The Truth About the 1% That You Would Never Know
There is often conversation about the 1% of America. They often are referred to as the wealthy individuals in America. We think of people in Tuxedos and Yachts and Ferrari’s and spending all your time traveling around the world and going to Gatsby style dinner parties. It may not be all of what it seems. The media has played up these individual to be more than what they actually are.
The 1% changes constantly
We talk about the 1% like they are this club of elite money makers that laugh at the poor people from their ivory towers and work to keep everyone down. The truth is however that the term “the 1%” is difficult to define in practice. Wages and costs vary widely based on where you live. The median household income in the state of Maryland is $80,776 as of May 2019. The median household income in Mississippi is $43,441. That is nearly double. Someone in Mississippi who makes $70,000 could easily be considered in the 1% but would be below the median income in Maryland.
Not only does the “1%” vary by state, it varies largely over time. Image that starts a business and gets very wealthy in a couple short years, they would probably be considered in the 1%. Then pretend a recession hits and he loses lots of money or a new trend comes that makes him vastly less popular. It is likely that they would no longer be considered in the 1%. They would have gone in and out of the 1% within a very short period of time. The fact that people get into the 1% and stay there is simply not true. People often move in and out of that status and it depends on where you live.
Different Priorities (millionaire next door)
We picture the lifestyle of the wealthy as extremely lavish and luxurious. The reality could not be further from this stigma. According to author Thomas J Stanley in his book The Millionaire Next Door he studies people with a net worth of over million dollars. He studied their jobs, their lifestyle, their marriages, their clothes, their diets, what kind of watch they wear. Down to every little thing to try and find out about them. His findings were groundbreaking. Those who looked wealthy (drove Ferrari’s, had enormous mansions and wore thousand-dollar suits) were actually in severe debt, not actually wealthy. The majority of the truly wealthy in America don’t look the part at all. They found that the average millionaire drives a car that is at least 5 years older than the current model. They had average sized homes and worked long days. They had different priorities than those who seem wealthy. The true wealthy were aggressive penny pinchers, they did not make extravagant spending decisions almost ever. The biggest priority of the wealthy is to be debt free, not to look cool. They have a modest but comfortable living but with no debt and lots of savings. It is more likely that the person who is cutting coupons at the supermarket and putting money into their best high yield business savings accounts is more wealthy than someone driving a corvette.
Who are they?
It is commonly believed that the wealthy is a bunch of trust fund brats who inherited their money from their parents. While these exist, they account for only 20% of millionaires. This means that 80% of millionaires in America are first generational wealthy. This means that most of the wealthy people in America worked for their money. If you think of the most popular wealthy people, they came from humble financial backgrounds. People like Bill Gates, Jeff Bezos, Warren Buffet, and Mark Cuban all were not born to wealthy families. They all found ways to add value to the world and earned their money from scratch. About 50% of millionaires are self-employed or own their own business. About 80% of all millionaires have a bachelor’s degree from an accredited university. They are not all that different from average people.
So, What about Income Inequality
The whole idea of income inequality implies that if there is someone who is wealthy, it is because they got their money from taking it from others. The data proves that this is not true. Someone like Bill Gates is wealthy because he created Microsoft a company that sells a product that solves many daily problems. Jeff Bezos made Amazon.com which solves problems of having to shop for products. The notion that the “1%” is taking money from the poor to make them richer and keep the poor poorer is simply not true. It is vastly more helpful to shift our mindset away from blaming the wealthy for our poverty. We should instead think about how we can lift ourselves out of our own situation and working hard like the wealthy did.