What “Net Worth” do you consider rich?
To be “Rich” in the United States of America in 2020 you would be in the 37% tax bracket, making more than $518,400 single or $622,050 as a couple.
That’s the “Tax Law” definition…
Does that surprise you?
Maybe, maybe not…
Here is how financialsamurai.com outlines income levels in America.
- $50,000 – Lower middle class
- $100,000 – Middle class or upper middle in low cost areas
- $200,000 – Upper middle class
- $350,000 – Upper middle class or rich in low cost areas
- $500,000 – Rich
But here is where people get confused between being wealthy and being rich!
Financial wealth is a function of net worth, not income.
Net worth is your total assets – total liabilities
To be considered “wealthy” you would set a net worth goal to be somewhere around 20X your average annual gross income, or 25X your annual expenses.
This is how “wealth” can be achieved regardless of income level.
Let me say that again;
WEALTH can be obtainable by anyone in any demographic.
It’s a mindset that results from disciplined spending and saving.
Rich people are not necessarily wealthy!
But rich people tend to have a game plan to get wealthy.
And anyone, regardless of financial demographic, can use the same game plan to become wealthy.
According to financialsamurai.com here are some key tools in your wealth plan: (Words in italic are my interpretation of each point)
- Depend on yourself. That’s right, you are your own #1 Asset. You have always been in control of your income. It’s your choice, no matter what anyone tells you.
- Get a mentor. Investing in yourself by hiring a mentor is a solid way to ensure you are growing your #1 Asset and creating more income and wealth.
- Remove disabling beliefs from your mind. You are the only one who can give yourself a report card. The more quickly you believe that you have always earned an A+, the more power you will have to push the negative aside and move forward to your goals.
- Go the traditional route. Disciplined spending and saving are key. When we do rash and risky things with our money, we often push our goals further away. A guaranteed dollar will always be worth more than a dollar at risk!
- Become your own boss. No matter where you are on your financial journey, invest in your #1 Asset and #1 Investment, your own business or career. Grow your experience and expertise so that you become the top of your game.
- Find an amazing partner. You’ve probably heard me say it countless times. Your spouse is key to your wealth generation. They are your biggest cheerleader, your defender, they push when it’s tough, and give perspective and love.
Interestingly a life insurance company will typically offer a death benefit of 20X the gross annual income of an individual 41-55 years old. Offering more or less depending on age.
As a whole life policy ages, the cash value grows and so does your overall net worth until eventually, you meet or exceed the 20X net worth.
This isn’t a magic 20X number. It’s based on calculable hard data.
And the more you use your #1 Strategy, the more you are guaranteed financial wealth!
I find it fascinating!
If you want to become wealthy financially, just follow the game plan.
Your #1 Strategy!
If you want to become rich financially then deliberately and consistently reinvest in yourself and your own business and career.
IE: your #1 Asset and your #1 Investment.
Michael G Isom
P.S. You have a Human Life (HLV) Balance sheet as well, where assets are things like education, relationships, life experiences, moral compass, integrity, passion, purpose….
What would your personal HLV “wealth” look like if you set a goal to 20X those assets?