Millionaires Increased Both in Number and in Wealth
|June 25, 2008||Posted by Roshawn Watson under Uncategorized|
According to the newly-released 12th Annual World Wealth Report, the number of millionaires increased last year by 6% to 10.1 million (this represents about 0.15% of the world population). This means about 600,000 people became millionaires or richer (note that the wealth-determination formula rightfully excludes primary residence from net worth). Their combined wealth also increased about 9.4% to $40.7 trillion, while those with a net worth of at least $30 million growing 8.8% in population. Their accumulated wealth grew 14.5% and controls about a third of the $40.7 trillion. Not surprisingly, their wealth increased significantly despite the current domestic (U.S.) and world economic troubles.
Often the initial reaction to such sobering statistics is to gripe about how life is not fair. Truthfully, some people clearly do have advantages (i.e. economic, education, etc.), but that alone should not stop you from succeeding. Take economic advantages for example. Some earnestly believe that they only way to wealth is to be born into it. However, eighty percent of America’s millionaires are first-generation rich (Millionaire Next Door). That means that most of the wealthy had to deal with the harsh realities of a turbulent economy at some point but persevered anyway, assuming American data can be extrapolated to the world’s millionaires. Note that about a third of individuals with a net worth exceeding $1,000,000 resided in America. Last year, there were about about 480,000 (600,000 x 80%)more examples. The point is to not count yourself out just because you were not born into it.
Although I definitely do not endorse all of Robert Kiyosaki’s teachings, he has a fantastic analogy in his staple New York Times Best Seller Rich Dad Poor Dad. It reads…
If we gave 100 people $10,000 at the start of the year, he proposes that by
the end of the year…
- 80 would have nothing left. In fact, many would have created greater debt by
making a down payment on a new car, refrigerator, TV, VCR, or a holiday.
- 16 would have increased that $10,000 by 5 percent to 10 percent.
- 4 would have increased it to $20,000 or into millions.
Taxed to Oblivion
Still others will say the answer is to tax these millionaires into oblivion. Despite valiant efforts, it typically doesn’t work. Increasing taxes on the rich often ends up making the middle class pay in the long run. Consider this oversimplified analogy. What’s happening now in the face of loss profits? The wealthy move their money to safer investments (lower returns and less innovations) and cut wages and jobs to ensure to stop the financial hemorrhage. The overall economy suffers. Others just move their money altogether to places that treat them and their money more kindly. Meanwhile, those who are trying to become (i.e. the middle-class) wealthy get the brunt of the new tax burden.
Avoiding debt and systematic and meticulous investing are tried and true methods of building wealth. When surveyed, 75% of the Forbes 400 said the best way to build wealth is to become and stay debt-free. That’s because once you are free of debt, you can systematically invest. Long-term, you can create phenomenal wealth with strategic financial planning.
Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.