Want to Be Rich? Salary Alone Won't Get You There

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“If your only goal is to become rich, you’ll never achieve it,” said John D. Rockefeller, America’s first billionaire.

His point was simple: when the only thing you care about is making money, no amount of money is ever enough. What you have always pales in comparison to what you don’t have and could have.

That’s why true success always involves a lot more than money… but even so, while we all define success differently (as well we should), most of us do factor some degree of wealth into our success equations.

So how do you become super rich? First embrace one fact: you’ll never get there on salary alone.

How do I know? The IRS says so.

Every year the IRS releases the annual report 400 Individual Tax Returns Reporting the Largest Adjusted Gross Incomes.  The latest report is for the years 1992 through 2009. (To you and I, 2009 seems like a long time ago, but to the government probably seems very timely.)

In 2009 it took $77.4 million in adjusted gross income to make the top 400. That might sound like a lot, but it’s down from $109.7 million in 2008 and significantly down from a record high of $138.8 million in 2007.

Making $77.4 million just lets you squeeze into the top 400, though. The average earnings were $202.4 million, clearly a lot of money but significantly down from the 2007 average of $334.8 million.

What’s interesting is how the people on the list made their money. Here’s a breakdown by percentages:

• Wages and salaries:  8.6%
• Interest: 6.6%
• Dividends: 13%
• Partnerships and corporations:  19.9%
• Capital gains: 45.8%

The top 400 averaged $92.6 million in capital gains income, or 16% of the total capital gains reported by all taxpayers. That means just 400 people accounted for over one-sixth of all capital gains income.

What that means is, if you want to get rich:

Working for a salary won’t cut it

Making relatively safe “income” investments won’t cut it

Investing only in stocks of large companies won’t cut it

Owning a business or businesses, whether in part or partnership, could not only build a solid wealth foundation but could someday…

Generate a huge financial windfall and make you rich

The data clearly supports the last point. A total of over 3,800 taxpayers have made the top 400 since 1992, but only 27% appear more than once, and only 2% appear 10 or more times.

Obviously becoming super rich (in financial terms) comes from investing in yourself and others, from taking risks, from doing a lot of small things well… and then doing one big thing really, really well.

Source : forbes.com