Statistics show that only 3-4% of households are categorized as affluent since they either have a net worth of over $1 million or the major bread winner of the family earns over $250,000 per year.
I personally take such studies with a grain of salt simply because to me, the criteria of being rich is flat-out wrong. Being rich, middle class or poor isn’t as much related to the money in your bank, it is more related to your mindset.
Misconceptions of The Middle Class
Unfortunately a lot of middle class people think they are rich because:
- They have a stable & lucrative job where they are earning over $100,000 per year
- They have just started their business and it is picking up
- They have paid off their primary residence and own it free and clear
- They earn abroard and bring tax free salary to their country
- They are more educated than the “average” person
The problem is that none of the above mentioned categories is rich in my books. Chances are you might fall somewhere in the list above but you really aren’t rich. So you might be dying to know what is it actually that makes people “rich”. Well, two things:
- The extent of their financial IQ
- The sources of their income
The Real Rich In My Book
I will categorize you as rich if:
- Your income primarily comes from rental real estate, dividends, businesses and royalties and not from a job where you work for someone else.
- You earn more from the above mentioned income than is required to sustain either you (if you are single) or your family (if you are married etc.)
- You understand how the economy works and can foresee the future to a certain extent.
- You know that money isn’t money. It is debt. This is because every single dollar printed by the central bank incurs interest which has to be paid.
- You are either working actively towards or have already achieved the exit from the rat race and are no longer running around at your job just so you can make monthly payments to sustain your lifestyle.
I am sorry if this comes across as bad news but in order to expand your horizons, it makes sense to know and understand the truth. That being said, being in the middle class is not a bad place to start at all! If you play your cards right, you can increase your net worth by millions in a couple of years. All it takes is knowledge, commitment and drive.