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.
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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(Image in today's post by barunpatro)