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Are You Richer Than Your Friends? (This Data Might Surprise You!)

How much money do Americans actually make? You’ll be surprised to find out how much your neighbors make every year and what income percentile you fall into.

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Episode Transcript

A conversation starter: Are you richer than your friends? I am excited to talk about this one because I hope what we’re able to do is set the record straight. Because I think out there in popular society, the perception of what is going on in your neighbors, your friends, and your colleagues is maybe different than what the actual reality is. Well, I like how, because are you richer than your friends? I think that when I think about community or the people you hang out with, and I’ve shared this – this is where the old man on the front porch moment is – that when I was younger, coming from humble beginnings, I didn’t realize how humble we were until I went to college. Sure, because everybody around me in my hometown was kind of in the same financial situation; all my peers were. We all worked jobs. You know when I heard people bragging about half baths and stuff, I was like, ‘Dad’s got a sink down the basement that he scrubs the Gojo off of his hands; we’re just as good as the half-bath people.’ But it wasn’t until I got to college that I realized the disparity between the haves and the have-nots, you know, to a degree. And now with social media, I feel like perceptions are being distorted because instead of just comparing ourselves to our neighbors, to our friends, and our peer group, we’ve gone beyond now to all the influences of what’s going on with social media, and it’s distorting how we process and see the world. Yeah, I think it’s interesting; our brains are filling in gaps with incorrect bridges to things that don’t exactly exist. So, we see these things on social media, and we see this perception that people put out there, well then we begin building a construct of something that in our opinion is completely detached from reality. And there’s been some really interesting numbers and studies that have come out to back this up recently.

Yeah, so let’s jump right into – I’d love to kind of show this. This is what we’re going to pull up: there was a survey conducted by the Bureau of Labor Statistics – YouGov – where they came up with and they asked people, ‘How much do you perceive people make throughout the United States?’ And then we’re going to drop in after we go through what the perception was, we’re going to put in what the actual data shows. And you’re going to see there are some distortions out there. So, look at these numbers. They said, ‘Okay, when Americans were asked what percentage of American households in general would you guess make over these different income thresholds?’ They started at fifty thousand dollars, and the survey respondents said they estimate that 50% of households make over fifty thousand dollars. Well, they said, ‘Okay, what percentage of households make over a hundred thousand dollars?’ That number was 38% of households they assumed make over a hundred thousand. Well, then I said, ‘Okay, what percentage of American households make over half a million dollars, five hundred thousand dollars?’ And the survey respondents said 26% of American households make over half a million dollars. And the last question they asked was, ‘What percent of American households make over one million dollars of annual income a year?’ And the respondents said twenty percent – one in five American households have incomes in the seven-figure land, above a million dollars a year. So, you quickly – I mean, because this is well beyond a hundred percent, by the way, so we have a distortion there. So, obviously, the people they surveyed weren’t good at math. But the part that really I want to draw attention to was the five hundred thousand in a million, because maybe it’s because of my tax prep background, I know that when you hear the term top one percent, I kind of know where that falls. And I’m not going to ruin it, but it is interesting that 26 percent is perceived for 500,000; 20 for a million dollars to make a million dollars a year, no matter what social media is telling you and all the influencers, that is a big deal, as the data will show. So, let’s look at what the actual reality was. So, this was the perception that Americans had.

When you look at the actual numbers, they’re kind of different. Let’s start with fifty thousand. The survey respondents said they thought 50% of American households make over fifty thousand. Well, in actuality, it’s about 63 percent. So, it’s actually a little bit better than Americans would have guessed. When it came to a hundred thousand, it was pretty well aligned. The perception was that 38% of households make over a hundred thousand. The reality is about 35 percent. But this is where it went off the rails. Yeah, this is where it just got wonky, where respondents to the survey said they thought that 26% of American households made over half a million dollars. The answer is one percent. It is the one percent that makes over half a million dollars. And the idea that one in five households makes over a million dollars is very, very different than the fact in reality it is only point one percent of American households actually reached that level. So, yeah, so differently, if you make a million dollars a year, you make more than 99.9% of people out there. I mean, that’s a massive number. So, it’s one of those things where I think people should take this moment not to say, ‘Wow, there’s a big disparity between what the perception versus the reality is,’ but also use this to say, ‘Look, look at your own personal situation. Instead of getting into this comparison game, realize that maybe you’re being misled or distorted into kind of focusing more on what money as a tool can do for you.’ And that’s what we really get into to focus on. And I think there is – I want to go one step further, but there was an article that Bloomberg did that lets you actually – because we know it’s hard when you do a national show like we do because we know we have people on the West Coast, we have people in cities like New York, and then we have people in very rural places too, where the cost of living is significantly lower. So, if you’re trying to get perspective on how your income and what you have compares to other parts of the country, there’s actually a tool that we found for you. Yeah, there’s a really neat Bloomberg article that – it kind of went through a number of different thoughts around what people thought, where they felt like they landed in terms of wealthy or not wealthy, poor, not poor. But one of the really interesting metrics this article had is you could actually put in your income and then put in your geography, the city or the zip code in which you live, and it would kind of tell you how you stack up. This is where your income is relative to your peers. Well, then one of the things that the tool lets you do is that, ‘Okay, well, what if I wanted to move to a different part of the country? What if I live in Nashville, but I want to move to San Francisco? Or what if I live in Los Angeles, and I want to move to Atlanta?’ It was a really interesting tool to show how that income stacks up, because a hundred thousand dollar income in Los Angeles might feel very different than a hundred thousand dollar income in Athens-Clarke County. And so, if you are someone who’s considering a move or thinking about changing jobs or thinking about relocating, you should use this tool to figure out, ‘Okay, is the income that I’m moving away from or towards commensurate with the area in which I’m living? Because at the end of the day, I want to make sure that I can at least maintain or improve the same standard of living that I currently have.’ Yeah, income, you know, we have a lot of discussion internally about the words ‘rich’ versus ‘wealth.’ I always think in terms of – and this isn’t like an exact thing – but when I hear people talk about ‘rich,’ I think of it in income terms. When I think of ‘wealth,’ I think about your net worth statement, essentially your balance sheet as an individual and a household. So, I would encourage everybody to go beyond the mindset of how do I get rich because that’s the income component. I would love for you to focus on how do you efficiently turn your income that you make through labor, through investments, and other things and actually turn it into a growing net worth or balance sheet asset that actually is working just as hard as you do with your back, your brain, and your hands. That’s the big thing.

We actually have some tools to make that happen. But we have the financial order of operations. You too can have a free copy of this. Go to moneyguy.com/resources. You can download your free Money Guy deliverable that’s going to help you know exactly what to do with your next dollar. It’s kind of the instruction manual for money on maximizing every opportunity that comes your way. And look, building assets, having a high income is great and it’s helpful. And even building your assets and building wealth is wonderful. But you already said this once, Brian: money is nothing more than a tool that allows us to accomplish the goals that we have. And so, we should view it as such. If reaching a certain income is your goal or reaching a certain asset is your goal, I think you’re going to find that when you continue chasing that goal, you’re going to find this pretty empty. So, you need to figure out how do I ground myself to focus on the things in life that truly matter. And then what decisions can I do today, like the financial order of operations, like automating my savings, like making wise financial decisions, to make sure that I myself am actually doing money better. I thought the big thing about perception, and obviously a lot of people think people make a lot more money. So, when you do the comparison game, you might be feeling that you’re lesser or are dealing with lesser. What I’m finding is that I think for you to feel that way, there’s a lot of people out there that are probably leveraging it up with nicer cars, nicer houses, but they don’t really own their house, they don’t own their car; they’re actually just borrowing those things and essentially renting their life. Now, use this data; that’s why I love going deeper into this so you can actually say, ‘Hey, wait a minute, I’m going to break through the mirage and realize that it’s much better instead of just looking rich, I’d actually like to be wealthy and actually use the financial order of operations, realize content like that we create there is a better way to do money and just become the best version of yourself. So, go check it out moneyguy.com and specifically go to moneyguy.com/resources so you can download our free stuff so you can get your journey maximized today.

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