I’ve written a lot about the economics of household income over at Investing for Beginners at About.com, a division of The New York Times.

[mainbodyad]Most economic data, as I explained there, comes in the form of regular households that are easily understandable to the average worker.  For example, to be in the top 5% of household income, which means you earn more than 19 out of 20 households, you need to earn at least $157,176 per year.  Most of these top-ranking households have dual income earners where both spouses work.  That is, it would take two college graduates earning $78,588 to rank among that top quintile if they were married and living under the same roof.

The Five Levels of “The Rich” in the United States

But what about “the rich”.  Where do the dividing lines for the rich fall?  I’ve been researching the economic classifications for some time and it seems that many economists, whether they realize it or not, seem to classify the rich according to an interesting hierarchy:

  1. The Millionaires Next Door
  2. The Capitalist Class
  3. The Glittering Rich
  4. The Ruling 15,000 Families of the United States
  5. The Forbes 400 List

1. The Millionaires Next Door

Most American millionaires are so-called "Millionaires Next Door". They are school teachers, accountants, lawyers, stock brokers, bankers, business owners, and real estate brokers who lived below their means and put the difference into savings and investments.

Most American millionaires are so-called “Millionaires Next Door”. They are school teachers, accountants, lawyers, stock brokers, bankers, business owners, and real estate brokers who lived below their means and put the difference into savings and investments. Image © “iStockphoto Collection/Thinkstock”

The millionaires next door are the vast majority of millionaires in the United States.  They are teachers, lawyers, plumbers, real estate brokers, small town bankers, and car dealers who spend their life spending less than they earn and putting the difference aside into savings and investments.

For many of these frugal millionaire households, most of their wealth is in the form of home equity and retirement accounts.  If you include home equity (I don’t but I understand why some people argue for it here), 7% of American households are millionaires, meaning 1 out of every 14.3 households.  The figure is higher if you exclude home equity; roughly 1 out of 25 households.  I think the latter is the more appropriate metric.  Nevertheless, a vast majority of these millionaires are millionaires next door.  You’d never know from their outward appearance that their assets minus liabilities resulted in a figure in the seven figures.

The millionaires next door are the Americans that have no mortgage debt, have no credit card debt, and generally have little or no financial stress.

2. The Capitalist Class

To rank in the “capitalist class“, which is the top 0.9% of household income, you need to earn at least $350,000 to $500,000 from dividends, interest, rents, profits, and other passive sources.  These are the folks showing up to their office and seeing cash from their hotels or jewelry stores, municipal bonds or blue chip stocks rolling into their bank accounts like clockwork.  Most have high educational achievement in the form of advanced degrees.  Many may still behave like millionaires next door.

Capitalist class members have built economic machines that don’t require their labor to generate profits.  A doctor earning six-figures is not a member of the capitalist class because the cash stops if he fails to go to work.  For all intents and purposes, you can do almost anything you want once you reach the capitalist class if you are smart about your expenditures.  You could spend half of the year in the south of France, give generously to charity, drive a Mercedes, and wear a $25,000 watch if you desired (most people don’t).  No matter what you spend, as long as you don’t dip into principal and act as a wise steward of your fortune, money keeps pouring into your accounts year after year.

Holiday Inn Express at Night

The capitalist class member may own a single, nice hotel in a regular town and collect $50,000 per month in income from their property.  They probably dress well and have a nice car, but you wouldn’t be able to pick them out from most of their neighbors.  Most keep a low profile and no one ever knows they have money.

3. The “Glittering Rich” as Dr. Thomas J. Stanley Calls Them

The next classification for the rich comes from Dr. Thomas J. Stanley, the academic and bestselling author who has spent his life studying the behaviors of the rich.  He calls them the “glittering rich”.

As he puts it in his great book, Stop Acting Rich:

[The glittering rich] generate extremely high incomes, have vast sums of wealth at their disposal, and spend accordingly on high-prestige cars, mansions, dinner every night at $300-plus per person restaurants, couture attire, and the like.  No matter what they spend their money on, though, it’s just a fraction of their overall net worth.  in other words, even the glittering rich spend below their means.  They are a very small minority, about 2 percent of U.S. millionaire households; no more than 80,000 in total.  As of the first quarter of 2007, in order to qualify as glittering rich, one needed to generate an annual realized household income of over $2 million, have a net worth in excess of $20 million, and live in a home valued at over $2 million (at least $3 million in California).

What is interesting is that even though the glittering rich are spending money in huge sums – $200,000 cars, $6,000 bespoke suits, $35,000 bookcases from high-end furniture companies – they are spending far less than they earn and often see their net worth grow each year.  By the very definition of the word, the glittering rich are frugal relative to their income and assets.

Once you rank among the glittering rich, there are virtually no barriers to anything you want to do if you are intelligent enough.  You would have the connections to raise money, fund new companies, attend dinners at the White House, and have your kids raised in a boarding school in Switzerland where they learn to speak three languages (not that you’d want to do that, but you could).

Glittering Rich

According to Dr. Thomas J. Stanley, the glittering rich consist of 80,000 households in the United States. They have annual realized household income of over $2 million, have a net worth in excess of $20 million, and live in a home valued at over $2 million (at least $3 million in California). The glittering rich still spend less than they earn and often see their net worth and income climb each year as more money works for them. Most are self-made.

4. The 15,000 Families that Rule the United States

Then we get to the really interesting part.  There are approximately 15,000 families that, in effect, rule the United States.  They have been described as “the richest of the rich”. They represent the top 0.01% of wealth in the population and have an annual income of $9.5 million or more. As a group, these families received 5% of the entire income of the nation. At a reasonable capitalization rate of ten percent, this would require assets of roughly $100 million.

The most encouraging part of the story is that 80% to 90% of these ruling families are self-made, meaning they created their fortune themselves and didn’t inherit it.  That is why I constantly harp on the fact that the United States is the greatest meritocracy the world has ever known despite our flaws.

You probably don’t know the names of more than a handful of the ruling families of America.  They are the people who control newspapers, banks, consumer product companies, theme parks, and real estate empires.

The members of the ruling class of families would have the ability to buy toys like this and travel the world with their personal staff as they monitored their investments on a Bloomberg terminal tied to their investment banks in Tokyo, Hong Kong, London, and New York.

Mega Luxury Yacht

The United States is ruled, in many ways, by a group of 15,000 families with minimum net worths of $100 million and household incomes of $9.5 million per year. Most of these fortunes are self-made. Image from Wikimedia Commons.

5. The Apex of Wealth Is the Forbes 400 List

[mainbodyad]Then, you reach the apex of wealth, which is the Forbes 400 list.  There is the smaller list of American billionaires and the larger, more competitive list of global billionaires.  For all intents and purposes, there is no standard of living increase for someone on the Forbes list that isn’t available to the 15,000 ruling families in the category below the Forbes list.  They are all traveling on private jets, have multiple houses, the best accountants and attorneys, etc.  The Forbes list is purely pride.

In other words, there is very, very little you couldn’t do as a member of the 15,000 families that you could do as a member of the Forbes 400.  In some ways, it becomes a detriment to rank on the list because suddenly you lose your anonymity.

This is the land of the Warren Buffetts, the Bill Gates, and the Carlos Slims.

  • I don’t think home equity qualifies when tabulating millionaires – only what can be relatively quickly sold and liquidated for purchasing power. Of course if you’re a talented flipper I suppose you can count your residence. But then you’d still have to account for the budget you’ll need to cough up for rent or hotel rooms in the overall equation. If you want to get even more specific you would then normalize assets based on relative buying power. Someone who lives in Akron OH earning $250K will probably have more purchasing power than someone living in San Francisco earning the same $250K. If you’re in the capitalist class, then frankly it doesn’t matter 🙂

    • neelam

      early education, ensuring safe neighborhoods, extinction of gangs, parenting parenting parenting every second of young lives. these are more impt than money.

  • Kwame

    I was thinking of asking you a question today similar to what this article is about. This article answers it perfectly.
    Thanks for the article Josh.

  • calegp

    Well I’m only 25 and I’ve finally reached 100k in liquid assets.

    Although it’s a bit cheating since $7,500 of it is from the 2008 Federal Housing Tax Credit that I have to pay back in $500 dollar yearly increments.

    On top of the 100k, I also have a potential 48k home equity. Thus I have almost reached 150k in net worth, none of which will be taxed if I cash out. I feel great for being so young and reaching this goal. My mortgage is only 82k thus I could technically pay it off now without issue.

    It’s funny because most people would be thinking of things to purchase at this point… About the only thing I could say I would want to do with 150k is withdraw it, hold it in my hand (yes in dollar format… it just feels good that way as the math is printed and you could count out 100k), then invest it right back. Obviously I’m not going to do that. 🙂

    Hopefully I can make some changes and start thinking about possibly being a part of one of these categories one day! To me, reaching #2 would be phenomenal, any others would just be icing on the cake.

    • That is awesome, calegp. If you are only 25, Buffett is currently 55 years older than you. If you earned 10% on your money, and never saved another dime, your $100,000 in liquid assets would grow to $18,905,914+. Obviously, you don’t want to wait until you are nearly 80 years old to enjoy your money. But the point is, with a foundation like that, you are already successful. Now, your goal is to be – as Charlie Munger puts it – “consistently NOT stupid”. You’re already lightyears ahead of a virtually all of your peers and age bracket.

  • I would like to address this to MR Joshua Mckennon and to the  post containing claims that the united states is still the greatest meritocracy. Its funny the way that you address the united states as a meritocracy yet on the other hand you refer to the 15000 thousand families that rule the united states’ this sounds to me like the two are not compatible.  I will give a good example of anything but meritocracy concerning anyone of the 15000 thousand families that owns a business.  Say you are the chief executive officer of a one billion dollar company and  have a son and daughter that  works for your company and  they both have  many years of experience working for the company they are both bright but not brilliant business wise so you intend to have one of them take over the reins of your company some day when you step down’ simply because their your son or daughter. But their are  other individuals working for your billion dollar company  that you know  are  definitely more capable of running your company than either your  son or daughter. Could you please explain how that has anything in the world to do with a  merit.  And Im sure that it happens thousand of times within that group of 15000 thousand families. Merit is all about putting the best most  capable person in the job’ promoting a close relative rather than the person most   qualified to do the job is nepotism not  merit.  Historically Large corporations have used their clout to gain favor from government to prevent or inhibit potential competitors from threatening their market dominance. A very good example of this is monsanto corporation. The company has a virtual monoply in the seed business. If I have a farm and plant corn that I did not buy from monsanto but my field of corn becomes contaminated with genetically engineered corn from a near by farm that bought the seed from monsanto. When the corn pollinates any seeds that I save from my own field are considered to be the property of monsanto because they partially consist of genetically modified seed that a neighboring farmer bought from monsanto. In other words If I am a farmer and have bought no seeds from monsanto I can not legally save and plant any seeds from my own farm because they are considered property of monsanto. Monsanto is not just successful because their seed business is one of the best  they also have  a monoply. Their is an interesting video about monsanto called david versus monsanto. Copyright laws tradmarks and so forth have always been designed to protect the rights of property owners At the expense of everyone else.

  • R

    Where did you get the figure that 80-90% of the Top 0.01% did not inherit their wealth? It is simply not true and you cannot cite a reliable source.

    I have more commonly heard the erroneous figure that 90% of the Top 0.9% did not inherit their wealth, which again cannot be traced to any source, let alone a reliable source.

    That is a lovely fantasy that you have about America and it is no wonder we are quick to believe it and repeat it without justification, even when there is no data to support it.  Until you can provide a reliable source, it is just that – a fantasy.

    • Joshua Kennon

      If you are looking for the source materials, academic research papers, and other studies showing 80% to 90% of millionaires are self-made, the best compilation can be found in the footnotes and chapter end notes of a book called The New Elite: Inside the Minds of the Truly Wealthy by Jim Taylor, Doug Harrison, and Stephen Kraus. It was originally designed for money managers who wanted to identify and get hired by America’s rich. Like all good market research, it starts with identifying who they are and what motivates them, breaking them down into individual psychology archetypes. Also, like all good research materials, it identifies its sources so you can pull the original research.

      For example, “Perhaps the single biggest misconception about the wealthy concerns the source of their wealth. Most people believe that the wealthy inherited their wealth; as we saw in Table 2-2, 85 percent of Americans believe that the wealthy “come from money.” Again, the media play a key role in maintaining this perception. And again, it is radically, dramatically wrong. In fact, over 90 percent of the wealthy created their own wealth, and fewer than 10 percent inherited it.” – Page 20

      They then go on to examine whether this was always true or whether it is a recent phenomenon, citing the research source. They found that it (the rise of self-made wealth) happened only after the onset of the industrial revolution. During colonial American days, the figure was reversed with meritocracy being a pipe dream because, “over 90 percent of the wealthy in those three cities [had] ‘rich or eminent parents'” – Page 23, referencing chapter footnote 1, Jeffrey G. Williamson and Peter H. Lindert, American Inequality (New York: Academic Press, 1980), p. 286.

      The whole thing is like that, examining the claim throughout time, referencing the original source, including links to the PDF studies for those that can be found online, saving you a trip to a research library.

      It’s an inexpensive book. If you truly want to verify the claim, there are dozens of original sources within its reference sections for you to do so. The whole thing is only 230 pages and provided me with several weeks of follow-up reading after going through those source materials.

      If you are talking about millionaires in general, the figure was also confirmed by Dr. Thomas J. Stanley of the University of Georgia. He used his academic studies to write several New York Times bestselling books. If you want the cliff’s note version (which is still 400 pages), skip the more famous book and go to a title he wrote called The Millionaire Mind. The data is a bit old now (it was published 10 years ago) but still useful since there hasn’t been that huge of a shift in income levels looking at the Federal Reserve household income figures and the IRS estate multiplier technique figures for calculating high net worth families in the United States.

      In that work (Dr. Stanley, Millionaire Mind, referencing and including the academic studies he did for the University of Georgia), talks about inheritance. The trouble is what you consider an inheritance. He states (ibid, page 7, “Nearly 8 percent inherited 50 percent of more of their net worth. In sharp contrast, 61 percent of us never received any inheritance, financial gifts, or income from an estate or trust”). That means you have 8 out of 100 who got more than half their wealth from inheritance, and 61 out of 100 who didn’t inherit a single penny. That leaves 31 out of 100 who inherited something. He later goes on to break this down to show that for a vast majority of that middle group, the inheritance was tiny – a few thousand dollars. For virtually all of them it was less than $100,000. If you build a fortune of more than $10 million, inheriting that small of an amount was not responsible for your success. That is why you see the nebulous 80 to 90% figure; not everyone can agree on how much of an inheritance makes a difference.

      Off topic, for me it is a moot point. I never inherited a penny.

      Again, since he is the leading academic specialist on the rich in the United States, Dr. Stanley’s work is a treasure trove of information. If I were researching the veracity of the data, I’d just call his office or write to him. Or you can just pick up his books, which source everything or, in many cases, lead back to his own research.

      It is true that the 80% to 90% figure starts to fall when you reach stratospheric wealth. This has to due with the nature of compounding. The most recent source that I’ve come across on that level is from French banking giant Societe Generale and Forbes, which examined the super-rich in 12 countries last year. They found that 80% of British billionaires were entirely “self-made” with no inheritance. In the United States, they found that 68% of billionaires were entirely “self-made”. So, yes, once you get into the minority-of-minority of rich, the figure does drop a bit here in the United States. Great Britain has us beat on the meritocracy scale there. I suspect is has to do with attracting, rather than creating, self-made wealth with their international tax laws. There are some really interesting ways to bypass a lot of tax payments if you domicile yourself in London and come from a nation like India. Ref: http://af.reuters.com/article/burundiNews/idAFLDE74P0AI20110526?sp=true

      So, the quote you asked about was directly from the book by Taylor / Harrison / Kraus, which go on to examine the claim throughout history, which seems confirmed by Dr. Thomas J. Stanley’s work, given on what you consider a “meaningful” inheritance, which follows up the scale until you see a little bit of a drop in self-made wealth at the billionaire club, though it is still overwhelming made up of those who started with nothing. If you go to those sources and don’t trust them or want to cross-reference them with other research, go through their own citations. The two books I cited in response, alone, have hundreds of referenced academic papers, market research studies, and other sources that expand on the assertions that self-made wealth dominates the Western world. This presumes, of course, that you are actually interested in the topic and not just a high school or college student trying to get me to give you a bullet point list of MLA references so I can do your homework for you. That happens frequently. If that is the case, just cite Taylor / Harrison/ Kraus’ work since it is a direct quote.

      • HaroldCallahan

         Your narrow focus on inheritance misses the big picture. Upper-class families confer numerous and myriad critical advantages to their children above and beyond the mere dollars and cents of an inheritance. If your mommy and daddy pay your college tuition, that gives you an edge. If they pay for your expensive boarding school in Switzerland thereby helping you gain admission into an elite university, that gives you an edge. Hell, even parents who can afford good food and a non-polluted, crime-free living environment for their children during the crucial developmental and growth years are doing their kids a big favor compared to other kids coming from disadvantaged backgrounds. None of these things would show up in any analysis of inheritances.

        The only thing your citations show is that most rich people do not come from backgrounds of stratospheric wealth. But if you counted the proportion of rich people who come from above-median vs. below-median parental incomes, I think you’d find that the vast majority are from above-median families. Unlike you, I view this opportunity gap (and it certainly is a gap) as a problem. It does not take much wealth to beget wealth, but it does take SOME wealth.

        • Joshua Kennon

          If you are talking about extreme poverty, I would agree. That is why I am such a heavy supporter of early childhood education funding (rather than direct transfer payments to parents, who can’t always be trusted to do the right thing with the money). If every kid in America is literate, mathematically functional, and civically aware by the time or she is 10 years old, they have a much easier go in life.

          Other than that, what you say *sounds* good, and most Americans believe it. The data just doesn’t back it up. At all. That’s the thing. The research also shows (seriously, get at the very minimum those two books I cited) that grades and elite schools have virtually no correlation with financial success outside of a few, specific industries (e.g., finance). Wealth accumulation has no correlation with SAT scores, ACT scores, grades in school, or grades in college. Whether you go to a good public school in a decent community or the best school in, as you say, Switzerland, your probability of being self-made is virtually the same unless you are hell bent on making your fortune in one of those niche areas.

          In the research cited in “The New Elite” I already referenced, it shows that for every 100 individuals in the United States with a household income of more than $500,000 and liquid net worth in excess of $5,000,000:

          8 grew up in poverty
          28 grew up in lower middle class
          36 grew up in middle class
          25 grew up in upper middle class
          8 grew up in a wealthy or affluent class

          In most academic models (e.g., Gilbert, Thompson & Hickey, etc.) “upper middle class” stops at around $100,000 per year in income. You might be able to stretch it and take it to $150,000 but that is really the top 5%.

          Still, let’s be generous to your argument and push that limit. If we do, it shows that for every 100 people who build significant personal wealth in the United States, 92 of them grew up in households with less than $150,000 in income. A vast majority – indeed, almost all – grew up in households earning less than $60,000 per year. At least 1 out of 12 grew up in abject poverty.

          So, while your beliefs *sound* reasonable on the surface, the facts show they are unequivocally wrong.

          Why do so many people continue to cling to these false beliefs when the evidence is unquestionably clear? It comes down to the media portrayal of the rich and something called “signaling theory”. When you are watching a show, reading a newspaper, or enjoying a movie, the script writers need to create, very quickly, often in a matter of seconds, an archetype to get you to associate certain types of feelings with someone. There are symbols they can use – clothes, watches, pronunciation, cars, drink preferences, personal grooming, educational background – to accomplish this.

          Take a show like Gossip Girl. The rich scions that make up its main cast of characters have precisely the sort of background the average guy thinks is a prerequisite to becoming super rich. It’s a fairly tale. You can *see* those people. What you don’t see is the scrap yard operator, driving a beatup pickup truck and living in a $200,000 manufactured home, who has $20 million in municipal bonds built up over a lifetime of growing his operation. That is the real face of wealth in the United States. The Federal Reserve knows it. The IRS knows it. Most of the rich themselves know it, unless you were born into an enclave and never escaped (e.g., children of Manhattan billionaires who only inter-marry among themselves to protect the fortunes their much more talented parents created).

        • HaroldCallahan

           Thanks for the patient explanation. I have gotten the book and will definitely look into it.

          Your 8/28/36/25/8 distribution seems to come from Figure 4-1 on page 43. There is no citation given for this figure, although from the text of the caption I can infer that it derives from the authors’ own survey. I checked the Appendix on page 225 to see how survey respondents were chosen. The authors state that they started from a list of 300 verifiably representative families and then used data from 200 out of those 300 families who completed interviews, along with 200 additional referrals. I am skeptical whether such a procedure would really yield an unbiased sample, and the methodological details given in the Appendix are not enough to answer this question. Self-selection is a big no-no in statistical sampling — if those families selected for the survey were chosen in part on the basis of willingness to respond (a condition hinted at in the second full paragraph on p. 227), then this would definitely skew the results.

          Another inherent limitation of any study of this form, no matter how well-executed, is that it is inevitably backwards-looking. You’ve already acknowledged that the industrial revolution changed the wealth outcomes of children from disadvantaged backgrounds compared to the prior agrarian society. The economy is currently undergoing structural changes that are arguably comparable in impact with the industrial revolution. It is quite possible that patterns of wealth mobility which held in previous generations will no longed hold going forward.

        • The Irish Immigrant

           I love the whole article.  Do you and your readers realize how much you owe to the comparably low taxes, and hence money available for investment in the US?  In the UK I earned in the top 15% but I never could save anything outside the equity in my house.

          I arrived in the US at 38 with a net worth of less than five figures.  20 years later I had 2 million net worth plus my home.  I never earned more than low six figures.

          If you can’t succeed in the US the mote may be in your own eye.

          BTW I was 16 before I lived in a house with an inside toilet, so I know a little about being poor.

      • Barry

        “80% to 90% of millionaires are self-made” Wrong. No millionaire is “self made” and your figure as to how many are “new money” is a radical and incredible over estimate.

    • Joshua Kennon

      P.S. If you aren’t actually interested in the topic and don’t want to read more, the short answer would have been MLA format citation:

      Harrison, Doug, Jim Taylor, and John Butman. “Chapter 2.” The New Elite. New York: AMACOM, 2008. 20. Print.

  • R

    Nope, your story is BS. It makes a great story, conjuring up images of David and Goliath, but
    its just a story.  Not the slippery slope that the farmer preaches. That farmer you are referring to purposely broke the license he agreed to when he bought the seed that he not replant the Monsanto seed.  His story of “contamination” was an obvious lie, judging from his crop being over 90% of his crop being Monsanto seed.  Contamination would more likely account for only a few %, and Monsanto would not/possibly could not pursue damages for accidental infringment of a few corn plants, where damages would be negligible.

    The farmer was trying to make money at Monsanto’s expense, and he knew full well what he was doing.  Furthermore, the Monsanto patents at issue expired in October 2011, so much for your supposed monopoly.

    Also, you’re mixing copyright laws and trademarks with your Monsanto story?  Apples and oranges!  Each are very different types of protection, and trademarks in particular protect the consumer as much as the trademark holder.

  • Joshua Kennon

    They are not contradictory at all.  If the 15,000 families were made up of a static group that never changed, then it would be a problem.  But it’s not.  Those 15,000 families are constantly changing as self-made people launch their ideas, proving that the United States, for all her flaws, is still one of the world’s best meritocracies.  This is even true at the extreme end, where there tend to be a bit higher proportion of inheritance; e.g., look at a list like the Forbes 400, which details the richest 400 people in the country.  When it was first released in the 1980’s, the names were Rockefeller, DuPont, etc.  Today, they are made up of Page, Brin, Gates, Slim, and Zuckerberg.  The same is true of the global Forbes 400 list, as well.

    In any meritocracy, someone will always be better – a faster runner, a more talented writer, have a richer bank account.  That isn’t a problem as long as the top, the creme de la creme, is always changing as people invent new products or develop new services.  Think of it like this: One of the “rulers” of the financial world would now be J.K. Rowling, with her $1 billion fortune.  But before her, there was Stephen King.  It goes on and on all the way to Benjamin Franklin becoming one of the richest men in the world through, among other things, his writings in the form of the Poor Farmers’ Almanac.  It doesn’t matter that there have always been rich writers.  It matters that, over time, those rich writers are changing and being replaced with new talent.  That is the definition of a meritocracy; not everyone being equal because, let’s face it, not everyone is equal in terms of abilities.

  • KB

    Did we consider families who hold their wealth in trusts? Since most trusts have privacy benefits, how can someone verify at what level a family becomes one of the “top” 15k? Moreover, how can we verify that the Forbes 400 are in truth the richest in America?

    • Joshua Kennon

      You can’t (in answer to your last question) but it is fairly accurate and there are teams of reporters who work on it at Forbes publishing since it is one of their big brand money makers and trademarks.

      I imagine there are at least a few people in the United States who should be on the list who have eluded notice.

      • KB

        Yeah. Absolutely. If you really get in the money (Rockefeller level), I doubt there’s much benefit in letting the masses know about it via Forbes etc. You probably couldn’t hide it all, but it would probably make sense to publicly “own [relatively little], and control [more than people need to know].”

        And big kudos to you, Josh. You have a great story, a wonderful wealth of knowledge, and a keen, self-aware mind. That’s a rare combo and it’s an honor to keep up with your posts. I hope you still do all the writing.


  • Barry

    I stopped at “They are teachers”; what gross and deliberate distortion of reality. Your credibility ended there. Time is limited; do some research and think before you write next time if you want ppl to invest their time in reading your writing.

    • So you have a belief, backed by no fact, and when you read something contrary to it, you stopped reading?

      That sounds like a recipe for intellectual rigor.

      Teachers are disproportionately represented among the top 1% of households compared to what they should be. This has been demonstrated time and time again, including in the work of well known academic experts on the subject such as Dr. Thomas J. Stanley at the Georgia State University.

      It’s such an interesting link that The New York Times wrote about it recently. You can read their special here.

      • weixiluo

        Very interesting graphic, Joshua. It shows clearly the number of people in each occupation/industry and also the percentage of people within each occupation/industry that make it to the top 1%. However, where are business owners, who represent up to 30% of the top 1%, represented in that graphic? Are they counting towards the specific industry of their business or put together under “CEO” ?

      • neil5

        It is amazing how the average person on the street believes the spin that all teachers are underpaid. I live in Illinois, where there is a pension crisis which may push the entire state to the brink of bankruptcy (if bankruptcy is even a legal option!) There are many retired teachers in IL who retired in their late 50s and who are now collecting six-figure pension payments and will continue to do so for the rest of their lives. In some of the bigger districts, high school gym teachers make over $100k/year! The system in IL, at least, is practically set up to make teachers millionaires many times over if they teach for a sufficiently long length of time.

  • You’re exercising that admirable ability to ignore facts again. Virtually every reputable academic and economic source says you are factually incorrect. Period. There is not room for interpretation.

    In fact, as illustrated brilliant in Robert Frank’s recent book, “The High Beta Rich”, wealth is becoming even more unstable as a result of the financialization of assets over the past 30 years, leading to even greater proportions of accumulation ending up (and ultimately leaving in the same generation) first-generation wealthy.

    If you post again without sourcing your objections, I’m banning you from the site. Disagreement is fine but spam posting a single article rapidly without sourcing your objections, as an adult would do in an intelligent conversation, is not.

    P.S. You realize that this discussion is entirely limited to the economy of the United States? It has no influence or accuracy whatsoever for your home country of Australia.

  • DonnieNYCA

    Hi Josh. Fan of your site. My wife and I are far from millionnaires (but hope to aspire to that one day) – read your post re median-household income and got me thinking. Here are my thougts when it comes to saving/investing proactively. My wife and I are in our mid-30(s), both employed and plan to raise a family. In our efforts to be balance-sheet affluent, we adhere to a monthly budget – which is often challenging. Before we invest, we keep an emergency/slush account in our credit union with at least 3-4 months worth of living expenses; for retirement, we currently maximize my wife’s 401k at 18k per year; and I continue to save money as much as I can (40-45% gross income). It can be difficult at times, but we ‘pay ourselves first’ and remind ourselves that we are playing this like a game – trying to save as much as we can and live within or if not below our means. Combined gross income is about 190k-200k per year; no credit-card debt, cars are paid for, and our biggest liability is our home on a 30yr fixed. The #s are considered healthy – our total living expenses are within 35% or less of our gross income. Yet, it’s only the two of us – so when we factor the additional costs of raising a family (ESA coverdells, 529s, day care, etc.) along with a new home to plan for, it just seems the net dollar amount to save prudently rises considerabily. once raising a child or two,or three the financial demands can become overwhelming regardless of where we ‘rank’ in household income. The only relief I have is to utiize these concerns as motivational pressure so that I can continue to increase my income, which in turn increase my savings – nothing new there, but is this pretty much the inherent struggle for the aspiring affluent today?