So, if you haven’t gathered by now, one of our long term goals is to become wealthy. For us, this means that we we’d like to have $4,000,000 in assets when we turn 65. Sometimes, when we tell our friends about this, some don’t believe it can be done. They’ll nod or smile or just flat out say it won’t happen. A lot of times people come back with some silly figure that 80% of millionaires got that way because of inheritance, or you have to come from money to get rich.
This is what I call the inheritance theory of wealth. This is the idea that most wealth in America is created by rich families and then passed down. There are several reasons why, if you’re interested in building wealth, you should decisively reject this philosophy.
1) Its not true. The facts suggest that inheritance isn’t that important for building wealth.
If you look at the Forbes 400 (e.g. the world’s richest people), America’s wealthiest man, Bill Gates, got his start in his garage (clicky). Also, according to Capgemini, the main source of wealth for high net worth individuals (HWIs) in America is actually business and earned income. Inheritance was the major source of income for only 21% of America’s millionaires. (here).
2) It Doesn’t Serve You. Lets face it, most American’s aren’t going to receive an inheritance. But, most of us are interested in financial security – you are, otherwise you wouldn’t be reading this blog. The reason why subscribing to the inheritance theory of wealth doesn’t serve you is the following: it causes you to believe that you cannot achieve financial security. Financial security for most people invariably means higher income and better networth. If you subscribe to a philosophy that says you need an inheritance to achieve this, you’re mentally handcuffing yourself. Instead, you should rely on your own belief in yourself, cleverness and discipline to achieve financial security.
Finally, I recognize that it doesn’t hurt to come from a family that is wealthy and financially savvy, but to assume that you need the right family background is both factually incorrect and psychologically hamstringing. In short, you should stay focused on what works in building wealth and not buy into common, but false notions about money in America.
Thanks,
James
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