The great author F. Scott Fitzgerald wrote in a 1926 story, The Rich Boy, “Let me tell you about the very rich. They are different from you and me.”
The quote has been changed and retold with time. But it conveys a crucial point; the ultra-rich are different than the merely rich and certainly compared to the middle class.
People like Warren Buffet, Michael Bloomberg, MacKenzie Scott, Jeff Bezos, Bill Gates, Bernard Arnault, and others constitute the ultra-rich. They are worth at least billions of dollars and, in many cases, tens of billions. A few are worth more than $100 billion. Most of them started companies that grew into market leaders.
The remarkable part is that some people earn a fairly small salary relative to their overall wealth. Warren Buffet has famously made $100,000 annually for decades. Jeff Bezos reportedly earned $81,840 per year since 1998. Bill Gates received a salary of less than $1 million for years. For the amount of wealth that he created for the shareholders of Microsoft, he was arguably underpaid compared to many other CEOs in present times. But these people do not need high salaries because their enormous wealth provides income in different ways.
However, the ultra-rich have far more wealth than most people will likely ever attain. But to be merely rich, it takes much less money.
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How Much to Join the One Percent
If you are asking yourself, am I rich, it takes about $5.1 million to join the rich in America? We define this as the top 1 percent of net worth. But the amount depends on the survey and how it is measured. Moreover, the amount differs based on state and city. For instance, in Mississippi, one must have $766 thousand as of 2020 to be in the top 1% net worth group. In Texas, it takes $1.3 million as of 2022, while the value goes up to $3.6 million in Florida. The top 1% have a net worth of at least $4.2 million in New York, $5.4 million in Washington, D.C., and $6.8 million in California.
Rest of the World
The dollar value is different in other countries. In ritzy Monaco, one needs $12.4 million to join the very rich. The tiny state is only 0.78 square miles with a population of about 39,000. But it is packed with millionaires. One estimate says more than 27,000 residents of the tiny state are millionaires, and 200+ have at least $30 million.
The amount is also larger in Switzerland, Australia, and New Zealand. However, the amount is smaller in the rest of the world. In Europe, you need at least $4.3 million in Ireland, the highest value. In Asia, Singapore checks in at $3.5 million. But in the Middle East, one needs $1.6 million in the United Arab Emirates.
The Net Worth of the Top 1% Makes Them Different
A large amount of money changes people’s perspective on daily living. The worries of middle-class people are not the same as those with a net worth in the top 1%. Below are several reasons making them different than most people.
Inflation is Less Concerning
The top 1% are different because they don’t have to worry about inflation. Suppose the price of a dozen eggs rises from $3.99 to $4.99, most people will grumble, and some may look for lower prices at other stores. But if your net worth is $5+ million, the extra $1 per carton makes little difference.
Even the price of gas does not affect your day-to-day activity. People are more sensitive to gas expenses because they fluctuate and can impact a weekly budget. But the top 1 percent probably does not care as much because their net worth is considerable. A $50 tank of gasoline is like one costing $40. Think about it, suppose your net worth is $5.1 million. The $10 difference is $0.0002 percent.
Cost of Housing Has Less Impact
The rich are not concerned about the cost of housing, whether they buy or rent. Housing is the most expensive item in most family budgets. According to the St. Louis Fed, the median house price is $438,600 in the United States at the end of Q1 2023. Conversely, the median family income was $70,784 in 2011. In addition, the median family net worth was only $93,270 in 2021. House prices were 6.2 times more than income and 4.7 times more than net worth for the standard American family.
However, the top 1 percent’s net worth is 11.6X greater than the median house price. Income estimates for this group are about $421,926, nearly the exact cost of a typical house. Granted, the top 1% will probably purchase a more expensive home. But even if they buy a $1.5 million house, they come out ahead on a relative basis.
Rich People Start Businesses
Rich people view starting a business as the quickest way of making money. This belief is counterintuitive because workers often view a job as safer than owning a business. But people building a company can seek new sources of revenue. The future is in their control, unlike an employee.
Despite the risks of starting a business, the rich are more likely to bet on themselves because they are confident in their abilities. Billionaires and millionaires create fortunes; employees trade time and skills for a steady paycheck.
Whether you are starting a software firm, blog, medical device company, real estate brokerage, etc., the opportunity to become rich is greater than drawing a paycheck. Simply put, to achieve a net worth equal to the top 1 percent of people, starting and building a business is an advantage.
The Well-Off Think Differently
Those in the top 1 percent of net worth think differently. They believe if they create value and growth for others, they have a right to be rich. Next, they know a team is needed to generate wealth. An ultra-wealthy person may be at the top of the pyramid, but they rely on others to execute their ideas. Elon Musk became rich running Tesla by hiring highly talented people who could make his vision happen.
In addition, they know creative thinking outside the box matters for making money regardless of the industry. On the other hand, the average person works longer hours to take home more pay.
Lastly, the well-off know that money is an asset opening endless possibilities. It can be used to make more money or free up time. The average person may need help understanding its importance and often views it as an obstacle to their goals.
The Rich Are Viewed Differently
For better or worse, the rich are viewed differently. A survey by the Pew Research Center indicates that people view the rich differently than average Americans. For example, they are perceived as more intelligent, harder working, greedy, and less honest. But notwithstanding these views, overwhelming majorities of people admire those who get rich by working hard.
The disparity extends to other areas besides income and net worth. In additional surveys, those who self-identified as upper-class or upper-middle class were generally happier, healthier, more satisfied with their jobs, and reported experiencing less stress than other groups.
Bottom Line About People with a Top 1 Percent Net Worth
The bottom line is those in the top 10% and certainly the top 1 percent of net worth and income are different.
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.