There is rich and super-rich. It is pretty hard to get super-rich unless you get lucky or are born well. And by lucky I mean a business that takes off or a book or song that takes off. I know someone who got super-rich by being one of the founders of a company which had a really good IPO. And by super-rich I mean taking a helicopter to work rich. He’s a nice guy, and smart, but I know smarter people who are not super-rich.
But lots of people in jobs that pay pretty well or who run successful but small businesses can get just rich by saving and not spending. But I agree that people who are never going to make much more than the minimum wage won’t get rich. Nor will people who shoot themselves in the foot by being lazy or spending more than they make.
Not really - yeah, cost of living stuff, but it isn’t 10% a year or anything, Apple doesn’t have a great rep as a company to get rich at now as a lower level exec (VP). You are working for APPLE! There will be OPTIONS! But the options at this point in Apple’s lifecycle aren’t likely to make anyone wealthy.
(Amazon has a similar mentality).
Both are great resume builders, and you could still do ok off Amazon’s options.
At tech companies it isn’t at all unusual for senior engineers to make more than VPs. Honestly, they are more important to the success of the organization and there is a dearth of talent and VPs are a set of interchangeable suits with MBAs. The high level execs know that.
Oh, to go back to the “why isn’t everyone multi-millionaires.”
It isn’t really hard with a decent middle class income and frugality to manage to be a millionaire. But that isn’t that much money.
Other than that, you have a few methods:
You could win the lottery - few people manage to do that.
You could win the talent lottery - entertainment, athletics - there isn’t a market for everyone to do that either. There are only so many professional musicians, actors, artists, athletes and authors the market will turn into mega wealthy people.
You could win the family I was born into lottery - again, not something you can control, and not many winners.
You could invent something, produce it by yourself or with a small number of partners, at manage to sell it for a ton.
The most common two ways to make money:
Make money off the labor of others - you see where the math doesn’t work well for this, but the guys taking a cut of every Uber trip do a lot better than the drivers.
Make money off investing it. But you need to have it to start with. The average person is never going to make enough money to have enough capital to drive themselves to be uber wealthy. If you can use someone else’s money (investment bankers) or get a kick start (inheritance, that one time windfall, start and sell a business), that will work. But again, few people are going to have the capital to start with.
My best friend is a senior director at Cisco, a pretty rich concern, and will be a VP soon enough, and he does very well but a million dollars a year is a fantasy. At his rate of salary increase, which has been quite lucrative, he’ll be at a million bucks a year several decades after he is dead. If a company as large as Apple or Cisco paid VPs a million bucks each they’d run out of money.
There’s an old joke about vice presidents. A man comes home and excitedly tells his wife “Honey, great news! I’ve been promoted to vice president!”
“So what?” she answers.
“So what? It’s great! Vice President!”
“Oh big deal,” she said, “Down at the grocery store they have a vice president of peas.”
“Nonsense!”
“Well, ask them if you don’t believe me.”
“I will!” he says, and he gets on the phone to the grocery store. “This is Mr. Williams, and I want to speak to the vice president of peas!”
The grocery store rep says “Fresh, frozen, or canned?”
I’m Australian so I know the details of my own situation but not my US friends situation. Some poking around on google will easily find you consultants who can give you specific advice on this and usually they’ll give you an initial consultation for free.
In my case as a company owner / director I am free to split my income between salary and dividends whatever way I want. Since numerous famous US executives have or had $1 a year salaries, including Steve Jobs, there must be legal ways of doing that in the US as well.
Not in the US. I found this page with several examples. The relevant section: Business owners often run afoul of the “substance over form” rule when they attempt to disguise compensation as “dividends” or “return of capital.” The IRS will not be amused; nor will you be when you receive an increased tax bill, plus interest and (most likely) penalties.
The arrangement works because the executive is explicitly tying their compensation to the success of the company. It doesn’t mean that an individual can funnel their income through a shell corporation and change their salary/dividend split on demand.
I can see how this might be a problem if you literally have only a salary paid by single company as income but if you do have any kind of business where you earn money from multiple clients (like a consulting business) then you can do the same thing and tie your salary to the success of your own company, You just need the right legal / accounting advice to make sure its structured in a legal way.
To reiterate my point from a previous post , 8 percent of American households are millionaires including the value of everything from their house to their socks.
A much higher percentage can obviously be classified as " middle class ".
On Page 4 , it says 49 percent of doctors over the age of 65 have accumulated a net worth of over 2 million. Less than half. This is after a solid 30 - 35 year working career earning an income which would put them solidly in the top 2-3 percent of all americans ( Many in the top 1 percent even as single earning households ). This is relevant to me because me and my wife are both Physicians.
So , yes theoretically , it is easy enough to accumulate a million bucks even earning a " middle class " income as you said , realistically though , not that much.
BTW , do you know that the average American saving rate is around 5 percent. The economy is heavily dependent on Americans going out and spending money.
You personally might be saving more or making great investments and all those great things but looking at the country as a whole , saving is an afterthought .
Have a look at this chart -
Credit card - 712 Billion $ owed , Car loans - over 1 TRILLION dollars owed. You combine these two together and you get a number that is bigger than the Nominal GDP of all but 10 countries on this planet.
You can imagine the kind of money banks make by lending all that money and the Power that comes with it. You know why not one banker went to jail after the 2008 financial crisis after basically stealing Trillions … this should give you some idea.
I’m really not that interested in researching the US tax system because its completely irrelevant to me personally. I can assure you I know US citizens using various methods to reduce tax liability and I assume they are doing so legally. I’ve said repeatedly to go talk to a good specialist consultant on this issue if you are interested and thats better advice than trying to untangle tax law yourself. A good tax lawyer knows legal exceptions or ways of structuring things that are not obvious to a lay person just from reading pages on the IRS website.
Hint, in my experience the ATO (Australian tax office) will often claim things on their website that are not actually strictly what the relevant legislation says, and I assume the IRS uses similar tactics.
Those are big number, but I think it’s interesting how they’re spread out. For instance, that same USCB dataset shows us most households don’t have credit card debt. So while that CC debt is nearly $6k per household, the average for household with CC debt is nearly $11k, and the median for all households is under $2.5k.
I don’t think that conflicts with your point that most people, even well-compensated ones like physicians, choose not to save very much.
So I understand that being wealthy means that someone has to be less well off. But lets go into a hypothetical scenario…
More and more Americans are getting innovative and starting their own businesses to profit from actually feasible ideas that can make a good sum of money. If so many businesses become successful (which means that very few of them fail) does that mean the value of money goes up down or stays the same? Will big business like Microsoft and Apple be affected by this? Will their profits go down?
It isn’t that hard with a decent middle class income and FRUGALITY to have a net worth of a million dollars. I had done it by 40.
But frugality means you won’t (or will rarely) carry credit card debt or have a car loan (beyond perhaps your first $3k worth of beater that you’ll drive until it dies and you’ve saved enough for a $5k beater). So debt is a red herring to the discussion because when you have either one of those things, you aren’t being frugal.
Good for you (seriously). And I’ve liked and agreed with your previous posts.
And this one too for that matter.
However, IMO being frugal most of your life so you can be comfortable in your later life still isn’t “rich”. Not that there is anything wrong with that (and this post is aimed at other posters that noted the same thing you just did).
And I am not certainly claiming that a hookers and blow lifestyle is anyway to get ahead either.
To be remotely rich, for all practical purposes, you gotta earn well above the mean or median income…and by definition MOST people can’t do that.
They can. It happened in Weimar Germany and Zimbabwe.
Those levels of REAL wealth almost always require a lot of risk taking and luck (in addition to hard work, ability talent, vision, (corruption?), etc.).
Almost all of them made a huge bet and let it ride. You can determine the wealth of many of the world’s wealthiest people by the fortunes of a single company that they own a LOT of.
I’m sorry, perhaps you didn’t read MY original post. Because I was responding to your reaction to my post. Or perhaps you just insult people instead of taking responsibility for making your point poorly?