Epictetus once said, "Wealth consists not in having great possessions, but in having few wants." And he's right... but that doesn't keep people from wanting to be rich. Even though we all define and success differently -- as well we should -- most of us factor wealth, at least to some degree, into our success equations.
So how can you get rich?
Here's an unlikely but extremely telling source: the 400 Individual Tax Returns Reporting the Largest Adjusted Gross Incomes, a report periodically issued by the IRS. (The latest report is for 2014, which to you and me was a long time ago but to the government is pretty up to date.)
While the IRS Statistics of Income division sounds like a place where fun goes to die, it turns out there's some interesting data buried in all the charts and tables.
For example, in 2014 it took $126.8 million in adjusted gross income to crack the top 400. That's up significantly from the $100 million required in 2013 and up dramatically from the $77.4 million necessary to make the list in 2009.
Making a "mere" $126.8 million only got you in, though; the average earnings for the top 400 were $202.4 million.
Where it gets interesting is how the top 400 made their money:
- Wages and salaries: 4.47%
- Interest: 4.24%
- Dividends: 10.89%
- Partnerships and corporations: 16.24%
- Capital gains: 65.16%
The last bullet is key: The top 400 averaged $192.1 million in capital gains income. Well over half of their income came from the sale of capital assets. Sure, some of that could have been profits from stock investments... but the lion's share comes from the sale, in part or in full, of business interests.
What does that mean to you?
- Working for a salary won't make you rich.
- Neither will making safe "income" investments.
- Neither will investing in blue chip stocks.
- Owning a business or businesses, whether in part or partnership, could not only build a solid wealth foundation, but someday could...
- Generate a huge financial windfall.
The data clearly supports the last point. A total of over 4,500 taxpayers have made the top 400 between the years of 1992 and 2014, but only 29% appear more than once, and only 3% appear 10 or more times.
Clearly, getting rich -- in monetary terms -- is the result of investing in yourself and others, taking risks, doing a lot of small things right... and then doing one big thing really, really right.
And hopefully achieving other goals along the way -- because then, even if you don't get rich, you'll still be wealthy.
Bottom line? If you want to be rich, in monetary terms, go start a business.