Who do you consider rich? With what income are you considered rich? For now we will put aside the topics that say that you are rich if you have health, a happy and loving family, close friends who support you and many interests. Of course, these are the reasons why we live and money cannot buy those treasures. But as Spike Mulligan once said, “money brings you a more pleasant form of misery.”
These characteristics of the vast majority of millionaires in the United States may surprise you:
- You live in a home under $ 400,000.
- You are more likely to wear a Timex watch.
- Pay $ 15 or less for a bottle of wine.
- I never paid more than $ 400 for a suit.
- You are more likely to drive an Acura than a BMW.
- Spend little on fashion brands and luxury items
Figures from the Center for Tax Policy say that if your annual household income is $ 107,628, you are in the top 20% of income earners. If you exceed $ 148,687, you are in the top 10%. The top 5% earn more than $ 208,810. And if your household income exceeds $ 521,411, congratulations. You are one of those “1% ers” and probably demonized by those who see hard work and risk taking as a matter of luck or good genes. However, as a business, your personal bottom line should be the determining factor. If you make $ 200,000 a year, there is no use spending $ 210,000.
In fact, it may Appear rich instead of really be Rich.
Take, for example, the recent news about NBA legend Alan Iverson. Surprisingly, a man who before the age of 35 had amassed a fortune more than what the average person will see in his life had ruined everything. To quote the article: “Iverson spent his money at an alarming rate on flashy jewelry, expensive cars and other frivolous purchases. In 2012, a Georgia judge garnished his wages to satisfy a debt of $ 859,896.46 to a jeweler.”
Hey? Almost a million dollars for a single jeweler! Here’s a man who not only looked rich, but was actually rich. But because the desire to look rich was overwhelming him, he is now asking for a change on the street. You can receive $ 30 million from a trust, but not until age 55. It will be interesting to see if he learns his lesson, if he can survive until then. I assume that $ 30 million will be lost before I reach the “official” retirement age.
This is why net worth is a much better indicator of true wealth than income. The Federal Reserve’s Consumer Finance Survey indicates that a net worth of $ 415,700 places you in the top 20% of households. You’re in the top 10% if your net worth is $ 952,200. (Dr. Thomas J. Stanley – author of The millionaire next door – says that one in eight American households has a net worth of $ 1 million or more. That’s close.) If your net worth totals $ 1,863,800, you’re in the top 5%. And if you have a family net worth of $ 6,816,200, ta daa – you’re in the top 1% … and possibly frowned upon by redistributors who resent people who live below their means, save regularly, and manage their financial affairs. with prudence.
Most millionaires are the complete opposite of big spenders. They spend far less than they can afford on all common property assets. Applicants, on the other hand, (people with average or above-average income but little net worth) are merely “aspirational.” They buy expensive clothes, premium wines, fancy cars, and often more home than they can comfortably afford.
It’s ironic that the very thing that makes them LOOK rich prevents them from ever BEING rich.
So how do you get rich if you are not currently rich? The basic formula is pretty simple: maximize your income (by improving your education or job skills). Minimize your responsibilities (living below your means). Save the difference in an IRA or 401K (I know that is easier said than done) and follow proven investment principles.
You must learn to be frugal. But eventually becoming financially free, being able to go where you want to go, not having to depend on a dumb boss or the federal government is what I consider rich. What feeling.
Some people refuse to change, but the bottom line is clear: if you want to be rich, you have to stop looking rich and start living like the many real millionaires you won’t see on TV.