to. So you slow down – or even stop – your marketing efforts.

George …
I’ve done this! It’s easy to do – there’s no time! But that insures the next down cycle because you’re not doing those things that you did to get to the up cycle.

Being careless with money
A lot of times cash flow is at its peak during an up cycle. That’s part of the reason you’re on an emotional high. So you make that major expenditure. Or you add to your overhead. The next thing you know you’re on a low because business and cash flow have slowed down and you have little or no cash reserves.

You may not be able to avoid the highs and lows. What you can do is conduct business so that your lows are higher … and your highs are higher!

It may not feel any different, but you know it is. You’re reaching ever higher levels of success! Now that’s bigg success!

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