3 Types of Rich People

OCTOBER 30, 2015 BY THOMAS C. CORLEY 4 COMMENTS

tip-o-the-morning
Tom Corley boats - crop
I ve been studying the wealthy and the poor for nearly 12 years now. One of the th
ings that I ve noticed is that almost 100% of the time the media misinforms its re
aders with respect to the definition of wealth. So, I thought I d clear it up for
you using the same language used by the media.
Three Classes of Rich:
Affluent These are individuals with net assets (assets minus liabilities) of bet
ween $100,000
$1 million.
High Net Worth These are individuals with net assets (assets minus liabilities)
of between $1 million and $3 million.
Ultra High Net Worth
These are the individuals with net assets (assets minus lia
bilities) $3 million and above.
In my Rich Habits Study only Ultra High Net Worth individuals made the cut. But,
in addition to having an Ultra High Net worth, in my study they needed to also
have an annual gross income of $160,000 or more. Below is the two-part test ever
y Ultra High Net Worth individual needed to satisfy in order to meet my definiti
on of Rich:
Net Assets of $3.2 million or more AND
Gross Income of $160,000 or more.
Some might argue that those individuals who meet the High Net Worth category of
between $1 million and $3 million are Rich as well. And you might be right. In ord
er for the High Net Worth individuals to be considered Rich , however, they would v
ery likely need to live what I call a minimalist lifestyle. A minimalist lifesty
le is one where the individual either lives below their means or lives within th
eir means. Examples always work best so let me give you one. Let s say you have ne
t assets totaling $2 million. And let s say that that $2 million is sitting in an
annuity or some other type of guaranteed investment kicking off 4% of guaranteed
annual taxable income, or $80,000. If you are in the 20% Federal and State tax
bracket that leaves you with $64,000. If on this $64,000 you are able to do the
things you want to do in life and, at the same time, meet all of your living exp
enses then you are Rich . You don t need to work in order to earn any income because
you have more than enough income to live the life you want to live.
Now, you might also argue that 4% is too conservative a number and that it is po
ssible to earn more income than 4% on your $2 million. This is called chasing yi
eld and whenever you chase yield you must take on additional risk. The downside
of finding an investment that pays more than 4% is the potential that that inves
tment might return less than 4% during downturns in the economy or the investmen
t marketplace. There are plenty of investment options out there that guarantee b
etween 4% 5% return without taking on any unnecessary risk. But there are not ma
ny investments out there that guarantee more than 5%. (Disclosure: my advice to
you would be to find a qualified professional who can help you meet your investm
ent goals.)
Those who are truly wealthy do not need to work . Their net assets generate all the
income they need to live the rich life . The rich life means you can do as you ple
ase with your time, live the life you want to live and not have to worry about w
orking to earn income in order to live that life.