9/7/2011 6:08 PM ET|
5 ways to get rich . . . or poor
Some households accumulate wealth, and some don't. It comes down to several factors, such as marriage, homeownership and college education, as well as the choices you make.
I'll break this to you gently: You're probably not going to end up filthy rich.
Only about 80,000 U.S. households (out of 115 million) qualify as "the glittering rich," which is what author Thomas J. Stanley calls the people with seven-figure incomes and eight-figure wealth. (Stanley co-authored the classic money book "The Millionaire Next Door" and authored "Stop Acting Rich . . . And Start Living Like a Real Millionaire.")
But you have a pretty good shot at accumulating a substantial net worth over your lifetime, depending on your choices. A relatively small number of factors can make a big difference in your wealth. Such as:
Two can't live as cheaply as one, but sharing household expenses can have an impressive impact on your wealth.
The median net worth of all married-couple households in a Census Bureau wealth study (.pdf file) was more than four times higher than that of single men and five times higher than single women.
You'd expect some disparity, since most people marry eventually, meaning the group of single people would skew younger and poorer.
But the wealth gap remains substantial even when you look at people the same age. A 15-year study of 9,000 people, starting in their 20s, found that people who married and stayed married built up nearly twice the net worth of people who stayed single.
Furthermore, married couples' wealth increased at a faster pace -- an average of 16% a year, compared with 8% for single people. That suggests that couples who stay together will build substantially more wealth over their lifetimes than two comparable singles.
But what marriage gives, divorce can take away -- and then some. Four years before a divorce, wealth typically starts to decline. After the final breakup, the typical divorced person's net worth is 77% less than that of the typical person who remained single.
"While men come out slightly ahead, divorce destroys wealth dramatically for both sexes," wrote Jay Zagorsky, a researcher for Ohio State University's Center for Human Resource Research. "Becoming and staying married is associated with higher net worth than being single or divorced."
The takeaway: Marry, but marry smart. Spending money on marriage counseling can be an investment if it helps prevent divorce. Read "Get real: Marriage is a business."
Owning a home is clearly associated with higher net worth. But as with marriage, a bad ending can be devastating to your finances.
Homeowners had a median net worth of $234,200 in 2007, the latest available Survey of Consumer Finances from the Federal Reserve says. Renters' median net worth was $5,100, or just 2% that of homeowners.
As millions of people have discovered since 2006, however, a house you can't afford isn't an asset. Trying to make unaffordable mortgage payments can drain your savings, while a foreclosure or short sale can substantially lower your credit scores with an effect that lasts up to seven years.
Research on people's net worth after a foreclosure is scarce, but Zagorsky and colleague Lois R. Lupica of the University of Maine School of Law found that the fallout from a similar traumatic setback -- bankruptcy -- was surprisingly long-lived. Those who filed for bankruptcy typically took more than 25 years to "catch up" to the net worth accumulated by those who hadn't filed. Fifteen years after their filing, for example, the median net worth of those who'd filed for bankruptcy was $132,772, compared with $192,251 for those who hadn't.
The takeaway: Most U.S. households (65.9% at last count) own their own homes, but it's not a slam-dunk decision. Make sure you're ready to stay put for several years. You also should have enough saved so you have some money after closing to cover the continuing costs of maintenance and repairs. Finally, try to keep your mortgage payments to 25% or less of your gross income. That can help ensure you have enough money left over to save for other goals and to live your life. Remember, you want to own your home -- not be owned by it. For more, read "Are you crazy to buy a home now?"
VIDEO ON MSN MONEY
The only way to win is not to play.
The middle class was sold a bill of goods with respect to 401ks, IRAs, and the stock market. They were led down the path with charts that predicted they would retire after 30 or 40 years of 'saving' as millionaires. And just look at what has come to pass.
Those that put their money into anything other than consumables, collectibles, or commodities that can be stored and resold are betting their future on scams perpetrated by experts who take each generation to the cleaners with the same massive exploitation schemes over and over again.
Put your cash in the safe, and keep some other types of useful items for exchange. Maybe when this country gets its collective head out of its **** there may be a place for your money to grow, but empirical evidence suggests it will be gobbled up by taxes, scams, or inflation.
If we all take a minute and think about this, this is the Republican Economy and they caused what this economy. And to add insult to injury they continue to work to make things worse. I am not a Republican any more nor am I a democrat. I’m just an American that know if we don’t get rid of these Republicans in November, things will only get worse for us all
Damn right, if the last few years have taught the average person anything it is that they should enjoy the here and now because the whole save to have a nice life in the future is a flat out lie that the corporations have perpetuated.
There is no golden years for the average person it seems, and the more you save the more they will have to take from you. The motto should be: "Work harder, millions on corporate welfare depend on you."
People like Obey the Vons forget that there has to be meaning in life and joy. You simply have forgotten that a major reason for labor at all is so that you can buy a few comforts. Why work if you're cannot afford to watch cable tv or go to a movie once in awhile? Gee I can't imagine poor people having the audacity to want to eat at a fast-food restaurant once in awhile. Did you ever stop to think you mean-spirited, Scrooge that maybe just maybe poor people realize the folly of listening to thieves and liars on Wall Street telling them to save all their money and forego all joys in the present so that they can enjoy a glorious future one day when in fact they intend to steal it from them just when they need it most. If they ever had any doubts before, the last five years have have put them to rest.
You and your kind are nothing more than a bunch of self-righteous whores who love to gloat about how great and smart you are while picking on the poor and vulnerable. Jesus Christ had plenty of things to say about people like you, and they aren't good. God forbid poor people should want to own a pet to keep them company in their misery.
Ok we get, we all should be saving, but save for what? Basically saving money is so we have it
to make purchases at a later date. If you save a dollar today for retirement, what is that dollar going to be worth 30 years from now? I'm assuming that the author means saving as in bank, cd, IRA, savings account, and not investments. If you bought gold in the mid 80's at spot price of $350 per ounce now 30 years later it's at $1800 per ounce and you want to sell it. You are going to pay capital gains, plus taxes because gold is considered an investment. If you made 5% per year in a CD you would have made more money because you only pay the taxes once on that money. You need to invest money to make it worth saving. You buy a cup of coffee for $1.00 today, and 30 years from now you want a cup of coffee but you need $10 to buy it, that means that you have to grow that dollar by 10 times to be able to get the same cup of coffee.
in this current economy there are no jobs for post college graduates. So basically you are wasting your money spending $20+ a yr on education. I finished my master's degree last year and while I am thankful that I have a job, its not in my career field and I am not being paid at a "college graduate" level. So I feel like my college education is wasted. It took me a year to find my current job.
Another way to get poor is to invest in Wall Street and casinos gamble.
I always swipe my card when I buy a candy bar, that's just good financial sense.
I put my money in the stock market, because its an honest system run by people with integrity, how can I go wrong?
This article boldly goes against leftwing propaganda by suggesting people have control over whether they become rich or poor.
Send in the Socialist NKVD goons!
BTW, going to risk this, even if it leads to imprisonment by the aforementioned: no matter how poor you are, if you spend money at McDonalds, on a cellphone, Pizza Hut, a pet, cable, movies...you have money that you could save and become richer over time.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
MORE PERSONAL FINANCE SECTIONS & TOOLS