You’ve likely heard about the 1%: Those people who’s net worth is among the top 1% in the nation. Just how wealthy are these individuals? Recent data shows that while the median U.S. income is $70,000 a year or so, the 1% can earn up to $955,000, or just a hair under a million dollars a year.
If you are curious about what it takes to be among the 1% or have your sights firmly set on joining their ranks, read on. Here’s a closer look at how the wealthiest people in America got their plus some of their most effective strategies for financial success.
What Does it Mean to be in the Top 1%?
While many people might think “top 1%” and immediately imagine a CEO whose salary is in the tens of millions, the top 1% in terms of net worth aren’t necessarily the people who earn the most.
Net worth refers to the value of the assets a person owns (which includes checking and savings account balances, the value of securities such as stocks or bonds, real property value, the market value of automobiles, etc), minus the liabilities (or debt, like mortgages, loans, credit card balances) they owe.
A deeper view of the top 1% indicates that this wealth accumulation is spurred by more than one source: Income, investments, tax breaks that help the wealthiest keep more of their money, property, and more. All of these help make up the resources a household or individual has socked away as net worth.
Recommended: What’s the Difference Between Income and Net Worth?
The Income and Savings of the 1%
Having a high net worth isn’t just a matter of earning more. It can also mean saving more. Consider these numbers:
• The median household in the U.S. has $11,700 in savings.
• The top 1% of American households have a median savings of $1.1 million.
• The lowest 20% of income earners have no savings, as you might expect, as they may be living paycheck to paycheck.
These numbers indicate that not only do high-wealth households make more money, but they also know the value of keeping some of it in a secure location, where it’s likely insured and earning a high-yield interest rate.
Get up to $300 when you bank with SoFi.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!
Is There a Formula for Becoming Part of the 1%?
There’s no one formula for joining the 1%, but several factors appear to play a role in the rise of many one-percenters. These include:
• Saving. Many people who save through traditional 401(k) retirement plans and other vehicles may receive a match from an employer. You might choose to save the minimum amount required to get that match, but saving more — the max allowed in a 401k and additional after-tax contributions — builds net worth faster.
• Starting early. The earlier you start saving and investing, the more you stand to gain due to compound earnings, which is when any returns you earn are reinvested to earn additional returns. This “interest on interest” can help your wealth snowball over time.
• Income consistency and growth. The more you earn and the more that grows over time, the more likely your household will be to enter the top 1% of wage earnings. There are some in-demand careers (like software engineers and data scientists) where average Big Tech salaries are in the range of $200,000 per year. But regardless of your particular job, staying consistently employed and saving is a path to building wealth versus leaving the work force or deciding to forego savings for a few years to, say, travel more.
• Frugality. You’ve heard that Warren Buffett wears outdated suits and lives in a house he paid $31,500 for in 1958. He’s worth approximately $113.3 billion. He also buys reduced-price cars, doesn’t spend big on expensive hobbies and he even clips coupons. Not all 1% are spending lavishly on yachts and third and fourth homes. If you want to be a part of the 1% and you didn’t invent the best thing since sliced bread, it may be helpful to stay motivated to save money vs. overspending.
Recommended: How to Stop Overspending
• Family history/Luck. Having a head start can certainly help. However, research indicates that 79% of 1%-ers are self-made. Finding the right solution for a big problem at the right moment can lead to a big windfall in a new company, or, starting the next Facebook or Amazon is a little bit luck, a little bit skill.
Recommended: Investing vs. Saving: How to Best Grow Your Money
Moving Towards the 1%
Thomas Stanley, author of The Millionaire Next Door, identified the seven characteristics of people who become big accumulators of wealth—and thus have a chance to build the wealth it takes to be in the top 1%. These common traits include:
1. They live below their means.
2. They allocate their money, energy, and time in ways that contribute to building wealth.
3. They believe that financial independence itself is more important than appearing to have a high social status.
4. Their parents did not provide money for their basics in adulthood.
5. Their adult children are self-sufficient economically.
6. They understand how to target economic opportunities.
7. They choose the right occupation.
Not all of these are factors one can fully control—and not everyone has a knack for targeting economic opportunities. In addition, many people choose an occupation around a passion, not around wealth-building. That doesn’t mean you can’t get there—or get close.
The Takeaway
Being part of the 1% appears to take a combination of luck, talent, hard work, and determination. Being diligent about saving is also a key way to grow your net worth over time. The more you can sock away, the better off you will likely be in the future.
Looking to start saving? SoFi Checking and Savings is an online banking account where you can spend and save all in one account. You’ll earn a competitive annual percentage yield (APY) and pay no account fees, which can help your money grow faster
With SoFi Checking and Savings’s Vaults feature, you can set up recurring deposits to help you reach your savings goals faster.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
SOBK0523052U
