Boost Your Odds for Financial Success
The tried and true strategy of saving your hard-earned money is still the most commonly traveled path to wealth.
Many Americans dream of becoming millionaires and billionaires, but what are your odds of really making it? According to an analysis based on 2010 data from the Current Population Survey, you have a better chance of being struck by lightning (about one in 750,000) or winning the lottery than joining the ranks of the one percent.
What's more, when the IRS studied high-income households over a 17-year period starting in 1992, they found that an overwhelming majority earned their wealth through corporate partnerships and capital gains – wealth-creation paths that usually require access to existing capital, a high tolerance for risk, or both.By contrast, only 8.6% of Americans joined the ranks of the country's most wealthy households by earning wages and salaries.
But there's good news for old-fashioned salary-earners: The number of American men and women who earn six-figure incomes hovers right around 4% of the U.S. population, or about 1 in 23 people—odds much better than being struck by lightning.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Can you achieve your financial goals by working hard, using your talents and pursuing a career that allows you to accumulate savings? The IRS study says yes, but we are bombarded with messages that tell us otherwise.
Perhaps the most glamorized path to wealth-creation today is entrepreneurship. Entrepreneurship is without a doubt one of the most tried and true roads to wealth, but how many of us are the types of creative and technical geniuses who can build companies such as Google, Facebook and Apple? Granted, the next generation of disrupters is always waiting in the wings, but they are the exceptions to the rule. Succeeding as an entrepreneur typically involves a groundbreaking idea or product, and effectively monetizing it before other competitors enter the market. In addition, it requires a level of intestinal fortitude known to drive people to their very limits.
Another glamorized path to wealth involves investing. With the advent of online trading and access to an ever-growing array of financial tools, investments and "expert" advice, millions of our fellow citizens now consider themselves future kings of Wall Street. But again, very few actually have the once-in-a-generation investment prowess or long-game mentality of a Warren Buffett or Charlie Munger.
Not that there is anything wrong with entrepreneurship and investing. These are the cornerstones of our free market economy. That doesn't change the fact that relatively few Americans will actually ever achieve wealth through these methods. For those that do succeed, the rewards can be immense. For others who wish to pursue ambitious but perhaps more realistic financial goals, other methods offer a greater chance of success. Finding a career that allows for savings, and allowing savings to grow over time until a desired level of wealth is achieved, is not some worn out idea from the previous century. In fact, those who compete in their chosen fields—rather than moonlighting as investment experts or entrepreneurs—are only burdened with outsmarting others in their industry to achieve success, rather than competing in the financial markets for their piece of the American dream.
In short, work hard at what you do, and leave the rest to a registered investment adviser who must put your best interests first by law. And if your expectations are more about preserving what you've earned and achieving reasonable growth – rather than joining a rarefied billionaires club—then a focus on wealth management is probably where your head should be.
Naturally, everyone wants their savings and retirement nest eggs to grow, but to what end? Set some reasonable expectations and talk to your financial adviser about an achievable set of goals. While others strive for the statistically impossible, you'll be protecting your assets over the course of a lifetime—not just waiting for lightning to strike.
Nathan J. Gendelman is President and Director of Investments for The Family Firm, Inc., which focuses on families and individuals with complex wealth management issues.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Stock Market Today: Dow Outperforms After IBM Earnings
Investors also parsed a strong reading on second-quarter GDP and a dismal decline in durable goods.
By Karee Venema Published
-
Try the 6 to 1 Grocery Shopping Method to Save Time and Money
The 6 to 1 Grocery Method can help you save money, reduce waste and eat healthier.
By Erin Bendig Published
-
If You're the Millionaire Next Door, You May Be a Terrible Spender
Good job on all that great saving. Now you need to start spending some of that hard-earned retirement savings on the things you love.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published
-
RSUs: In Divorce, They're Easy to Hide (or Misunderstand)
You may have never heard of restricted stock units, but they can be worth big money. You can't afford to overlook them when negotiating a divorce settlement.
By Stacy Francis, CFP®, CDFA®, CES™ Published
-
How to Live Like You’ve Won the Lottery
Just because you haven’t won a jackpot doesn’t mean you can’t fulfill your dreams of doing what’s important to you with who is important to you.
By Frank J. Legan Published
-
Want to Move to France? What to Consider Financially
Before you start packing, you might want to check out the potential impacts on your taxes, investments, retirement planning and estate planning.
By Alex Ingrim, Chartered MCSI Published