Seven Financial Realities and Opportunities

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Excerpt from the reference guide “Wealth Building Values, Attitudes, and Habits”

Middle class security is gone.

For a generation, since the end of World War II, being middle class in the U.S. meant having access to affordable college education, which led to gainful employment, inexpensive health care, home ownership, savings for children’s college tuition, and social security upon retirement.

Today, none of these assumptions can safety be made for those in the middle income bracket. Being middle class is now inherently insecure. It means having to stretch limited resources to meet ever more expensive obligations, and making sacrifices to stay financially afloat.

At the same time, more individuals than ever in the U.S. are becoming independently wealthy. In 2009 alone, in the midst of a severe economic downturn, the number of millionaires in the country increased by over 16%. Many who started in the middle or even lower income brackets are prospering. What are their secrets? What can we learn from the behavior patterns of self-made millionaires? Below is an excerpt of my publication “Wealth Building Values, Attitudes, and Habits”, which points to some telling clues.

Seven Financial Realities and Opportunities

“I expect to spend the rest of my life in the future, so I want to be reasonably sure what kind of future it is going to be. That is my reason for planning.”

– Charles Kettering, Industrialist

1. The middle class is struggling and declining

Between 1988 and 2008, after adjusting for inflation, the annual income of average Americans increased by zero percent (0%). In fact, it went down slightly, from $33,400 in 1988 to $33,000 in 2008. The typical middle class American today is less well off than the previous generation. Major reasons cited for the decline of middle class include globalization, technology, and weakening of union collective bargaining powers.

2. The rich are getting richer

Over the same twenty year span, after adjusting for inflation, annual income of the richest 1% Americans increased by 33%, from an average of $380,000 in 1998 to $505,400 in 2008. The richest 20% Americans also increased their income by an estimated 30%. Wealthy Americans tend to possess specialized skills, work in globally competitive professions, and utilize technology as means of enhancing their career and financial success.

3. New financial security means being in the top twenty percent

As the implication of being middle class changes from security to struggle, the new paradigm for financial security in the U.S. is to be in the top 20% of income earning bracket. As of 2010, this means having an individual income of over $100,000 per year. Some would put the amount at over $165,000 if you live in a high cost of living area. These income figures are not necessarily derived from work salary. In fact, a good portion of wealth generated by the top 20% income earners comes from sources other than direct wages.

4. Reaching the top twenty percent is possible for people with modest income.

It is not necessary to have a large income to become wealthy. The key, to quote Ryan Guina of U.S. News and World Report, is “to consistently spend less than you earn and invest the difference to become wealthy. Even someone with a modest income can become a millionaire when they save diligently and invest wisely over a long period of time.” The list of “Wealth Building Values, Attitudes, and Habits” in this reference guide provides tips on how one may start small, and work progressively towards the possibility of becoming a self-made millionaire.

5. The big payoff #1 – higher education

The most important and profitable investment you can make is in yourself. Higher education remains perhaps the single, most financially rewarding investment, especially in specialized, globally competitive fields. Consider the following comparison of lifetime salaries based on education:

Professional – $4,400,000+

Masters – $2,500,000+

Bachelors – $2,100,000+

AA/AS – $1,600,000+

High School Diploma – $1,200,000+

No High School Diploma – $1,000,000+

Simply put, it pays to educate. However, even this statement has to be qualified in the face of rapidly rising tuition costs, where more college graduates with a bachelor degree are finding themselves $100,000-$250,000 in debt. Perhaps the last bastion of affordable higher education is community colleges, where highly specialized and university transferrable courses can be taken at a fraction of the cost.

6. The big payoff #2 – how millions begin a few dollars at a time

“Creating wealth is sort of like dieting. Everybody wants the end result but the discipline to achieve that result is usually lacking…Delay gratification. Pay yourself first. Invest and then buy toys with the profits.”

– Anonymous

One of the most important keys to wealth creation is to control discretionary spending that adds up quickly. These are often frivolous, habitual purchases of impulse and convenience, most of which are forgotten as soon as the item is used or consumed.

Here are some statistics derived from Kathy Kristof of Yahoo! Financially Fit on how discretionary expenses add up over time. The chart below shows how much money you would accumulate if it was invested and earned 8% a year:

Expense Today/Over 10 years/Over 30 years

Gourmet coffee $4 a day/$22,389/$190,453

Smoking or alcohol $35 a week/$26,125/$222,223

Dining out $40 a week/$29,857/$253,969

Lunch at work $10 a day/5 times a wk/$37,322/$317,462

Total: Over 10 years $115,693/Over 30 years $984,107

It’s useful to keep these totals in mind, as we consider the next point of accumulating enough wealth for a comfortable retirement.

7. How much is enough to retire comfortably?

“By failing to prepare you are preparing to fail.”

– Benjamin Franklin

According to a poll of investment advisors conducted by Scottrade, the following are amounts in today’s dollars necessary for a comfortable retirement. The figures below represent one’s net worth (total assets minus total liabilities), and presume a retirement age of between 60-65.

Generations X and older Generation Y (born 1965 to 1993) – at least 2 million.

For Boomers (born 1945 to 1964) – at least 1.5 million.

Traditionalists (born prior to 1945) – close to 1 million.

The complete reference guide “Wealth Building Values, Attitudes, and Habits” is available at


2009 Spectrum Group study surveying U.S. households with $1 million or more in net worth, excluding wealth derived from primary residence. Total number of millionaires in the U.S. in 2009 was 7.8 million. Feb. 16, 2011. “How the middle class became the underclass” Based on IRS data.

Estimate of richest 20% income increase based on 2004 U.S. census data.

CBS News US, Washington, Sept. 28, 2010. “Income gap between the rich, poor widest ever.”

FinAid article “Middle income

U.S. Census Bureau, Current Population Surveys, March 1998, 1999, and 2000.


Preston Ni is a professor of communication studies, Fortune 500 trainer, executive coach, and organizational change consultant. Write to Preston at, and access free resources at

© 2011 by Preston C. Ni. All rights reserved worldwide.

About the Author

Preston Ni is a professor of communication studies, Fortune 500 trainer, executive coach, and organizational change consultant. Write to Preston at, and access free resources at