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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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Wealth is in the Eyes of the Beholder

Written on December 22, 2008 by George Krueger & Mary-Lynn Foster in Inspiration, Money

santa-claus This is our twist on the old saying, “Beauty is in the eye of the beholder.” Many people are enduring a rough holiday season. We may not be spending as much as we normally would. We see that as a bad thing. We don’t want to disappoint our kids.

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Sometimes we forget how much we already have. As we get older, we put expectations on ourselves and judge ourselves based on what we have and the gifts we can give.

The cardboard box

Have you ever seen a little kid get his or her first bigg toy – the one that comes in the bigg cardboard box? Have you ever seen a kid put the real toy aside and start playing with that cardboard box? They turn it into a fort and have fun with it for hours, playing with their friends. Through the eyes of us adults, that cardboard box is extraneous. Through the eyes of a kid, the cardboard box is a valuable toy itself.

We develop our point-of-view from our experiences. Obviously, we want to learn from them, but we need to be careful not to take away the wrong lessons. So this holiday season, try looking at the world through the eyes of a child again. Look at things as if you were seeing them for the first time. Be innocent again.

Through the eyes of a child

We want to share a touching story comparing how we perceive things as adults to how we might see them through the eyes of a child. A rich dad wants to show his daughter how less fortunate people live. So he took his daughter out to the country, where they spent a couple of days and nights on a farm with a family most people considered very poor. Here’s the conversation as they drove back to the city …

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dad
How was the trip?

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girl
It was great, Dad.

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dad
Did you see how poor people live?

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girl
Oh yeah.

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dad
So, tell me, what did you learn?

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girl I saw that we have one dog and they have four. We have a pool that reaches to the middle of our garden and they have a creek that has no end. We have imported lanterns in our garden and they have the stars at night. Our patio reaches to the front yard and they have the whole horizon. We have a small piece of land to live on and they have fields that go beyond our sight. We buy our food, but they grow theirs. We have walls around our property to protect us; they have friends to protect them. We have a staff that serves us, but they serve others. Thanks Dad for showing me how poor we are.

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As you might imagine, the girl’s father was speechless. He thought he would teach his daughter a lesson … it turns out that it was he who needed to learn one.

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We really appreciate you checking in on us today. Join us next time when we talk about the best present of all. Until then, here’s to your bigg success!

Subscribe to The Bigg Success Show in iTunes.

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Direct link to The Bigg Success Show audio file:
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(Image of the car by stOrmz,CC 2.0)

(Images of dad and daughter in today's post by stockbroke)