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Saturday, 15 August 2009

How to be rich (part 2)

Exactly 5 months ago, I suggested that a mentor is the way to riches and that luck may play a part.

Now we have hard data that luck really plays a part (at least according to a report by trusted names like Capgemini and Merrill Lynch).

A high net worth individual is defined as having more than US$1 million of investable assets on top of his/her residence property. So if you have US$1 million in your savings account, you’re a HNWI. Or if you have a 2nd property worth US$1 million, you’re one of the 67,000 HNWIs in Singapore.

22% of the high net worth individuals in Singapore became rich because they inherited the wealth.

That is about 15,000 of them. They are lucky to have wealthy parents. Their lucky kids are probably future HNWIs.

To be fair, the rest are self-made millionaires. In fact, 36% or about 24,000 got rich from their businesses, but a week ago, we just touched on the issue of fewer entrepreneurs.

22% + 36% = 58%

So what about the remaining 42%? I infer from the report that “earned income” and “stock options” are 2 other major sources of wealth. (Now, doesn’t “stock options” relate to owning a business, or at least part of it?)

The question now is: Is it possible to become wealthy working for others?

Consider the case of a financial futures dealer/broker. The 75th-percentile dealer earns a monthly gross income of $23,517 (see top 100 jobs). In 10 years he’ll earn $2.8 million. This is more than enough to own a property to stay in and have more than US$1 million in investable assets. He’ll be a HNWI before hitting 40 years old.

So, to answer the question, yes it’s possible to be wealthy through earned income. But it depends on what job you do.

Otherwise, you can always be lucky.

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