Millionaire Net Worth
Welcome back. This is the forth part of the series on building wealth and the new millionaires. Today we focus on millionaire net worth. In addition, we will discuss millionaire income levels. Before we get started, I would like to provide a quick recap of the series.
Part 1 explained the 5 key Dividends Diversify principles to Build Your Wealth. Part 2 introduced you to the research study on the new millionaires. It provides the basis and explanation for the entire series. Finally, part 3 analyzed the millionaire demographics included in the study. And, compared the demographics to the famous book, The Millionaire Next Door.
What is the point of this series? It is to see what we can learn from the current millionaire class. And, compare them to the households studied in The Millionaire Next Door. In addition, are their practices similar to the wealth building principles in my first article in the series, Build Your Wealth?
The group I studied has a current average annual income from active work efforts of $305,000. This mainly comes from their careers as Corporate professionals. A few study participants also had income from actively managed rental properties. However, rental income was not a large part of their earnings.
The groups’s average compensation compares to $247,000 in the book, The Millionaire Next Door. Furthermore, the average household income in the US for 2015 was about $79,000 according to DQYDJ. High earners pull the average up. For those of you who like statistics, the mean annual household income in the U.S. during 2015 was $56,000.
THE MILLIONAIRE PERSPECTIVE
Virtually ever millionaire I studied attributes their main source of wealth to their professional career. Most importantly, the compensation it has provided. Virtually all attribute hard work in their chosen field as a one important key to success.
As a group, they improve their skills, take on additional responsibility and network within their industry. And, they demand to be paid well. Some have stayed with one employer for many years. Others, have changed jobs frequently to maximize their opportunities.
This group isn’t side hustling their way to wealth. Rather, they focus on their professional careers. Specifically, performing at a high level, increasing their salary, maximizing annual bonuses and cashing in on company stock when offered.
Their earnings haven’t come all at once. Rather, they have worked their way up the Corporate ladder. Their capabilities include managing people, specialized skills valued by their employer or a combination of both.
The new millionaires approach to earning money is consistent with the Dividends Diversify build wealth rule number 2: Put a laser focus on your career or business to maximize your earnings.
MILLIONAIRE NET WORTH
The study group has an average net worth of $2.8 million. The groups’s net worth compares to $3.7 million in The Millionaire Next Door. These figures far exceed the average household net worth in America.
Below is a breakdown of the study participants net worth. I have also thrown in the Dividends Diversify household percentages (DD %) for my personal comparison. One of the key points the study participants made is that they started saving and investing at young age.
|Classification||Description||% of Net Worth||DD %|
|IRAs & 401ks||Stocks & Funds||34.3%||20%|
|Taxable Accounts||Stocks & Funds||27.6%||60%|
|Home Equity||Primary residence||13.0%||8%|
|Real Estate||Rentals & Investments||9.3%||0%|
|Cash||Savings & CDs||6.6%||12%|
|Stock Options||Employer stock||2.3%||0%|
|529 Savings Plans||College savings||1.5%||0%|
|Alternatives||Autos, metals, other||1.4%||0%|
A FEW OBSERVATIONS
Here are a couple things that jump out to me regarding the net worth figures:
- Publicly traded stocks and funds represent almost two thirds of total net worth. In The Millionaire Next Door (MND), this area accounted for only 20% of household wealth. That is a huge change. The new millionaires invest in the public markets. They are not self employed. Consequently, their wealth is not invested in their own private businesses. In contrast, the MND millionaires net worth was mainly invested in their own private businesses. This makes sense, two thirds were self employed.
- The new millionaires have maximized use of tax advantaged accounts including IRA’s and 401ks. You might have noted, the DD household falls way behind here. In fact that is my only regret in life.
- Few have equity built up in company pension plans. These plans were being phased out when this group got their professional starts in life.
The new millionaires approach to their assets is consistent with the Dividends Diversify build wealth rule number 5: Invest early and often.
What do you think readers? Does anything strike you in the income or millionaire net worth data? What conclusions do you draw?
And don’t forget to come back soon for Part 5 of this series on building your wealth and the new millionaires! We will dive into how they spend their money.