Written by The American Academy of Estate Planning Attorneys,
Compliments of Morris Hall
Last year, the number of households in the United States with a net worth of $1 million or more grew by 16%, reaching 7.8 million. This is according to a survey by Spectrem Group, a research and consulting firm, which, interestingly, excluded the value of the survey participants’ primary residence from the net worth calculation.
So, what does a typical American millionaire look like? The answer may surprise you. The authors of the 1997 book “The Millionaire Next Door,” found that the average millionaire may not have the lifestyle you’d expect. He and his family don’t spend lavishly – they’re unlikely to drive brand-new cars or live in large, opulent homes. Instead, many American millionaires have several things in common:
- they’re first-generation wealthy; most millionaires earn their wealth instead of inheriting it
- they’re well-educated; 80% have college degrees and more than 35% have advanced degrees
- they save more than 15% of their money
- they live well below their means, driving American-made cars and living in relatively modest homes
So, how do you know if you’re “on track” for being as wealthy as you should – or could – be? The book’s authors have a simple rule of thumb for calculating what your net worth should look like. For mid-income 35 to 65 year-olds, the math looks like this:
Multiply your age by your annual income, and then divide by ten. If the grand total is less than your actual net worth, then you’re a wealth accumulator – and this means that your financial picture is good. For example, if you’re 40 years old and you make $100,000 per year, then your net worth should be at least $400,000.
One more common characteristic of the millionaires surveyed in the book? They plan ahead, not only for financial goals, but in every aspect of their lives. Meticulous planning, and following through with those plans, is one of the traits that set them apart from their less-affluent peers.
Planning for your future and the future of your family is one of the ways that you can put yourself on the right track. A good first step is to consult with an estate planning attorney. He or she can help you answer some important questions, such as, who would be in charge of your finances and your medical decision-making if you became disabled? What would happen to your business if you passed away unexpectedly? How can you make sure your children’s inheritance is protected from things like creditors and the possibility of a future divorce?
No matter what your net worth, to your family, you’re priceless. With a plan in place, you and your family can face the future with assurance. Request a consultation with an attorney from Morris Hall to ensure your wealth passes to them when you want, how you want, and at the least cost.