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Financial Literacy

Financial Literacy

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Wealthy Americans

If you're going to become the next multibillionaire, you'll want to look at the people that came before you: the Rockefellers and, uh, Mark Zuckerbergs of the world. While lots of American Dreamers pull themselves up by their bootstraps and have white picket fences, that's not the only reality.

Here's a look at a few times of rich folk.

The Heritage Classics

Ah, old money.

These wealthy folks (a la Tom Buchanan) are like the big-finned Cadillacs from days gone past. They're still around, but they tend to not be as popular as they once were.

We're thinking of people like the Rockefellers, who pass money down from generation to generation. They're the trust fund babies—the ones who have wealthy daddies (and granddaddies) and don't ever have to worry about money.

The Noobs

Hello, Steve Jobs and Mark Zuckerberg.

These folks lived the American Dream by being born into a middle-class family (usually) and driving themselves up the ranks

They tend to all have a few things in common:

(1) They start young. A lot of self-made millionaires and billionaires got started when they were still in school. They started building up a company or an idea early and focused on that one thing throughout their lives. Bill Gates didn’t jump around from health care to law to computer science. He got into computers young and stuck with it. You would, too, if it made you ridiculously rich.

(2) They focus on ownership. Billionaires don't tend to work for The Man; they work for themselves. These people build their own companies and hold on to ownership. Bill Gates had the opportunity to sell Microsoft to other companies, but he focused on licensing and held on. Mark Zuckerberg could have handed over his vision early—and for a lot of dough—but he was very protective of Facebook.

(3) They get in on the ground floor. There's not a lot of money to be made when something is already full-blown. The big billionaires that you read about in newspapers and see on TV generally got in to an industry before everyone else did, which gave them an advantage.

The Invisible Rich

Nobody talks of these peeps, but around the country, there are millions of people who are wealthy enough to never have to work again.

While they may not have the type of wealth that allows them to fly into Venice on their own luxury jet if they get a craving for authentic Italian pizza, they still make hundreds of thousands of dollars from their investments and lead a very cozy life without having to worry about schlepping anywhere to punch a time clock.

How do they do it? Often, by investing. The invisible rich tend to start early and invest their money in stocks, bonds, companies, or anything else to create a big nest egg. In some cases, they flip homes, invest in real estate, or launch their own business to become wealthy.

However they do it, it's worked out pretty well for 'em. And they don't have to worry about the paparazzi. Win win.

Case Studies in Getting Rich

Let’s take a look at two rich buddies: Warren Buffet and Bill Gates.

Warren Buffet

Warren Buffet is one of the richest men in America and is considered the rock star of investing (but without the attitude and loud concerts). Buffet has been running Berkshire Hathaway since 1964 and owns about 20% of it. If you'd invested when he first started and got out in 2009, Berkshire Hathaway would have given you gains of 434,057%. Translation: your thousand bucks would be worth over four million.

Buffet—who, by the way, was rejected by Harvard Business School—thinks the secret to being rich is compound investing.

When you invest early, all you have to do is sit around long enough for that money to start making money off itself. And then you’re rich…if you’re patient.

Bill Gates

Buffet’s BFF, Bill Gates, had a different approach.

Rather than wait around, he launched his own company and used margins to make himself rich (much more quickly than waiting for compound interest). Gates founded Microsoft after asking IBM to make software for their computes. With every IBM computer sold, Gates sold an operating system. Eventually, other PC brands started using his software, too, making him even more money (even when IBM lost its position as #1 computer company).

Microsoft basically became a monopoly. It was hard to avoid using Microsoft products (even if you wanted to). On top of that, Microsoft products cost $10 to make but sell for $200. Quite a margin. 

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