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Home Page | Table Of Contents | Introduction
A NEW STANDARD OF WEALTH
You may be richer than you think.
There’s a new standard of wealth today, and a great many people who make the grade don’t even know they’re members of the club.
This new standard isn’t just about living well—having enough to do pretty much anything, go pretty much anywhere, or buy just about anything. It isn’t just about security, either— about owning every protection and hedge to guarantee a comfortable retirement for yourself. The new standard of wealth is about much more.
It is about having all of that plus the great bonus benefit of becoming rich—namely, the chance to leave a legacy of wealth to your children or heirs, to their children, and to the generations to come.
Think of it as a kind of perpetual wealth—enough wealth to keep you rich through your lifetime and to keep the heirs you will never meet rich forever. Such a legacy is within the reach of most people today, and most of them don’t even know it.
Such a new measure of wealth may be within your reach, too—if only you know how to get it. That’s why we wrote this book. It will tell you how.
RICH? AFFLUENT? GETTING THERE?
Are you worth $5 million—not including the house you live in? Some 1,140,000 American households are members of that club. Are you worth a million dollars—again, not including the equity in your home? It’s not an unreasonable question. More than seven million American households today claim total assets of a million dollars or more.
Still, it’s probably more likely—more than three and a half times more likely, in fact—that you’re among a group we call the mass affluent, people whose total assets add up to anywhere between $100,000 and $1 million. There are 33.4 million mass affluent households in the United States, and chances are pretty good that yours is one of them.
Wealthy Households in America
MASS AFFLUENT |
MILLIONAIRES |
MEGA-MILLIONAIRES |
|
$100K–$1M Net Worth Not Including Primary Residence |
$1M–$5M Net Worth Not Including Primary Residence |
More than $5M Net Worth Not Including Primary Residence |
|
| TOTAL | 33,400,000 |
7,900,000 |
1,140,000 |
Do you own a nice home? Do you have a good salary—one commensurate with your skills, training, and responsibilities— or reap a substantial income from your business? Maybe you own a vacation home—or are looking to buy one.
You probably have a 401(k) plan or a portfolio of “buyand-
hold” stocks, bonds, and funds that keep growing with
the economy. If so, your total assets very likely add up to at
least $100,000, which puts you easily among the mass affluent.
That means you qualify, as much as do the rich, the
very rich, and the very, very rich, for a new standard of wealth—perpetual wealth for yourself and for the generations
of your heirs to come.
WHO ARE AMERICA’S RICH?
A profile of the more than 42 million mass affluent, millionaire, and mega-millionaire American households offers some interesting, even surprising, facts. The wealthiest Americans— our mega-millionaires—tend to be, on average, age sixty-five, or ten years older than those in the mass affluent and millionaire categories. This age difference also accounts for the higher percentage of mega-millionaires who are retired, compared to the 72 percent of mass affluent who are still employed. Education is another interesting indicator; the data show a direct correlation between wealth and a college degree— notably, that nearly two-thirds of mega-millionaires have dvanced degrees. Career choice is also a key driver of wealth. Many so-called “C-level” executives and business owners are mega-millionaires. Professional training also pays: Doctors and lawyers constitute an important segment of the rich in America. In their case, education and career choice have converged— along with the desire, felt by millions of Americans, to get rich and stay rich.
America’s Rich
MASS AFFLUENT |
MILLIONAIRES |
MEGA-MILLIONAIRES |
|
| AVERAGE AGE | 54 | 56 | 65 |
| EDUCATION | 87% College Graduates 46% Advanced Degree |
91% College Graduates 57% Advanced Degree |
94% College Graduates 63% Advanced Degree |
| WORK STATUS | 28% Retired | 33% Retired | 48% Retired |
| PRIMARY OCCUPATION |
8% Senior Corporate Executives 6% Business Owners 3% Physician/Dentist 16% Other Professional Specialist 3% Attorney 5% Consultant |
12% Senior Corporate Executives 6% Business Owners 8% Physician/Dentist 10% Other Professional Specialist 2% Attorney 3% Consultant |
22% Senior Corporate Executives 15% Business Owners 10% Physician/Dentist 9% Other Professional Specialist 7% Attorney 6% Consultant |
THE GET-RICH FORMULA
Carnegie, du Pont, Rockefeller. These are names associated with both generous philanthropy and wealth that seems to go on forever—virtual dynasties of wealth. Microsoft’s Bill Gates and uberinvestor Warren Buffett will give away well over 90 percent of what they have earned and still have billions to pass down, but of course, they are the wealthiest two people on the planet. You probably won’t be able to do quite what these families have managed to do—give away most of their wealth and still have enough to pass down to multiple generations—but by studying the model of getting rich, staying rich, and passing it on, as defined by the Rockefellers and the Buffetts—you can create your own prescription for your own version of perpetual wealth.
We’ve done the studying for you. That’s our job, and frankly, the market agrees that we do it better than just about anybody else. What do we study? Each year, we research thousands of wealthy households as well as normal households invested in standard 401(k) and other company plans. By doing the research month after month, we can continually monitor how these people are allocating their assets, the returns they are achieving on their investments, and the approaches they are using in their decision making.
Each year we perform in-depth, mail-based research on approximately 5,000 mass affluent, millionaire, and megamillionaire households. Again, the aim is to analyze asset allocation and the attitudes and perceptions that go into investment decisions.
We support this in-depth mail research with detailed online research, and we also host focus groups across the country on an ongoing basis to further understand how people get rich and stay rich—and how the shrewdest of these people get rich enough to pass it on.
We issue monthly indices that are carried in all the financial media, including the Wall Street Journal and New York Times, and we publish subject-specific research reports that are read widely by economists in government, business, and the foundation community. Both of us are often called upon to comment on economic trends or shifts in the market and on changing investment practices. (If you do not recall seeing our faces, there is a chance you may have heard our voices on the radio while listening to the financial news).
Specifically for this book, we conducted in-depth interviews with more than two dozen wealthy individuals who qualify as perpetually wealthy—rich enough to stay rich for their lifetime and to ensure rich lifetimes for multiple future generations. You’ll meet many of these folks in the pages that follow, although under different names. We matched what we learned from them against what is known about the great sustainable fortunes of history and about the megafortunes of today’s ultrarich. We also looked at the asset allocations of today’s garden-variety households—the households of people like you and your neighbors.
We put all this data together and then analyzed what it is you have to do to ensure perpetual wealth. We’ve found that while there are many ways to get rich, and while there are diverse paths to remaining rich during a single lifetime, there are only two definitive ways to create the kind of wealth that can be bequeathed to multiple generations:
Doing both is a surefire way to get rich, stay rich, and pass
on your riches to future generations. The great fortunes we
have studied all share these two characteristics, whatever the
source of the wealth and despite a great diversity of background,
geography, educational level, interest, skill, and talent
among the progenitors of the fortunes.
It sounds simple, and in a way it is: Involve yourself continually in innovative enterprises, and become an owner of income-producing real estate. Do this and you open the door to getting rich, staying rich, and passing it on to your children, grandchildren, great-grandchildren, and beyond.
But in another way, of course, it is not simple at all. How do you find the innovative enterprise, and how do you immerse yourself in the business? Are you ready for a life-altering career change—ready to become an entrepreneur and take an entrepreneur’s risk? If a career change is not in the works, how much money and personal attention should you invest in such enterprises? How do you define “innovative,” and how do you ensure that an innovative enterprise will continue to provide a perpetual income stream? As for real estate, which real estate should you buy? When? How? How do you manage your ownership of real estate?
At what point in a career should one start down these paths? How should a business owner allocate funds for investing in or purchasing other businesses? How should the investments or purchases be structured?
In other words, exactly how do you open the door to the kind of wealth we have described? That is precisely the question we’ll help you answer in the pages that follow.
BUILD YOUR OWN WEALTH MODEL
Maybe you’re a professional—a lawyer, doctor, executive— proud of the accomplishments that are providing you and your family a comfortable living but unaware that you have the means to leave a substantial financial legacy. After all, you reason, the income you make today comes directly from your individual expertise—strenuously obtained through study, effort, and training. But when you go, the expertise goes with you—and the wealth stops streaming, unless you take action while you’re very much alive to keep the income flowing for generations.
Perhaps you’re a business owner, satisfied that you’ve built something significant that will provide for a comfortable retirement—but not thinking beyond that. Maybe you inherited a fixed amount of assets or wealth, either through a family member, divorce, or other means. While you are grateful to be on the receiving end of the inheritance, you suspect it is finite; in fact, there are ways to make it expansible. Or maybe you are just now on the brink of attaining wealth, starting up a business venture or beginning a career that will lift you from the ranks of the “well-off” to the more rarefied rank of mass affluent, millionaire, or mega-millionaire.
In any of these cases, you have the power to ensure virtually perpetual wealth for yourself and your heirs. All you really need is to know how to use the same wealth-building tools Carnegie and du Pont and all the other progenitors of sustainable fortunes used. They created the model but they didn’t patent it. It’s available for your use, and this book is the operating manual.
We’ll show you how the model works and how professionals, business owners, corporate managers, trust-fund babies, single women, and others—people you know, people just like you—have used the formula to develop their own individual prescription for creating, keeping, and passing on their money.
Then we’ll show you how it can work for you. We’ll walk you step by step through the process:
From all this, we’ll help you derive your personal prescription— a true action plan for creating your own model of wealth sufficient to pass on and on and on.
But we’ll do more than that. In addition to finding the model for getting rich, staying rich, and passing it on, we have, through our research, also uncovered the character traits and mental attitudes that have consistently proved to be decisive factors in attaining such wealth. While character and intellect cannot be taught, the principles, premises, formulas, and standards they drive can be learned. We’ve learned them, and we’ll teach them to you in the chapters that follow.
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