Yahoo Finance How To Get ‘Top 10% Rich’
While reaching the top 1% of wealth may be impossible for most people, it’s possible for an average person to reach the top 10%.
Learn More: Robert Kiyosaki: 7 Ways To Become Wealthy Beyond the 9-to-5
Find Out: 4 Genius Things All Wealthy People Do With Their Money
You may have heard about these terms in the media, but here’s a closer look at why the top 1% feels out of reach — and how to reach the top 10%.
What Is the Top 1%?
What does this mean in terms of net worth and income? Fortune reported that an American needs an estimated net worth of $5.8 million to enter the top 1%. You would also need to have an average annual income of $819,324. Notably, the U.S. is ranked fourth globally in terms of assets needed to reach the top 1% of the population. It’s also worth pointing out that these figures will change based on location and other economic factors.
Why could it be difficult to reach the top 1%?
You don’t have the connections.
You weren’t born into money.
You don’t have the qualifications to earn a higher income.
Income opportunities are limited based on your available resources.
You’re not sure where to start.
You’re satisfied with your current career and income.
There could be various other reasons why reaching the top 1% won’t always be feasible. Some people are born into money and others get lucky through working on the right business at the right time.
Explore More: Jeff Bezos’ Billion-Dollar Life: A Look at His Mansion Collection
How To Get Top 10% Rich
It turns out that it may be more attainable to reach the top 10%. Based on the Federal Reserve’s 2022 Survey of Consumer Finances, the top 10% of families had a median net worth of $3.79 million. With a median net worth of $192,900 for American families, this means that those in the top 10% were still significantly ahead of the average family.
“To get to the top 10% of wealth, you’d need to earn at least $173,176 annually,” said Scott Lieberman, founder of Touchdown Money. “That’s a pretty intimidating number, but it is reachable.”
Step 1: Invest Wisely
“One of the best ways to do it is by making smart investments,” Lieberman said. “Even when you’re starting out, setting aside a portion of your salary for investments is a smart habit that pays off in the long run.”
If you want to build your wealth, you have to focus on improving your net worth by consistently investing your money to ensure that you have compound interest working for you and that you’re moving forward. You want to invest in assets that are known for producing substantial returns, like a business venture, real estate or the stock market.
“Over time, your investment portfolio will increase, usually about 7% after adjusting for inflation. That, coupled with raises as you gain experience in your field, can help you climb the ladder toward the top 10%,” Lieberman elaborated.
You also want to review your investments often to see what kind of returns they produce so that you’re invested in the right assets. You want your money working for you to help you get to the next level of wealth.
“You should also set up a diverse investment portfolio,” said Todd Stearn, founder and CEO of The Money Manual. “If many of your investments look very similar and could all be impacted similarly in certain economic conditions, consider alternative investments like real estate, particularly real estate investment trusts (REITs), precious metals and even wine and spirits.”
You may even want to consider working with a financial professional so that your investments grow consistently over time. You can’t reach the top 10% if you don’t have the right investments.
Step 2: Contribute To Your Retirement
“If your employer offers 401(k) matching, try to invest the maximum amount that they will match, because that’s free money,” Stearn said.
By taking advantage of the investing opportunities offered through your employer, you can increase your net worth over time. As your retirement portfolio grows, your net worth increases and this could help you get closer to the top 10%.
Step 3: Evaluating Spending Closely
“It sounds obvious, but many people make purchases every day without looking closely at their finances or evaluating whether the purchase is something they really need or will add any meaningful value to their lives,” Stearn said. “A study by Klarna found that shoppers using buy now, pay later (BNPL) apps spend a whopping 68% more. This demonstrates that a mindset of having less money available to you can help you grow your wealth.”
As important as your income is, you want to analyze your spending to ensure you contribute as much as possible to your investment accounts. The top 10% have a high net worth, so you have to find ways to cut back on discretionary spending.
Step 4: Focus On Increasing Income
Reaching the top 10% will require a higher income — you can only cut your spending so much. This means that you need to take the proper steps to increase your earnings.
How can you do this?
Pursue a lucrative field. You want to find a field with lucrative income options to continuously increase your earnings.
Upgrade your skills. You may need to learn new skills to make more money and speed up the process.
Improve your certifications at work. If your workplace offers certifications and courses, you can improve your standing by becoming more valuable.
Try to get a raise. By excelling in your role, you could earn a substantial salary bump.
You want to emphasize your earnings, as you can’t reach the top 10% if your income isn’t at a certain level.
Step 5: Keep Saving and Investing
“Having some of your money automatically transferred to a high-yield savings account each payday can help you earn more interest and keep a growing stash of your money out of sight and out of mind,” Stearn said.
The goal is to keep on saving and investing your money. Everyone has a different starting point when it comes to building wealth, so it’s critical that you’re realistic about where you are and where you want to be.
Stearn added, “You’ll also want to make sure you’re earning as much as possible on your savings. The difference between the going rate at the average brick-and-mortar bank and the best high-yield rate at a digital bank is massive and adds up considerably over time.”
“Very few will make that leap overnight, but these are steps you can take to head in the right direction,” Stearn concluded.
If you want to reach the country’s top 10% of the rich, it’s not out of the realm of possibility. You will have to remain disciplined and focused on consistently increasing your income and investing your money. The good news is that you could get there one day if you stay on track.
More From GOBankingRates
Don't Buy a House in These 3 Cities Facing a 'Climate Change Real Estate Bubble'
This is One of the Best Ways to Boost Your Retirement Savings in 2024
This article originally appeared on GOBankingRates.com: How To Get ‘Top 10% Rich’
